David Cameron, the British prime minister, has channeled his inner Thatcher. He has dared to say “no.” By refusing to go along with German chancellor Angela Merkel and French president Nicolas Sarkozy’s latest rescue scheme for the euro, Cameron has raised profound questions about Britain’s relationship with the European Union. At the same time, the rest of the EU has provided no answer to the crisis engulfing the euro.
EU governments were meeting in Brussels in the latest of a series of summits designed to cobble together a definitive rescue passage for the struggling single currency. The several mountains of debt in the eurozone are increasing inexorably, and recession has taken the place of growth for the foreseeable future. If anything, austerity on the scale now being proposed may well make prospects of balanced budgets even more elusive.
In essence, what was agreed to in Brussels was more of the same, only with more conviction, i.e. more centralized policing of national budgets. There’s no denying the need for budgetary discipline, but sorting this mess out will take more than that. As has always been obvious, the underlying flaw in the single currency is that one size does not fit all: Greece is not Germany. For the euro to have any chance of success would require something close to federation and a corresponding loss of sovereignty for member countries. Quite a few EU governments might be prepared to pay that price in the expectation of receiving transfer payments from Germany and other countries in the eurozone’s richer north. Merkel continues to believe that this would be one step too far. Hoping against hope, she argues that the economic and fiscal convergence that a successful eurozone would require is a merely a matter of tighter bureaucratic control.
Cameron’s government itself argues that the eurozone must be much more closely integrated if it is to work. At the same time, he is aware that the eurozone’s difficulties represent an opportunity for him to block the long Franco-German offensive against the City of London in the form of centralized regulation and potentially oppressive taxation. Proposed amendments to the EU treaty forging greater fiscal integration would require British assent. Cameron was thought likely to go along with treaty changes in exchange for leeway being given to Britain to protect its financial sector.
It became clear, though, that the deal Cameron wanted was not going to be acceptable to the other EU countries. Comes the hour, comes the man. Confounding his euroskeptic critics within the Conservative party (probably because of his fear of what they might do), Cameron refused to blink. He stood alone. When he returned to England, those who had previously feared that he was another Chamberlain were prepared to hand him a Churchillian cigar.
He is not going to find the going easy. Thanks to the efforts of Merkel and Sarkozy, the EU now seems set on a course that has no respect for national sovereignty and little prospect for economic success. Without the palliative of German money, German fiscal discipline may create social disorder in more places than Greece. Cameron has stood for sovereignty, and, inevitably the BBC is already fretting that Britain is “isolated.” But isolated from folly is exactly the place to be.