Foreign Secretary speech on the European Union and its future

Foreign Secretary William Hague gave a speech on the European Union and its future to a dinner hosted by think tank Open Europe.

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William Hague

Foreign Secretary William Hague says changes in the Eurozone mean this is the most interesting and important time in European policy since the fall of the Berlin Wall, and the decisions made in the next few years by the peoples of Europe and their leaders will set the continent’s course for a generation.


I am delighted to speak to you here this evening for this great think tank Open Europe’s summer reception. I want to talk about the European Union, why the status quo isn’t working, why it’s worth trying to put it right and something of how we can do that, but first I do want to say something about our hosts.

Open Europe has been going for eight years and in that time it has become one of the outstanding think tanks on EU matters anywhere in Europe. The quality of its analysis on the political, economic and financial issues facing the Eurozone is incisive and unsurpassed among think tanks in Britain.

It is entirely in keeping with the tradition that Open Europe grew from that it should have distinguished itself on thinking about the Eurozone, because it emerged, of course, from the campaign to keep Britain out of the Euro. I can see here many veterans of that campaign and thank goodness we succeeded, because it is now clear to nearly everyone that what we predicted was right: British membership of the Eurozone would have been an economic disaster for our country and would have created a political crisis in this country.

Without the monetary and other policy flexibility afforded to us by the possession of our own currency the recession that followed the Great Bust of 2008 would have worse. The consequences of the sovereign-bank loop that have afflicted some Eurozone countries would, if replicated in Britain, have been truly serious. As I used to put it years ago, we would have been the elephant in the rowing boat – if the elephant slips the rowing boat has quite a serious problem. The steps taken thus far towards deeper fiscal and economic integration in the Eurozone, while they fall far short of fiscal and economic union, would certainly have proved democratically intolerable to the United Kingdom.

And so I want to pay particular thanks to Lord Leach, first for his part down the years in bringing together the efforts of all those who prevented such a disastrous turn of events, and second for his role in founding Open Europe.

Open Europe has been lucky in some ways as well. The Eurozone crisis and its interlocking facets have meant that there has never been a better time to be a think tank specialising in EU issues. Interesting times are just what think tanks want, but they are not what we politicians want, because we are expected to deliver the solutions.

Fortunately, Open Europe is an organisation that doesn’t simply enjoy commentating on problems but also helps with the answers, and their work on banking union in particular has been exceptional.

And because I share Open Europe’s vision of an open, dynamic, more democratic and flexible European Union I am particularly pleased that its voice and significance in the wider European debate is growing, with new offices in Brussels and Berlin. I think that absolutely the right thing to do.

They are such a valuable part of the debate that we should celebrate their success by asking them to work harder, all over Europe, and that’s what I am asking them to do tonight.

I don’t think there is anyone here who doubts the importance of the question of the European Union’s future, or of Britain’s relationship with it. It is an illusion to think that we are confined by our neighbourhood and that the world beyond it is of secondary importance and it is equally a mistake to think that any country can escape its neighbourhood.

Europe’s future now is more uncertain than at any time since the fall of the Berlin Wall and the decisions made in the next few years by the peoples of Europe and their leaders will set the continent’s course for a generation. The future state of the Eurozone is not determined: the search for a settlement that combines democratic acceptability and economic workability goes on. It may take some time and it is right that it should: these are fateful decisions and an attempt to impose a complete settlement of the zone’s difficulties that did not work economically or proved democratically unsustainable would be more dangerous than dealing with the problems step by step.

We all know about the deep flaws in the Eurozone’s design. Governments must be very careful in prescribing solutions for their neighbours that they do not mean to inflict on their own countries so I shall try not to, but the Eurozone’s crisis has been made far worse by two other faults that affect the EU as a whole.

The first is some European countries’ lack of global competitiveness. The problem is in part domestic – some countries have failed to ensure that their citizens are equipped to keep up in the global race in education or have economies flexible enough to adapt. Of course, some countries, such as Sweden and Germany, are doing very well and we have lessons to learn from them.

But the problem is also European in origin. We all know there’s far too much European regulation that makes it harder for businesses to compete globally. And even though every European country is struggling to nurture every green shoot of economic growth they can find, the EU’s legislative machine still manages to churn out proposals that would smother them, proposals that we and our allies must then spend time and effort in blocking.

The second flaw, the lack of proper democratic control, is deeper seated and has been even more harshly exposed by the Eurozone crisis. Of all the European institutions it is the Council, accountable to national parliaments, that has taken the lead because when decisions about money are at stake it has predictably turned out that voters look to their national parliaments as the legitimate decision makers.

That point is more broadly true of the EU as a whole. People do not know how to make their views heard or how to change things as they do in a national democracy.

The proposed solution to what is known in the jargon as the question of democratic deficit has long been the European Parliament. The European Parliament has an important role to play. It holds the European Commission to account and it can be a great force for reform, as we’ve seen with the Common Fisheries Policy. But if after five major EU treaties, all of which have greatly increased its power, the voters are still asking the question then it, the European Parliament, is not the answer.

Particularly in Britain, unnecessary bureaucratic intrusion into matters where there is no need for the EU to be involved causes immense resentment. A few weeks ago the EU almost banned olive oil jugs in restaurants from the Arctic Circle to the Mediterranean, causing indignation and incomprehension across thirty degrees of latitude. It’s very welcome that the Commission listened to what in business you might call negative customer feedback but the worrying thing is that if it had gone ahead it would have been very hard for anyone to reverse.

People see the same systemic problem in other EU institutions. The Dutch Government’s new subsidiarity review complains that ‘the European Court of Justice interprets EU legislation in a way that EU legislators did not foresee or intend’.

The core of the problem with the way the EU works is that as a system it is very good at centralising power from its Member States but very bad at letting go of power, at decentralising. Underlying this we have that famous phrase to conjure with, the ‘ever closer union of the peoples of Europe’. What was an understandable, even admirable aspiration after the Second World War is now seen as a justification for a process that has emptied parts of national democracy of its meaning and content.

And if this seems like a problem for a country like Britain outside the Eurozone it is going to be even more of a problem if Eurozone countries have to enter into deep fiscal and economic union, although that is not a foregone conclusion.

This is not a process that can go on without making the problem worse. To quote the Dutch Subsidiarity Review again, ‘the time of an “ever closer union” in every possible policy area is behind us … the Dutch people were, and still are, discontented with a Union that is continually expanding its scope, as if this were a goal in itself.’

And if all this is controversial in the Netherlands it is many times more so in Britain where the last Government’s astonishing act of arrogance – agreeing and bringing into law the Lisbon Treaty without consulting the voters in any way at all – did severe damage to the EU’s democratic legitimacy in this country.

Now some argue that the harm these faults of the European Union cause is so great, that reform is so hard to achieve Britain should simply leave. It is a legitimate point of view and in due course the British electorate should have the right to decide whether they agree with it in a referendum.

But I believe that reforming the EU so that Britain wants to stay in it would be the best outcome for our country, and indeed for Europe. I believe that change is not only possible but that this Government has gone some way to proving that it is possible.

I will give you are three reasons. The first is economic: membership of the Single Market does bring important economic benefits to Britain, particularly for inward investment.

TheCityUK studied 147 decisions to invest in the UK in the last six years and found that two-thirds of finance firms gave access to European markets as a core reason for choosing London.

The UN’s World Investment Report showed that Britain remains first in Europe for attracting inward investment. We attracted twice as many projects as Germany, and three times as many as either France or Spain.

Naturally, increased trade works both ways. British firms have sold wood to the Scandinavians, amazingly, Scottish knitwear to the Italians, Pret a Manger sandwiches to the French, and we have worked with European partners to sell Airbus planes to the world.

The EU’s collective weight as a negotiator in trade is also formidable. Of course, the United Kingdom alone might be nimbler in trade negotiations and our free-trading instincts would remove obstacles but the power that comes from size allows the Europe’s nations negotiating collectively to break down barriers that might otherwise have remained. That is of direct benefit to Britain.

There follows the second reason: the EU’s collective weight applies in areas other than trade policy. My experience as Foreign Secretary is that being one of the EU’s leading nations in foreign policy makes Britain stronger in world affairs on some important issues, such as Iran and Burma, and our voice is listened to more attentively in other capitals because of it.

That is not to say that we should fall into the opposite error of thinking that we live in a world of blocs or that only Brussels, Washington and Beijing count. On the contrary, we live in a networked world where engagement between countries is broader than ever before and where there are many more centres of decision making. But what Winston Churchill saw for Britain’s role in the world as using the membership of our circles of influence – with the Commonwealth, with Europe and our indispensible relationship with the United States – still has force today. Indeed, the Foreign and Commonwealth Office is engaged now in enlarging our circles of influence in Latin America, in South East Asia and in Africa.

The third reason is our broader enlightened national interest in our neighbourhood. The nations of Western Europe are now happily deeply rooted in attachment to peace and democracy but the tragic history of the 20th century means those roots are shallower to the East. The EU has acted and still acts as a great encouragement with strong incentives at its disposal to help the nations on its borders entrench those values, and that process is undoubtedly to our benefit.

So change in the EU is worth fighting for and that change would not just benefit Britain but every country in the EU. But these changes and reforms cannot be superficial. We need to give the EU the mechanisms to stop unnecessary interference, to decentralise powers better dealt with by national parliaments and governments back to national parliaments and governments. That is best done by giving parliaments the tools to do so. In that context I have discussed giving national parliaments a red card enforcement power on subsidiarity and proportionality.

We need change too to make our economies more globally competitive, by expanding the Single Market further into energy, services and the digital economy, by going forward with free trade and by learning to lighten regulatory burdens on business.

Crucially, the European Union must ensure that it is flexible enough to reconcile the differing goals countries seek in it: those for whom federalism is a dream and those for whom it is the opposite, and flexible enough to remain a European Union that works and is fair to those in the Eurozone and those who keep their own currencies.

Some say that this is all impossible. But this Government has already won arguments that people said we never would win, even on the hardest arguments of all, which are always about real money.

People said that Britain was now locked into Eurozone bail outs, but we shut down the future use of that EU power, perhaps the first power ever returned from the EU to a Member State. People said we would never be able to cut the EU budget. But we got a cut in the budget. People said that the Common Fisheries Policy was unreformable, but we have achieved real reform. People said that the EU was irredeemably protectionist, but we have concluded free trade agreements with Korea and Singapore and launched the most ambitious free trade negotiations of them all with the United States. People said that the Eurozone would inevitably caucus against us, but we secured rules on double-majority voting and non-discrimination that protect our interests in the most sensitive area of banking union.

So, ladies and gentlemen, this is the most interesting and important time in European policy since the fall of the Berlin Wall. The Eurozone is changing and that means that the EU is in changing. The future shape of Europe will depend upon the choices Member States make in relation to that crisis and that future shape cannot yet be predicted with certainty. The status quo is not working to this country’s satisfaction or for the EU as a whole; the sustainability, economic and democratic, of the EU and the Eurozone depends on successful reform of both. For all the difficulties the EU poses for this country and for national democracy its achievements, the advantages it brings for our national interest and its future potential mean the right course is clear: negotiation of reform based on the five principles set out by the Prime Minister’s speech in January – global competitiveness, flexibility, powers flowing back to Member States, democratic accountability and fairness between Eurozone and non-Eurozone – and then a decision on Britain’s EU membership in a referendum.

We have shown many times now that change is possible. Getting the deep change and real reform we want will not be easy but it is in our national interest to pursue it. Open Europe is a great advocate of that task and that is why I am so pleased to support their work here this evening.

Further information

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Published 16 July 2013