The Telegraph: EU will move to full fiscal union, or disband. The UK must hold course

As debates have raged about Britain’s future relationship with the EU, little attention has been given to the nature of the entity that we would be leaving or remaining in, or to its future. Better late than never.

What we now call the European Union has never stood still. It emerged out of an innocent sounding agreement to establish the Coal and Steel Community in 1952. Five years later came the Treaty of Rome that established the European Economic Community (EEC). It represented a giant leap (forwards or backwards?). It clearly embodied the objective of reaching a full union of the member countries. The community has been growing like topsy ever since. The EEC became the European Community (EC) and then the European Union (EU). Membership expanded from the original six to the current 28 countries.

Initially, the members of the union enjoyed substantial economic success. In the early years, the EU may have helped, but only marginally. Growth was driven primarily by post-war reconstruction, the shift from agriculture to industry and the global boom.

Apparently unnoticed by the UK’s Europhile establishment both then and now, most countries in the industrialised world enjoyed rapid growth during this period. The outlier was not the EU but rather the UK, held back by self-imposed burdens that were not lifted until the radical Thatcher reforms of the Eighties. Interestingly, once shot of them, the UK started to outperform other EU members.

As time moved on, the EU’s plans became more and more grandiose. The Maastricht treaty, which laid the foundations for the euro, was signed in 1992. Since then, the EU’s relative economic performance has been poor. But the grandiose plans have trundled on.

So do you suppose that the EU will stay as it currently is? It cannot. Put to one side the question of the union’s future geographical expansion, although this is bound to happen. The position of the eurozone makes profound change inevitable. It still has no integrated fiscal and economic policy. The monetary union has fused together countries as different as Germany and Italy without forging the institutions necessary to keep the union together. It is a child’s fantasy of a union. That is precisely why the Bundesbank, Germany’s widely revered central bank, opposed it.

To resolve the contradiction at the heart of it, the European elites have believed that something would turn up – or down. Now it is decision time. Its members must now press on to full fiscal and political union or the union must break up. The euro is one recession away from an existential crisis.

So the UK cannot remain in the same EU that we currently belong to. If the eurozone holds together and presses on to full fiscal and political union, we would be under enormous pressure to join. This union would soon take control over taxes, pensions and heaven knows what else. If we were somehow allowed to remain outside the euro, we would find ourselves in a weak position, forced by the powerful euro bloc to toe the line on everything without having much of a say on anything.

If we stay in the EU and the euro splits, there would be severe financial dislocation, with heavy bills to be paid by all EU members, including us.

So, run it by me again: why do many people feel passionately that we must stay in? Of course there are some reasonable economic arguments for remaining although, in my view, they don’t stand up to close analysis. But, interestingly, they aren’t the ones ardently espoused by most Remainers. Many of them seem to confuse European identity with current European political institutions. Liking European food, wine, culture, skiing and sunshine – not to mention German cars – they seem to subliminally assume that somehow these goodies are bound up with current European political institutions and that we would lose access to them if we left the EU. But of course we would continue to enjoy them, just as other non-EU countries do. I have repeatedly stated that the EU is a zone of comparatively low growth and argued that this is related to the EU’s misguided policy obsessions, deriving from its essential nature. But still the Europhile establishment from Tony Blair downwards seems to presume that the EU is a stonking economic success. Perhaps arid economic statistics don’t cut any ice with them (they never did with Tony Blair).

In that case, perhaps they should reflect on the continent’s terrible demographic prospects? Or on why it is that, outside the UK, so few tech companies have started up in Europe? Or on why, outside the UK, there are no internationally ranked top universities in Europe? Interestingly, the highest-ranked continental university is Zurich which, of course, is in non-EU Switzerland.

Having reflected on these matters, would they please tell us what the basis is for believing that the EU is heading for a prosperous, never mind stable, future.

Of course, many Remainers are not so much confident about the EU’s future as worried about ours, as a small country cast adrift in a difficult world. Yet, although we are no longer large, we aren’t small and we wouldn’t be adrift. Put aside for a moment the UK’s connections and friends around the world and its global reach. Once we leave the EU and are seen to prosper, other countries are likely to follow. The future that beckons is not as some fringe country, isolated from its own continent.

Many people in Europe long to escape from the bureaucratic and undemocratic nightmare that is the EU. They want institutions that foster and protect free trade, co-operation and friendship, without the political mumbo jumbo. It would be our role to lead Europe to such a future. If only the UK Government can muster the gumption to deliver what the British people have voted for, Brexit can save, not just the UK, but the whole of Europe.

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