The EU and the Eurozone

 

WEEKLY COMMENT 29-10-2015

By Barry Edwards

The EU and the Eurozone

 

The debate about the European referendum in the UK has finally centred on the question of how the EU and the Eurozone coexist. The core of the problem is that the Eurozone is committed to financial cohesion because of the Euro while those countries that have their own currency do not wish to adopt all the proposals that are being put forward by the European Commission. This is a subject that is discussed by the bureaucracy in Brussels but has not been addressed by the media or the individual governments at all.

This week we have seen various comments by the government stating that this is a point that must be agreed as part of the renegotiations for a reformed EU. In my view, this is the key point since up until now it has been assumed that those non-Euro members will simply adopt the rules and regulations imposed from Brussels because they will become members eventually.

The reason this is not acceptable is that this approach imposes terms and conditions on non-members which conflict with the concept of each of those countries managing their own financial affairs beyond the rules agreed by all EU members concerning government expenditure. Allowing non-members to opt out of those regulations that do not apply to a country managing its own currency is not currently part of any agreement which sets out precisely how this would work.

Consequently, it is not just the UK that has a problem with this; it is all non-members most of whom are small countries without the influence of the UK. David Cameron has been discussing this matter concerning non-members at his meetings with EU leaders but the details have not been published. The ‘5 Presidents Report’ which we discussed on the 10th of September in this weekly comment demonstrates the intentions very clearly with a short mention that an arrangement has to be reached between the Eurozone and non-members.

It is not surprising that the public is confused how the EU will function when you have two conflicting objectives which have not been debated anywhere in the media or by governments. Fundamentally, until the precise terms have been agreed on this specific point, it will be difficult to discuss properly any reform of the EU that can accommodate all members.

The mass of refugees and immigrants is exposing all the weaknesses in the EU agreements and it is not just the UK that is seeking a serious rethink about the future of the union. The refugee problem is dominating the headlines and putting enormous pressure on all the EU leaders and the population in the areas that are most affected. It is obvious that there will be much less concern about the EU referendum in the UK until this matter is resolved. It is possible that the referendum will be postponed if the refugee problem becomes more intense.

That does not change the fact that there is a problem about the arrangements between the Eurozone and the non-members. The EU summit in December has been allocated time to discuss the reforms that the UK is seeking and David Cameron has promised to present in November the terms he wishes to be considered to allow time for the EU leaders to respond properly.

The world leaders are beginning to become involved in the EU reform debate and the USA has stated that it wishes the UK to remain in the EU. It has also stated that if the UK leaves the EU it would not be able to negotiate special terms for a trade deal with the USA and has made clear there would be tariffs similar to China, Brazil and India. This is likely to be the situation with other large countries including China substantially weakening the argument for the Eurosceptics.

The whole debate is opening out and the real issues are beginning to be discussed in the media. Until this time the No campaign has had the advantage, the argument for staying in the EU is now starting to gain some credence. The next few months will be an interesting time for the EU debate, providing the refugee crisis does not turn out to be the catalyst for the break-up of the EU.

That’s all for this week, more observations next week.