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British European policy / Alasdair Murray. - London, 2000. - 8 Bl. =3D 39 Kb, Text . - (Working papers / Friedrich-Ebert-Stiftung, London Office ; 2000,3)
Electronic ed.: Bonn : FES Library, 2000

=A9 Friedrich-Ebert-Stiftung

=3D"INHALT"

INTRODUCTION

1. THE POLITICAL CONTEXT

2. THE POLICY DEBATE

CONCLUSIONS

INTRODUCTION

It is impossible to escape the spectre of the Euro in any discussion of = Britain=92s European policy. As this paper was being prepared in June 2000,= the debate over if, and when, Britain should join the single currency had = burst into life again and was threatening to become the defining debate wit= hin British politics. More than any other issue, the Euro question has the= ability to expose the differences not just between the Labour government a= nd the main Conservative opposition but the internal divisions within the p= arties themselves.

The battle over British membership of the Euro is also increasingly = colouring attitudes towards the EU in general. On paper, both main politic= al parties remain committed to British membership of the EU. But this conce= als a growing gulf in the approach of the two main parties. The British go= vernment is working hard to try and establish its pro-EU credentials, confi= dent that this will send a message to its European partners that it is comm= itted to the long-term future of the Union. In contrast, the Conservative P= arty=92s scepticism over the Euro appears to be increasingly spilling over = into a hard-line anti-EU stance.=20

As a result, other parts of the broader European debate =96 such as = defence, institutional and economic reform =96 have moved from fringe inter= ests to also play an increasingly central role in the British political deb= ate. The government weighs up every stance it takes within the EU for its = perceived impact on the popularity of the Euro. In particular, Tony Blair= =92s advocacy of economic reform across Europe is an attempt to nullify one= of the Euro-sceptic=92s chief weapons. It is seeking to reassure the Brit= ish electorate that joining the Euro zone would not result in Britain havin= g to adopt bad economic policies. The Conservatives, meanwhile, are beginn= ing to treat every European policy issue as if, like the Euro, it represent= s a fundamental challenge to British sovereignty.

The first part of this paper will consider the current political con= text in more detail. =20

The second part will examine the major European policy issues before= taking a look at the likely evolution of the European debate within Britai= n.

1. THE POLITICAL CONTEXT

The Government

The Labour government which took power in 1997 is that rare thing in rec= ent British history =96 instinctively pro-European. It arrived with a comm= itment to ensure Britain took up its 'rightful' place at the heart of Europ= e. In an effort to remove the single currency as an election issue, the L= abour Party adopted the previous Conservative government=92s policy of 'wai= t and see' and promised a referendum ahead of Euro entry. However, it did = not conceal a far more positive tone towards EMU, suggesting that it was in= clined in favour of Euro membership and would attempt to guide the country= =92s economy and the electorate in the right direction. Indeed, in the aut= umn of 1997 an unsourced 'leak' to a British newspaper, which suggested the= government was close to announcing a date for Euro entry, was greeted with= euphoria in the London markets. At that stage it seemed likely that Brita= in would join the single currency in tandem with the other Euro 'outs' in a= round 2003.

However, the apparently pro-Euro thrust hid some real differences wi= thin the new cabinet about the best approach to the single currency. On th= e strongly pro-Euro side are ministers such as Peter Mandelson =96 a close = confidant of Tony Blair =96, Robin Cook, the Foreign Minister, and Stephen= Byers, the Secretary of State for Trade and Industry. These ministers rem= ain inclined to announce a referendum date as soon as politically possible = and would like to be able to campaign more vigorously on behalf of British = Euro membership. =20

But a much more cautious approach has been adopted by the powerful f= igure of Gordon Brown, the Chancellor of the Exchequer. Mr Brown is despera= te to try and avoid any substantive discussion of the single currency ahead= of the election. While the government=92s internal differences are minor = compared to the crippling divisions of the Conservatives under John Major, = they do in part explain its apparent timidity over the Euro issue during th= e last year.

Mr Brown=92s motives have never been entirely explained and it remai= ns uncertain whether he is more philosophically dubious about the Euro or i= s simply making a series of tactical political judgements about the timing = of a referendum. There is a suspicion that he is distancing himself from th= e Euro project in an effort to pick up the pieces should Tony Blair come un= stuck following a referendum. It should also be noted that Mr Brown=92s ch= ief adviser, Ed Balls, is something of a Euro-sceptic and that Mr Brown see= ms to seek inspiration from American rather than European economic models. = The Chancellor also possesses one major advantage over his colleagues havi= ng ensured he is the guardian of the five economic 'tests' which will deter= mine whether Britain is ready to enter the Euro (see Section 2).=20

For much of the last year, the government has tried hard to avoid di= scussion of the Euro issue. The highly image-conscious Prime Minister has b= een stung by the press criticism which has greeted every previous pronounce= ment on the Euro and has been anxious to play down talk of cabinet policy s= plits. As a result Mr Blair has made a concerted effort to talk up other a= spects of the government=92s European policy. The logic is that the govern= ment will find it much easier to sell the Euro membership if it can persuad= e the electorate Europe is moving in Britain=92s direction.

There is little doubt that the government has made good progress in = some key EU policy areas. The new Prodi Commission has a strongly British = flavour and the government has been unusually successful at securing senior= positions for its own highfliers within the Commission apparatus. The Lis= bon Summit also provided a notable triumph for the British approach to Euro= pe with its emphasis on liberal economic reforms and 'soft' methods of enfo= rcement such as benchmarking and peer pressure. But it is questionable whe= ther in the short term these developments have had any noticeable impact on= public opinion. Instead, the protracted crisis over British beef exports = has attracted much more media excitement. =20

In recent months the strongly pro-Euro camp within government has be= come restless as each new opinion poll suggests opposition to Britain joini= ng the EMU is hardening. Peter Mandelson, the Northern Ireland Secretary, = reopened the internal debate in May 2000. Despite having his hands full tr= ying to implement the latest Northern Ireland peace deal, Mr Mandelson made= a speech arguing the economy would suffer if the government continued to s= it on the fence. The Chancellor was reported to be furious that the speech= was not cleared with him first while the Prime Minister appeared unhappy t= hat the internal cabinet disputes was surfacing in public again. Stephen B= yers =96 apparently with the tacit approval of Number 10 =96 then picked up= the pro-Euro baton, although the tone of his comments appears to have been= watered down. =20

The pro-Europeans scored a minor political coup of their own when it= emerged in June that the Treasury had tried to tone down an independent re= port from the Organisation of Economic Co-operation and Development which s= uggested on many counts Britain had already converged with Europe. =20

At the time of writing, however, it was not clear whether Tony Blair= would finally end his self-imposed silence and come out strongly in favour= of the Euro or continue emphasising other aspects of Britain=92s EU policy= . The hint from Downing Street was that Mr Blair was inclined to continue = with the latter strategy this side of the election.

Relations with Britain=92s European Partners

An essential part of the government=92s pro-European approach has been i= ts efforts to build alliances within the EU. The government has been deter= mined to shake the traditional perception that Britain is only capable of a= dopting a negative position within the new EU =96 at best reluctantly accep= ting its partners=92 ideas, at worst holding out alone against any new EU d= evelopment.=20

This government has been aided in its alliance- building by the cred= ibility bestowed by Labour=92s large majority and Tony Blair=92s warm perso= nal relationship with a number of European leaders. The government has also= shown the flexibility needed to deal with different allies on separate iss= ues. Mr Blair, for instance, worked very hard in cultivating the support o= f Guy Verhofstadt, the Belgian Prime Minister, ahead of the Lisbon Summit, = although the two leaders are poles apart on issues such as institutional re= form.

However, it is fair to say that the relationship with Spain is perha= ps the single most successful to date, despite the fact that Mr Blair and J= ose-Maria Aznar, the Spanish Prime Minister, represent parties from the opp= osite sides of the political spectrum. Most recently, the two leaders penn= ed a joint article for the Financial Times newspaper in an effort to= keep the economic reform debate alive ahead of the French EU Presidency.= =20

Relations with the two traditional heavyweights of EU affairs =96 Fr= ance and Germany =96 have not been so smooth. There is a huge gulf in styl= e between the moderniser Blair and the more traditional socialist rhetoric = of French Prime Minister Lionel Jospin and a consequent lack of personal ra= pport. The French remain suspicious that Britain=92s new found enthusiasm = for the EU is simply an attempt to arrest the pace of integration. Relatio= ns have also been damaged by specific issues such as the French ban on Brit= ish beef and its reluctance to open its electricity market to competition. = However, the British government=92s flexible approach is demonstrated by t= he fact that the two countries have pushed forward with the creation of a E= uropean Defence Force =96 a key French demand that Britain had always previ= ously resisted.

A strong Anglo-German alliance initially seemed a much more promisin= g prospect. German Chancellor Gerhard Schroeder arrived in office with a m= odernising reputation and a style that owed much to New Labour. Peter Mand= elson acted as an unofficial envoy in an effort to build bridges between th= e two governments. However, relations have become increasingly fraught in = the last year. Herr Schroeder appears to have resorted to a more tradition= al economic approach in an effort to shore up his party=92s poor poll ratin= gs. The British government was less than pleased by the German Chancellor= =92s intervention in the Vodafone/Mannesman take-over battle. Joschka Fisch= er=92s recent advocacy of a 'federal' system for Europe also caused palpita= tions in Downing Street. For its part, the British government=92s concerte= d opposition to a European Withholding Tax, which it fears will destroy the= Eurobond market in London, has also soured relations. France appears to h= ave taken advantage of these difficulties to reactivate the Franco-German a= xis, with the two countries now busy developing a common approach ahead of= the Nice Intergovernmental Conference at the end of the year.=20

Trouble and Strife =96 the government=92s battles with the media= and business

The vast bulk of British print media is hostile to the Euro. Of the mai= n national newspapers only the Financial Times, Independen= t, Express and the Mirror can be said to be consistently = pro-EMU. Even the centre-left Guardian has been wavering on this is= sue in recent months, although it remains broadly pro-European. In contras= t, the Times, Telegraph, Mail and Sun newspaper= s =96 which dominate the market in terms of sales =96 are strongly Euro-sce= ptic and increasingly anti-EU in tone.=20

This has presented the government with a major challenge which it ha= s so far failed to resolve. The Labour Party remains scarred by the legacy = of its poor relations with the press during the 1980s. It is this fact whi= ch seems to be at the root of the Prime Minister=92s timidity on the issue = of the Euro. Yet Mr Blair=92s alternative strategy =96 of flagging up posi= tive developments within the EU in general =96 can hardly be termed a succe= ss. The quality of British reporting of the EU is in general poor and most= newspapers prefer to bury EU developments deep within the foreign pages.

However, in recent weeks there have been a few indications that this= 'softly softly' approach to the print media may be shifting. The long per= iod of almost uniformly positive coverage of the government has drawn to a = close and normal service =96 which in Britain means government bashing =96 = has resumed. There are signs that, in turn, the government may be beginnin= g to worry less about every article and will be prepared to swallow some ba= d headlines on the Euro and Europe.=20

It should also be noted that the extent to which newspapers influenc= e their readers has long been a matter for debate. Most British voters rec= eive the bulk of their news from the broadcast media which has tight rules = about impartiality.=20

The government had hoped an alliance with the business sector over t= he Euro would help neutralise some of the press criticism. Many of Britain= =92s biggest businesses are keenly pro-Euro (and pro-European). Some are be= coming increasingly exasperated at the government=92s refusal to provide a = clear lead, worried that late entry could cost their companies dear. Indiv= idual businesses also loathe sticking their heads above the parapet until i= t is clear the government will provide a lead. The Confederation of Britis= h Industry, the pro-Euro representative organisation for major employers, h= as also taken the decision to try and avoid the debate after some of its me= mbers objected to it taking an overtly political stance. The government no= w appears unlikely to receive any significant support from business and ind= ustry until a Euro referendum is finally announced.=20

It should also be noted that there are important elements of the bus= iness sector which are opposed to the Euro. Small businesses, in particula= r, are worried by the costs of conversion. But a number of senior corporate= figures, generally with Conservative Party links, are also vocally opposed= . The anti-Euro group, Business for Sterling, has cleverly mustered these = forces.

The Conservative Party

When William Hague assumed the Conservative Party leadership in 1997, he= was determined to end the infighting over Europe which had been a prime ca= use of his party=92s heavy defeat in the election. He chose to harden the p= revious government=92s 'wait and see' line on the Euro by insisting the Con= servatives would now not join the Euro until it had seen the single currenc= y deal with "bad times as well as good". This new line effectively ruled o= ut membership for at least two full terms of government.=20

The policy was ruthlessly enforced, leaving pro-European Conservativ= es the choice of keeping quiet or quitting the Party =96 an option taken by= a handful of current and former MPs. The pro-European left is now all but= silent, with many of its heavyweight supporters such as Michael Heseltine = heading into retirement after the next election. Only Kenneth Clarke, the = popular former Chancellor, has suggested he will remain to fight the pro-Eu= ropean cause.

There is little doubt that the policy has proved effective in curbin= g much of the dissent within the party over the Euro. It has also proved e= lectorally popular and was part of the reason the Conservatives achieved an= unexpected level of success in the 1999 European elections.

On the broader issues of EU policy there have been few clear policy = moves, although, opportunistically, the Conservatives have generally taken = a hard line =96 encapsulated in the vacuous slogan "In Europe, but not run = by Europe". Francis Maude, the Shadow Foreign Secretary, has offered suppo= rt for an idea floated by John Redwood, a hardcore Euro-sceptic MP and form= er cabinet minister, that all future issues of 'major' constitutional impor= tance should be submitted to a referendum. This would mean the outcome of = the Nice Intergovernmental Conference, for instance, would have to be submi= tted to a national vote.

However, even this hardening of anti-EU tone has failed to appease p= arts of the Conservative party. In fact, each sop to the right by Mr Hague = seems to embolden the Euro-sceptics to demand more. There is talk of some p= rospective MPs running on a "never" to the Euro at the next election in def= iance of official party policy. A hardcore of Conservative MPs are also ca= mpaigning for renegotiations of all EU treaties =96 tantamount to full with= drawal.=20

Michael Portillo, the Shadow Chancellor and chief rival to Mr Hague = for the leadership, appears to have recognised the dangers and has adopted = a markedly more pragmatic tone in recent speeches. Without departing from = official policy, Mr Portillo has emphasised in recent speeches that the Con= servatives should "never say never" to the Euro, and suggested that a futur= e Conservative Chancellor would not take Britain out of EMU if it is alread= y a member. While this to some extent merely represents a pragmatic grasp = of reality, it is a considerable softening of tone by a politician criticis= ed in the past for the xenophobic tone of some of his speeches.

The Liberal Democrats and the smaller parties

The Liberal Democrat party is the most overtly pro-Euro political groupi= ng in Britain. While it has only a limited impact on policy at present, it= could play a pivotal role if Labour was re-elected with a heavily reduced = majority. The various nationalist parties are also pro-Euro =96 viewing Eu= rope as an escape from the clutches of Westminster =96 and could prove usef= ul allies for the government in a referendum campaign. It is also worth not= ing that the UK Independence Party is likely to field a large number of can= didates at the next election and, although unlikely to win any seats, will = pressurise Conservative candidates to take a more hostile stance against th= e EU.

2. THE POLICY DEBATE

The Euro

This paper has already looked in detail at the politics of the current E= uro debate in Britain. However, it is worth outlining in more detail the pr= actical policy.=20

The government=92s overall position has changed little since the las= t election, when it declared that it was inclined to join the Euro "when" t= he economic conditions are right and after it has received the backing of t= he electorate via a referendum. Since this point, however, there have been= two important qualifications.

Firstly, Gordon Brown, the Chancellor of the Exchequer, has stated t= hat Britain will need to pass five 'economic tests' before it is ready for = Euro entry. These include:

Evidence that the UK=92s business cycle is moving into line with tha= t of the core Euro area.;

An indication that the economy is sufficiently flexible to deal with= any future economic shocks;

Evidence that Euro membership will create better conditions for long= term investment;

Indications that the financial services sector and, in particular, t= he City of London are suffering from being outside the Euro;

Confirmation that joining the Euro will be good for employment.

The Conservatives claim that these tests are too vague =96 a view sh= ared in part by the financial community in Britain =96 and the decision to = enter EMU will be political not economic. The suspicion also remains that = the Chancellor is inclined to use the tests as a reason to delay Euro entry= , a view given credence by Mr Brown=92s robust defence of a cautious approa= ch to Euro entry at the annual Mansion House Speech in June. The governmen= t=92s sensitivity on the issue of the tests was further demonstrated when t= he Treasury took the unusual step of issuing an outright denial to a report= in the Financial Times suggesting an internal review had concluded = Britain was close to meeting the five criteria.

In 1999, the government also put in place a National Changeover plan= outlining the practical steps that would be needed to make the transition = to the Euro. The media initially greeted the plan, which includes a provis= ional timetable for adoption of the Euro but no firm start date, as firm ev= idence of its Euro intentions. The Conservatives, meanwhile, sought to play= up the costs which will be incurred by both the public and private sector = during the transition period. However, the government=92s prevarication on = the Euro issue since the release of the Changeover Plan has diminished its = political significance.

Economic Reform

In an effort to side-step the Euro debate, the government has deliberate= ly focused much of its European strategy since the beginning of the year on= promoting economic reform within EU. Tony Blair has undertaken a series o= f trips around Europe, proselytising the virtues of structural reform and s= eeking like-minded allies to help push forward a series of bogged-down libe= ralising measures.=20

This culminated in the Lisbon Summit in March. The Summit conclusion= s =96 which concentrate on structural reform measures and advocate employin= g 'soft' measures, such as benchmarking and peer pressure, to achieve polic= y goals =96 have a distinctive 'Anglo-Saxon' flavour. There is a strong em= phasis on the completion of the single market in areas such as financial se= rvices and energy, where the relatively liberalised British economy should = benefit. The British government has also raised the need for European-wide= reforms in pensions and the labour market. The EU has rarely tried to tac= kle these issues before, regarding them as the preserve of national politic= s. France and Germany remain extremely politically sensitive to any sugges= tions that they must adopt an Anglo-American economic model. However, Mr Bl= air has insisted these measures are vital for the Euro to work effectively = =96 a suggestion that has led some commentators to dub the EU=92s willingne= ss to embrace reform as the "sixth economic test" for British membership of= the single currency.

However, Britain now faces a major challenge on economic policy from= within the EU. The French government, which is widely perceived as less t= han enthusiastic for widespread structural reform, assumes the EU Presidenc= y in the latter half of 2000. There have been suggestions that some Europe= an countries may try and hamper reform moves unless Britain relents on the = EU Withholding Tax Directive. Many of the Lisbon conclusions are also vagu= e aspirations rather than firm commitments, and it seems certain that Brita= in will need to work hard ahead of the economic summit next Spring to ensur= e further progress is made. An indication that the British government inte= nds to pursue this strategy came recently, when Mr Blair teamed up with Jos= e-Maria Aznar, the Spanish Prime Minister, to reiterate the need for econom= ic reform if the Euro is to function properly.

Foreign Policy and Defence

Surprisingly, the Labour government has also been keen to take a leading= role in the previously taboo areas of defence and foreign policy. Britain= had in the past resisted any moves to establish an independent EU defence = entity, fearing it could undermine NATO and damage the 'special relationshi= p' with the United States. However, by the end of 1998 it had radically al= tered its line, concluding that some form of independent European defence = capability would help spread the burden of paying for the EU=92s security m= ore fairly. The government argued that, if EU member states could be persu= aded to spend more on their common defence, the US would be more likely to = remain fully engaged in Europe.=20

The government reached a pivotal agreement with the French at St Mal= o in December 1998 which laid the foundations for the EU to begin developin= g its own military capacity. Unexpectedly, it also bowed to a key French de= mand that this force could act 'autonomously' where necessary and would not= need NATO to take the lead. Since this point, the government has pressed = ahead with the creation of a rapid reaction force of around 50,000 men. Th= e Conservatives appear much more sceptical on this issue and Iain Duncan Sm= ith, the Shadow Defence Secretary, has indicated that if the party takes of= fice it will reverse any moves already made to establish the defence force.

The British government has also thrown its weight behind Javier Sola= na, the EU=92s High Representative who is charged with developing a coheren= t EU foreign policy. A number of Senor Solana=92s senior advisers are Brit= ish and the government was a strong supporter of his attempts to create a s= trategy for future EU/Russian relations. The government is convinced that = the High Representative role is necessary if the failures in the Balkans, w= here EU money and support was often slow to arrive, are not to be repeated.

Justice and Home Affairs

Another clear sign of the shift in British European policy is the govern= ment=92s evolving attitude towards justice and home affairs. Britain may s= till possess an opt-out from the Schengen Agreement on free movement, but t= his has not prevented the government from taking an increasingly active pol= icy role on justice and home affairs issues. Jack Straw, the Home Secretar= y, was once considered the most Euro-sceptic member of the Cabinet. But he = has become a committed and influential member of the Justice and Home Affai= rs (JHA) Council of Ministers.=20

The Home Office devoted a lot of energy in preparations for the spec= ial summit in Tampere in October 1999 which focused on the issues of immigr= ation, asylum and the fight against crime. Although the government made cle= ar that it is committed to maintaining border controls, it has begun to opt= into aspects of the EU=92s free movement policies. Ahead of the Tampere S= ummit, the UK issued a joint paper with the French and German governments o= n the future of EU immigration and asylum policy. It has applied to join t= he Schengen Information System, a cross-border police database. It has qui= etly indicated that it would be prepared to take part in a future EU asylum= policy. By early 2000, Britain ranked alongside Germany as the main targe= t for asylum-seekers, leading the government to conclude that other EU coun= tries need to share the burden. However, the government remains opposed to= any formal quota system, arguing that each case should be dealt with indiv= idually and should take into account other national contributions to crisis= management.

Britain has also been at the forefront of the campaign to speed up t= he process of European justice through mutual recognition of court orders a= nd judgements. It argues that the federalist dream of harmonising legal sy= stems will prove an impossibly complex and ultimately unnecessary task. In= stead, it believes that a mutual recognition system =96 although in itself = a major undertaking =96 will enable governments to cope with diversity and = avoid wasting decades in fruitless arguments.

Institutional Reform

While the British government has been able to take the lead on a surpris= ingly wide range of European issues, the lead up to the Nice Intergovernmen= tal Conference has found it once again on the defensive. In particular, it= is worried by Franco-German plans to remove the veto on tax issues and the= possibility that the European Charter will enshrine new, legally binding s= ocial and economic rights within British law. The Conservative opposition = is already highlighting both issues as a major threat, not just to British = sovereignty but to the "superior" performance of the British economy.

Although the British government has yet to clarify its full position= on the Nice institutional reforms, there is little doubt it is looking for= a 'minimal' treaty. It accepts the need to expand Qualified Majority Voti= ng (QMV) to prevent policy blockage in an enlarged EU. But, like the other= large member states, will want a re-weighting of the voting powers of the = member states in return. It is desperate to avoid QMV being introduced in = highly sensitive areas such as tax, and is seeking support on this issue fr= om countries such as Spain, Finland and Ireland. The government has also b= egun to campaign against the Charter being anything other than a broad stat= ement of principles with no legal implications. It has appealed to like-min= ded states such as Portugal and Finland to support its position.

The French plans to increase the powers of the Euro-11 group of fina= nce ministers have also presented Britain with a challenge. It arguably pr= ovides the clearest indication yet of the willingness of 'core' members of = the EU to move forward without Britain. The government naturally fears tha= t a beefed-up Euro-11 could lead to a downgrading in the importance of Ecof= in and in the future effectively leave Britain outside the loop on major ec= onomic decisions. Pro-Euro elements of the government are already seizing = on the Euro-11 move as fresh evidence that Britain must join the single cur= rency sooner rather than later. =20

For the moment, the government seems certain to block any attempts t= o formalise the Euro-11 arrangements. However, there are those close to th= e government who suggest that Britain will have to learn accept a more flex= ible approach to EU policy-making and that this can often work in Britain= =92s favour =96 for instance in defence, where they can clearly take a poli= cy lead.

Beef and other policy headaches

For all the government=92s largely positive European stance in the major= policy areas, it remains bedevilled by a series of minor issues which have= at times dominated the headlines in the UK media. The ban on British beef= exports looms large in this context, providing evidence that even this mos= t pro-European of governments can still resort to a more populist anti-Euro= peanism when under political pressure. The government initially took a mod= erate line on the French decision to refuse to lift the ban, insisting it w= as a matter for the EU to resolve. However, with the British media buildin= g itself into a frenzy of righteous indignation, the government=92s handlin= g of the problem became increasingly tetchy and erratic.

Another case in point is the battle over the Withholding Tax Directi= ve, where Britain has often appeared to stand alone in its opposition. The = Treasury probably has not helped its cause by initially hinting it was prep= ared to reach a compromise on the directive and then hardening its tone as = the issue became more widely reported in Britain. The government has now b= oxed itself in by its apparent promise to defend the London Eurobond market= at all costs. It is hard to see how it can now reach any agreement that d= oes not clearly exempt the Eurobond market without being accused of "caving= in" to Brussels. The Treasury=92s latest proposal =96 to encourage the ex= change of information on savings rather than directly impose the tax =96 ma= y play well in Europe but is likely to come under fire domestically. =20

But this is not to argue that the government=92s pro-Europeanism is = only skin deep. Rather it stresses the difficulties faced by any UK govern= ment in presenting the normal give-and-take of EU politics as anything othe= r than Britain versus the rest.

CONCLUSIONS

British European Policy is at a crossroads. If the government consolida= tes its position as the most pro-European force in British political histor= y it could play a lead role in the future evolution of the EU. However, th= e government=92s own reticence over the Euro means there is a risk that ant= i-single currency sentiment could become entrenched within the electorate a= nd even spill over into a more general anti-EU tone.=20

In five years time it is possible to foresee two starkly different s= cenarios. Tony Blair could successfully steer the country through the Euro= referendum and Britain would be on the verge of finally joining the EMU. = The government=92s credibility with its European partners would be further = enhanced, ensuring it could take the lead in its favoured policy areas. The= government=92s dream of placing Britain at the heart of the Europe would b= e on the verge of becoming a reality.=20

However, there is also a real chance that Britain may face a more pr= olonged absence from the Euro. Other European countries would rapidly lose= patience and push ahead with their own agendas, placing Britain constantly= on the defensive. A reviving Conservative Party may even follow the logic= of its recent European pronouncements and begin to campaign for outright w= ithdrawal. The policy battle would no longer be about the pros and cons of= the Euro or how Britain can best play a creative European role, but whethe= r the country has any future in the EU at all.=20

Alasdair Murray is the Economist at the Centre for European Refor= m, London=20

The views and opinions expressed in publications of the Friedrich= -Ebert-Stiftung London Office do not necessarily represent the views= of the Foundation.

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web: www.fes.de/london

=A9 Friedrich Ebert Stiftung | te= chnical support | net edition=20 fes-library | Oktober 2000

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