«Economic Constitution Instead of Economic Government!»
Speech by Michael Wohlgemuth (in German)
Economist and research director at the Foundation for Economic Governance and Public Law (Stiftung für Ordnungspolitik und Staatsrecht) in Liechtenstein
Almost exactly 70 years after Winston Churchill gave a speech in Zurich about the future of Europe, it demands immense respect. What would Churchill say today? He would likely be surprised that his fellow countrymen voted for Brexit this year—especially since he could never have imagined them joining any “kind of United States of Europe.” He clearly saw that Germany and France would need to form the core of this union—and he was right. However, Churchill’s expectation that a united Europe would one day be as free and happy as Switzerland has not really materialized.
Today, the Eurozone is especially in disarray. Even though comparing it to the failure of the League of Nations might seem far-fetched, Churchill’s comment on the League can also be applied to the Euro experiment: “The League of Nations failed not because of its principles or ideas. It failed because the nations that founded it had been unfaithful to those principles. It failed because the governments of those days were afraid to face facts and act while there was still time.”
While this has not been the case in Britain, on the continent, there has been a consensus that the European Union was from the start a “political project,” with its finality necessarily being an “ever closer political union,” even something like the “United States of Europe.”
The crisis of the European Monetary Union has, in my opinion, proven that the attempt to understand and shape an economically dubious and risky act as a “political project” based on political criteria had to fail. However, the Euro crisis now serves as a reason to push for a political union; at least for the Eurozone countries: the self-inflicted crisis as an opportunity to force through what was politically unachievable before the introduction of the Euro! The “only” sovereignly overlooked problem is: for truly far-reaching steps in this direction, even in the current “emergency state,” both (constitutional) legal and democratic foundations are lacking.
My brief analysis will conclude that a “great leap forward” into some form of “United States of Europe” is not to be expected for a long time. Especially because France and Germany have completely opposing views on a functional “fiscal union.”
This might reassure or alarm many. In any case, I conclude that the crisis will likely remain a permanent condition. At best, it will be managed with a mix of different and often incoherent measures, but not “solved.”
The philosopher Hermann Lübbe, who lives in Zurich, noted four years ago: “A topos from the tradition of old European moralism encourages us to see crises as opportunities… Now, ‘visions’ are leading to a transfer of central sovereign rights from member states to the Union, which was previously considered unattainable before the crisis.” However, Lübbe warns: “Just in the crisis, into which one has fallen due to overestimation, not to push one’s own purposes and goals further and higher.”
But does this really apply to the officially announced concepts from Brussels? Last summer, the European Council was presented with a “five presidents report.” It involves deepening on four fronts: “Economic Union,” “Financial Union,” “Fiscal Union,” “Political Union,” and this in three stages by 2025 at the latest. Here’s a brief summary:
“Economic Union”: It rightly points out that the core of European integration—the internal market—is not yet “complete” in key areas (services, energy, digital, and capital markets). There are many initiatives here, and that is good.
“Financial Union”: This initially concerns the further development of the Banking Union. Very explicitly also about the still missing “third pillar,” the common deposit insurance, which has been rejected so far mainly by Germany. The five presidents want to avoid “moral hazards” here, but they do not say how.
“Fiscal Union”: This is where it gets serious. At the “end of the process,” a function for fiscal stabilization for the entire Eurozone should be created.
How this “function” is supposed to “function” remains unclear; but a new term has been found for a redistribution pot!
Initially, however, there should be “responsible budgetary policy.” But how?
As is often the case in Brussels: An independent “European Fiscal Board” should be established to coordinate national “Councils for Financial Policy.” The central council has been in place since last week. Among the five experts, there is of course a Frenchwoman, but no German. The Eurozone does not need German economists!
“Political Union”: The five presidents understand this as “improved democratic accountability, more legitimacy, and a strengthening of institutions.” Sounds good; only little is likely to come of it if not even a committee or council has been formed yet…
In general, the question of which parts of the EU ten-year plan actually require or warrant a change in primary law (EU treaties) is also not answered. This question is crucial: Only when clear statements are made about this can one recognize which steps would truly create significantly new competencies for the EU.
Of course, all parties involved know that real treaty changes are politically taboo at the moment because they would open Pandora’s box and ignite endless disputes. In the end, any new treaty with further cessions of sovereignty to “Brussels” would likely fail in many national parliaments and in almost every referendum.
Nevertheless, the statement that a monetary union cannot succeed without a political union or fiscal union is, at least in Berlin and Brussels, considered a truism. In Paris, there has always been a dream of a “political” management of the monetary union. However, even if Berlin and Paris both talk about “economic governance,” “political union,” or “fiscal union,” they use the same terms but fundamentally mean different things.
The French position (very similar to the Italian) certainly does not mean that the sovereignty of the Republic and its President should be mitigated by a European “Finance Minister” or stricter rules for French budget policy.
French-style European “economic governance” mainly means:
- Mutualization of Eurozone debts
- Even more fiscal engagement by the ECB
- Common EU taxes
- A common Eurozone budget
- A common European unemployment insurance
- A common deposit insurance
- And above all, more European industrial policy, specifically: subsidies for European (French) champions, support and protection for (French) “losers” of globalization.
Instead of regulatory rules for self-restraint by governments, “political” decisions should stand in place of EU-wide “planning.” That is: intergovernmental acts of will by heads of state, which, backed or driven by a majority in a Eurozone parliament, decide on a Eurozone budget funded by mutualized taxes and debts.
The German idea of a “fiscal union” (at least according to Wolfgang Schäuble’s concept) is a completely opposite one. This “political” union should be largely “depoliticized”; binding rules (such as in the “Fiscal Compact”) should be agreed upon and enforced through automatic sanctions or with the help of independent decision-makers.
Economic Constitution instead of Economic Governance!
This would at least be an ideal-type interpretation of a German concept of “fiscal union,” which would draw on the central concept of the ordoliberal “Freiburg School” (Walter Eucken, Franz Böhm), which once provided the intellectual foundation for a rather successful model.
At its core, the economic constitution is about the primacy of rule-based policy over interventionist process policy. Of course, this has also largely disappeared in Germany. In most other European cultures, “order policy” is even harder to convey. There is not even a suitable word for it in English. Even less so in French.
Intermediate conclusion: Both the French and German proposals go further than those of the five EU presidents. They align more with the vision of a European federal state, though each in a very different way: one more centrally planned and interventionist, and the other more market-oriented and order-policy-based. Both proposals would also require treaty changes! As usual: “Pandora’s Box.” A unanimous agreement of all 28 (soon to be 27) member states to either model of European economic governance or economic constitution is completely illusory. At best, it would result in a typically “European solution” with vaguely defined elements from both models.
Both (and any combination of both) also require democratic legitimacy not only for the treaty change itself but also for the implementation of a transfer of central elements of previously national sovereign power. This would even be difficult in Germany.
Here, more than elsewhere, a “permissive consensus” has prevailed: the friendly, rather uninterested willingness to accept what the political class decided on European integration. Due to the EU rescue policy, this “permissive consensus” has largely eroded in Germany; as well as in Greece, where it once existed, and elsewhere.
And: There are still judges in Karlsruhe! The Federal Constitutional Court has repeatedly stated that the EU cannot become a federal state as long as the Basic Law is in effect. Membership in real “United States of Europe” must be democratically legitimized. For this, the Basic Law uniquely provides for a nationwide referendum.
It is about sovereignty; and the core component of state sovereignty is budget and tax law. In the “ESM ruling” from Karlsruhe, it is stated:
“A necessary condition for ensuring political freedom in the sense of the core identity of the constitution is that the budgetary legislator makes its decisions on revenues and expenditures free from external control by the organs and other member states of the European Union and remains permanently ‘master of its decisions.’”
In its “OMT ruling” of 2014, the Federal Constitutional Court reaffirmed this and sought to draw a “red line” with unlimited purchases of government bonds by the ECB. The issue with “red lines” from Karlsruhe is that they are often ambiguous
The situation is different with federalist “visions,” where EU institutions would gain their own tax competences and where debts, unemployment insurances, or savings deposits would be “mutualized.” The constitutional lawyer diFabio also emphasizes the budgetary power as the “crown jewel of Parliament,” which must not be “pledged.”
Furthermore, the rallying cry of the American independence movement also applies at the European level: “no taxation without representation.” The reference to the EU Parliament or a new “Eurozone Parliament,” which in a “true” fiscal union would have its own taxes and tasks like a type of European financial equalization or could correct national budgets, is no longer sufficient.
This is because another central democratic principle is missing here: “One man, one vote.” It is well known that a Maltese vote in European elections weighs over eleven times more than a German vote. In the lower house of a “real” federal state, which would claim extensive redistributive competences and ultimately also competence-competence, such a situation would no longer be tenable.
The “Lisbon Ruling” of the Federal Constitutional Court is also clear on this:
“The European Parliament is … not a representative body of a sovereign European people. This is reflected in the fact that it represents the peoples in the respective assigned national contingents of deputies and is not designed as representation of Union citizens … according to the principle of electoral equality.”
To even remotely reflect national party preferences in a “truly” democratic one-man-one-vote EU parliament, one would have to increase the number of members at least tenfold, resulting in about 7500 members. Have the EU federalists ever considered this? They may continue to rely on the emergence of a European public, “identity,” and “solidarity,” as well as uniformly acting and competing pan-European parties. However, this will take a very long time, if it happens at all. Current trends are moving in the opposite direction.
Meanwhile, starting with European economic governance, fiscal union, and similar measures in the hope that a European demos will later retroactively legitimize a quasi-federal state seems reckless and irresponsible to me. It would be a strategy to burst the European project through overextension.
But I must reassure you: it probably won’t come to that! The dream of the United States of Europe is temporarily over—also “thanks” to the pressure of the increasingly politically effective national romanticism that is reappearing all over Europe. These populist forces from both the right and the left are also quite “false friends” of the liberal opponents of a European superstate. They could, in turn, promote the nightmare of a regression to nationalism, xenophobia, and protectionism.
In general: right or left no longer seems to be a meaningful compass in Europe. The opponents of liberalism, free trade, and freedom of movement are increasing on the increasingly similar right and left fringes.
But that would be another lecture. I come to the conclusion and outlook.
“Europe is facing decisive crossroads”—this has been heard since the founding of the European Communities. This time, the image is justified. A “business as usual” will not last in the long run, just as a “going back to the beginning” will not. The EU faces crossroads that need to be built. There are no predefined escape routes from the crisis.
At least it is clear: not all 28 (soon to be 27) EU member states will want or be able to head towards a “political union.” Also, because there are as many “political unions” as there are political visions—many of which are simply incompatible.
One might lament this geopolitically. Politically and economically, I would rather welcome it if at least further communalization of policies were limited to the willing and capable. That would be another lecture.
A regression of the EU to an economically reasonable and legitimately defensible “core” is, of course, almost illusory due to the politico-economic locking mechanisms. When the internal market could still be understood as the core of the economic integration process, mutual usefulness, the so-called “output legitimacy,” was still sufficient.
However, since the monetary union now describes the “hard core” of integration, which almost inevitably prescribes further integration steps, the situation is different. The ugly term “community of fate” now has a certain justification and normative force of factual quasi-irrevocability despite recognized dysfunctionality.
The problem is: We do not have a time machine to correct old mistakes. Otherwise, we could, for example, form two competing monetary unions and then see: a “Northern” or “hard” Eurozone with ordoliberal economic constitution and (if you like) a “Southern” or “soft” Eurozone with interventionist economic governance.
Instead, I expect ongoing crisis management of the Eurozone, not its imminent dissolution; but also not a real solution to most problems. At best, the measures of the five presidents will show some effect—although a return of market signals, which are currently being suppressed by the ECB, would be more effective than new political pacts.
At worst, a toxic combination of some of the following scenarios could occur:
- Reforms in Greece stall, leading the IMF to withdraw completely. A debt haircut also fails to materialize; the Greek government must call for new elections again, and the idea of a “temporary Grexit” returns to the agenda.
- Spain and Portugal reverse market-friendly reforms, state debts and unemployment return to old crisis levels. Both countries could experience “Greek conditions” with unstable minority governments, political chaos, and exasperated creditors.
- Italy and France fail to achieve global competitiveness while maintaining their bloated welfare states. For the survival of the monetary union, both countries are each “too big to fail.” Once they switch from creditor to debtor status, the rescue umbrellas collapse, and it may no longer be possible to have a common currency for the “Club Med” and the fiscally stable countries of the North.
At best, nothing or very little of this will happen. This is what the EU Commission’s latest economic forecast assumes. As long as one simply extrapolates the latest macroeconomic trends, a slight recovery of all European economies might indeed occur.
The question is whether the popular assumption of economists—ceteris paribus, all other things being equal—is really adequate. The acute refugee crisis can change the assumptions as radically as a renewed banking crisis. In both cases, trust in European institutions and solutions is not very high.
So, in conclusion, I can only quote Churchill again, who pointed out a wonderful similarity between the abilities of economists and politicians:
“Politics is the ability to foretell what is going to happen tomorrow, next week, next month, and next year. And to have the ability afterwards to explain why it didn’t happen.”
«The Dysfunctional Eurozone»
Speech by David Owen
American journalist and author
Eventual Eurozone Reform and improving Russian/European relations
The EU is wisely, four months on since the UK referendum vote to leave the EU, less inclined to dismiss Brexit as an event of little significance, a matter just for the British. The EU is more likely now, in the wake of Brexit, to start to face long overdue reform. Changes needed in the Eurozone, with luck, could be under discussion by December 2019 but it again may well be postponed. Defining a core Eurozone involving a Fiscal Union and a Banking Union will have to be openly discussed, as already has been done informally by Germany and the Netherlands. Initially at least with Belgium and Austria. Even if something dire happens to the Eurozone these four countries will ensure that a small Eurozone continues. The question is who will be their partners? As for France a lot will depend on the outcome of the French elections. But for the first time, whereas it would have been automatic in the past that Germany would insist on French membership, there may not be the level of public support after the elections in Germany to include France initially.
It is very unlikely that German public opinion will accept any system of automatic money transfers to Italy even if Schauble and Merkel succeed in trying to get the ECB to stop quantitative easing by their autumn 2017 election and there is some fiscal reflation in Italy and other Eurozone countries. Other countries that would want to be part of a core Eurozone are Spain and Ireland. Finland in the past would have expected to be a member; perhaps not now. Luxembourg will want to participate but they, Ireland, Cyprus and Malta, may need to face tax haven questions first as it is very undesirable that any unacceptable practices should be inherited by a new Fiscal and Banking Union. Other small Eurozone countries might technically manage the disciplines but I have not attempted to identify them and the decisions are anyhow for the core Eurozone countries to take.
The core Eurozone countries cannot throw a number of countries out of the Eurozone given the practical politics of the EU. What they can do is make them ineligible to be part of a core because of the way that core has fixed the initial criteria for a Fiscal and Banking Union. The weakest economies would become more vulnerable to speculative moves aimed at destabilising some of their economies but if they can ride out speculation they might be able to stay in the Eurozone even though they were not protected as would be members of the core. Aware of their vulnerability and anticipating such speculation, some might prefer to leave rather than await being forced to decide to leave at a time of crisis. The best outcome would be if Italy voluntarily chose to leave the Eurozone for they would have the power to lead a serious restructuring of the EEA and ensure it was not unduly influenced by core Eurozone members. And others like Greece and Portugal might follow.
A core Eurozone will not be a North-South Eurozone in the sense of a formal geographical divide, though this may be the appearance. A divide will happen because of the design and disciplines of the core. Some countries that stay in the Eurozone and make the transition will be able to qualify to be part of the Fiscal Union and Banking Union over time. In effect this core will become a federal Europe.
The key to a core Eurozone emerging will be their use of Article 136 (1) of the Treaty on the Functioning of the EU (TFEU) which states “In order to ensure the proper functioning of economic and monetary union …the Council shall ….adopt measures specific to those Members whose currency is the euro. Article 136 (2) provides that “only members of the Council representing Member States whose currency is the euro shall take part in the vote.” So all they need is a majority within the Eurozone.
As Jean-Claude Piris argues in his book, “the scope of application of Article 136 is extremely wide, because many measures may be characterised as ‘strengthening the coordination and surveillance’ of the budgetary discipline of the states whose currency is the euro, or as ‘setting out economic policy guidelines for them’.”1 What the core introduce will legally be EU measures and the new criteria will apply to new applicants to the Eurozone. There could and should be added on transitional arrangements for helping existing Members introduce greater discipline. But inherent in this design is that some existing Eurozone countries will never be able to accept core disciplines.
The as yet unanswered question is whether the German people will give the green light or a red light to their politicians in the autumn of 2017 to save the Eurozone by developing a core Eurozone as a Fiscal Union, where financial resources move through independent decision making from the core Eurozone’s richer regions to poorer regions. It would require the members to appoint an economic head of the core Eurozone to work with the ECB. The reluctance of the French people to accept even European Commission disciplines within the present framework also needs to be faced up to in France. Juppe, of the likely French Presidents, would have the least difficulty in accepting financial discipline. But Marine Le Pen after campaigning to leave the Eurozone as part of her Presidential bid may have considerably changed the nature of the debate in France on the Eurozone.
The Eurozone crisis, oft predicted, most recently by Joseph Stiglitz2 , the Nobel Prize winner, a believer in a North-South split of the Eurozone, hovers ominously in the background. Stiglitz judges the 17-year-old monetary experiment “an economic and political disaster”. “Flawed at birth,” he argues, the “structure of the euro is to blame for the poor performance of Europe, its successive crises and increased inequality.” Far from promoting European prosperity, peace or influence, it has “tied together” countries with vastly different economic and social backgrounds, denying them the vital ability to manipulate their exchange and interest rates.
In France much will depend on whether Sarkozy or Juppe reach the second run off election widely expected to be with Marine Le Pen. Juppe looks more likely to have the same ability to draw votes from the left in France as the Gaullist, Jacques Chirac, did in the run off against Marine Le Pen’s father. But prediction based on past precedent may be misleading.
What about reform of the European Central Bank (ECB)? It is important to recognize that it is not a normal central bank because it is the central bank of a half-baked currency union. Were the ECB a normal central bank, when Greece was facing a run on its banks it would have lent, and if it thought Greek banks insolvent it would have had to recapitalise them and fund them through a properly constructed European stability mechanism. The fact that it has been inhibited from doing so at every turn in the Greek crisis is a reflection of the flawed nature of the legislation covering European Monetary Union (EMU).
Improving Russian/European Relations
Besides Eurozone reform, there is the need to face up to President Obama’s criticism that Europe is “freeloading” within NATO and the disappointing record of the European External Action Service, EEAS. This embryonic department of foreign affairs for a federal Europe was responsible for the EU/Ukraine Agreement which did so much to ignite the conflict within Ukraine challenging the diplomatic skills and the security of a wider Europe. This conflict could very easily have spilled over to engulf Europe in a war.
The danger is less now but it has not disappeared. When Putin returned as President of the Russian Federation in May 2012, after his initial two terms following the one term presidency of Medvedev. It should have been obvious that he was poised to make his presence felt across the wider Europe in the light of the policies he had developed during the five-day Georgian war of August 2008. Russian armed forces after Georgia had already been set on a path of reform and re-equipment. Putin had clearly vowed that never again was he going to be treated with a superficial friendliness by a US President like George W. Bush, but ignored on substance, something which in a different way continued under President Obama. Putin’s KGB training demands a serious and structured relationship, not necessarily adversarial but that is what has developed. Recreating the warmth associated with Gorbachev and Yeltsin will be difficult, but slowly not impossible.
It is too easy to forget that Putin had made an unprecedented offer of friendship to the United States immediately after 9/11, reinforcing this offer with concrete measures, with the unilateral announcement of the closure of bases in Cuba and North Korea but it was ignored, leaving him sore and humiliated. Putin is now suggesting that he might return to bases in both these countries as well. The port facilities Russia has had on the Mediterranean, since 1971 in Syria, was never going to be surrendered to control by forces fighting Assad. It was to protect Damascus Putin enhanced capability by building up airfields Russia had access to in Syria. Putin, as acting President after Yeltsin stood down, decided to deal with the Islamic Sunni jihad in Chechnya. The brutal destruction of Grozny was in his terms a success. Hence now Aleppo. He believes only brutal bombing achieves results with minimal casualties to his own military. Yet he will continue to bomb ISIS because they want a Sunni caliphate which is a threat to Russia. He has cooperated with Shia forces from Hezbollah and Iran in Syria while talking to Israel and Arab countries. The policy on his terms has succeeded and if Iran has a continuous land route to the Mediterranean he still believes he can be a player in brokering a peace of sorts between Israel and the Palestinians.
Putin’s Kremlin watched with apprehension NATO and then the EU coming right up to the borders of the Russian Federation. From May 2004 Poland, Hungary, the Czech Republic, Slovakia and Slovenia, the last mentioned formerly part of Tito’s Yugoslavia, had come into the EU, as had the three Baltic states, Estonia, Latvia and Lithuania. Russia is not like the USSR, it now has a market economy that is not likely to disappear. But there is less and less enthusiasm in the US for working constructively with Russia on economic questions. This is not another Cold War but it has been called a ‘Hot Peace’.
The EU needs to accept that the EU/Ukraine Association Agreement in 2014 was a trigger for the Russians’ military involvement in East Ukraine and the Crimea. They chose to regard it not without reason as a substitution of an EU defence policy for Ukraine where NATO was declining to go. The more that agreement is examined in detail the more concern it will generate in EU countries. That Agreement was voted down in 2016 in a low poll referendum in the Netherlands. The Dutch daily De Volkskrant on 22 October reported that Mark Rutte, Prime Minister of the Netherlands, is upholding his threat to refuse to ratify the EU-Ukraine Treaty, in accordance with the referendum result and is seeking an opt-out on military cooperation with Ukraine and a guarantee against allowing Ukrainian EU membership and free movement of people.
Russia needs to recognize that the annexation of Crimea and boundary change for the Russian Federation cannot be accepted other than within a negotiated regional settlement and having some regard to the Budapest Memorandum which was signed by the UK, with the US and Russia, in 1994. The signatories to that agreement reaffirmed ‘their obligation to refrain from the threat or use of force against the territorial integrity or political independence of Ukraine’. Even as recently as 4 December 2009 the US and Russia confirmed these assurances and recorded them at a meeting.
The EU/Russian relationship is deteriorating as economic sanctions have been renewed again and some on both sides of the Atlantic want sanctions toughened. Renzi, however, the young Italian Prime Minister resists, a vestige of Berlusconi’s warm relationship with Putin but a position also rooted in post-war Euro Communism. Before the US, Germany and France go down this route of harsher economic sanctions we need all of us to learn from past mistakes and start a negotiation which should take as its starting point the Budapest Memorandum. Hopefully the Permanent Five on the Security Council plus Germany could agree terms of reference for such a negotiation.
The memorandum issued from Budapest was designed to reassure Ukrainian public opinion. The signatories, UK, US and Russia, France signed separately, to that agreement reaffirmed ‘their obligation to refrain from the threat or use of force against the territorial integrity or political independence of Ukraine’. Even as recently as 4 December 2009 the US and Russia confirmed these assurances and recorded them at a meeting. Ukrainian public opinion was challenging the decision that 4,000 strategic and tactical nuclear weapons should be transferred from the Ukraine to Russia, in addition to 1,900 strategic nuclear warheads – a larger arsenal than Britain, France and China combined. Also included were 130 SS-19 ICBMs, 46 SS-24 ICBMs and 44 strategic bombers with hundreds of air-launched cruise missiles.5 The annexation of Crimea by Russia in 2014 may be cited not just by Ukrainians, but elsewhere in the world, for decades to come as the vindication for those who believe ‘if you have nuclear weapons never give them up and if you have not got nuclear weapons find a way of getting some’. That doctrine, if it takes root, has profound dangers to the whole Non Proliferation Treaty.
Negotiating Objectives for P5 +1
- There should be no formal recognition of Crimea being part of the Russian Federation, implicit or explicit, unless and until a negotiated resolution is achieved, in the context of Ukraine and Transnistria with a settlement in Eastern Ukraine.
- There should be no further extension of NATO to cover the territory of Ukraine or Georgia or extension of the EU defence and security provision to either of these two countries though that does not exclude their membership of EU. A further attempt would be made to agree the boundaries of Georgia.
- The Budapest Memorandum shall be reaffirmed by the Heads of State of the original signatory countries.
- With the coming into force of (a), (b) and (c), economic sanctions against the Russian Federation should cease.
There can be no guarantee this regional negotiation covering all disputed boundaries can even start, let alone succeed. But a starting point would be the prescient wisdom of the American diplomat, George Kennan, about Russia and NATO which was said in an interview with Thomas L. Friedman of the New York Times on 2 May 1998 when Kennan denounced the form of NATO expansion that had just been agreed by the US Senate:
“I think it is the beginning of a new Cold War. I think the Russians will gradually react quite adversely and it will affect their policies. I think it is a tragic mistake. There was no reason for this whatsoever. No one was threatening anybody else. This expansion would make the Founding Fathers of this country turn over in their graves. We have signed up to protect a whole series of countries, even though we have neither the resources nor the intention to do so in any serious way. [NATO expansion] was simply a lighthearted action by a Senate that has no real interest in foreign affairs.”
Meanwhile a new EU defence posture formally held back until after the UK referendum was launched in the summer of 2016 and a EU military HQ heralded in the German defence paper3 will be added against British advice. I see no point in the UK threatening to block this undesirable development. It can, anyhow, be introduced through the enhanced cooperation mechanism with the EU Treaties. So it makes good sense for the UK to reinforce its NATO commitment as part of a staged exit from the EU sooner rather than later and to leave the European External Action Service, EEAS, by agreement in 2017. The UK should agree to dedicate that EEAS saving to NATO on top of the UK’s pledged 2% of GDP contribution so that all of Europe will benefit and not just the UK.
Leaving the EEAS by agreement now is a far better option than blocking EU defence as the UK Secretary of State for Defence unwisely promised to do for the next few years until Article 50 negotiations are completed. Already quite sensibly the other 27 EU states met at Bratislava without the UK and that is planned to continue. Far better a fair and square deal in stages and taken over months rather than a shotgun arrangement on a cliff edge in two to three years time.
Only in a revived NATO, where European countries are no longer as President Obama rightly accused us of being ‘freeloaders’, and we make a greater financial contribution, will Europe redress the imbalance between us and President Putin’s Russian Federation. The UK’s priority outside the EU and the EEAS will now be to strengthen the Atlantic alliance. Over the next 4 years besides adding the present UK EEAS budget to our contribution to NATO we will need to move as quickly as we can to devoting 2.5% of GDP to NATO to be seen as serious. The UK should also continue to spend the £2 billion on Eastern Europe we do at present and in other ways help the political stabilisation of the wider Europe. In leaving the EU the UK should demonstrate its continued goodwill with a readiness to increase spending with some coming from the DFID budget. When the EU recognizes that the UK is even more committed to European stability as well as security then Brexit will be seen in a different light as strengthening the wider Europe.
