Daniel Korski

The government’s Sarkozy problem (and other euro dilemmas)

The government's Sarkozy problem (and other euro dilemmas)
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This week’s European Council meeting has been analysed by diplomats and commentators alike, but a number of issues have not been brought out as clearly as they need to be.

The first is that Britain will now achieve political advantage, at the cost of economic setback, if the euro collapses. Although the government insists both that it is still wedded to the success of the euro and that it will not be isolated in Europe now or in the future, the simple fact is that eurofailure will ensure that efforts to organise among the 26, rather than the full 27, will finish. The economic costs would be considerable — possibly 10 percent of Britain’s GDP — but it would help Britain back into the centre of European decision-making. So the problem is not that Britain will be marginalised, but that our political interests are now directly opposed to those on the European continent.

The second issue concerns the future of Britain’s relationship with the EU and the timing of future debates about it. In the short term, the Prime Minister must show that Britain is not being marginalised, which is why George Osborne and William Hague are insisting that everything is as it was before. For if we are marginalised, then Labour will say that Britain has become irrelevant under the government’s leadership while Conservatives will have a strong argument to push for a complete withdrawal.

Unfortunately, Nicolas Sarkozy has more power to determine the timing of this than David Cameron. If The French leader pushes to exclude Britain further, he can trigger the debate in Britain. To counter this, the government needs to immediately review the range of its EU policy positions, deciding the costs of obstructionism against the benefits of being helpful to other EU allies. Crucially, it also needs to decide how to handle President Sarkozy. Less than a year ago there was talk of a closer relationship between Britain and France than ever before. That has now collapsed to the point where it may be in Britain’s interest if the French president loses the next election.

Part of this must also be stronger links with Germany, Spain and the smaller states who will fear a EU future where the European Commission is sidelined. This cannot amount to leading anybody, but issue by issue Britain can muddy the waters.