Are Rejoiners ready to sell today’s EU?

The European Movement UK has the stated aim of fighting to rejoin the EU “as soon as it is politically possible”, an aim which I support.

However, the EU that the UK would be rejoining is different to that which it left - both because the UK would almost certainly no longer enjoy its previous array of opt-outs, and because the EU has already moved on since Brexit happened. (The only opt-out one can envisage the UK potentially re-obtaining is that from the Schengen area, and then only because of Ireland’s opt-out and the need to keep the Irish border open - though Ireland could instead choose to insist on UK Schengen membership as a condition for the UK’s accession.)

In the economic arena in particular, the European project (a term many UK pro-Europeans shy away from using) continues to move forward, with developments in the following three areas fundamentally changing the character of the EU membership which the UK left behind.

1. The euro
   
   The euro is of course not new. In fact, it existed for almost half of the time that the UK was an EU member. However, a rejoining UK would almost certainly no longer enjoy a legal opt-out from the treaty obligation to join the euro, nor from associated policies such as the Stability and Growth Pact. While some may be tempted to suggest that the UK could ‘do a Sweden’, or a Poland, etc, none of these countries are in the situation of seeking to join the EU having previously left (and having left in some acrimony). It is not unreasonable to assume that the UK’s intentions vis-à-vis the single currency would be heavily scrutinised, particularly with the country’s behaviour in relation to the Northern Ireland Protocol still in the back of everyone’s mind. A suggestion, well-publicised in the UK media, that the country could simply pretend it intended to join the euro but never actually do so would likely not wash.
   
   In any case, suggesting that the UK could do a Sweden - ie, commit in principle to joining the euro but never actually do so - to some extent misses the point. The euro area member states - who, when Bulgaria, Croatia and Romania join sometime this decade, will once again represent more than 80% of the EU population - increasingly set the agenda for the EU as a whole, as they must if their currency is to thrive. But they do so today in a rather awkward way, with institutions - the Eurogroup and Euro Summit - which are rather opaque and informal in nature, and which to some extent circumvent the EU’s normal institutional balance. (There is no Euro Parliament, for example.) The euro area member states squatting inside the institutions of the wider EU is suboptimal both for them and for the ‘outs’ (particularly countries like Denmark, Hungary, Poland and Sweden who have no intention of joining the euro for the foreseeable future, if ever), and so there is likely to be increasing pressure to recast the EU in ways which suit the majority of its members - ie, those inside the euro area - at the expense of those outside the single currency tent.
   
   If someone were to suggest that Northern Ireland or Scotland should leave the UK’s single currency but stay in the ‘UK single market', most would find that a rather odd proposition - the two are presumed to go together. In a similar vein, one can argue that the EU’s single currency is a necessary and fundamental step on the path towards completing the EU single market. In any case though, regardless of one’s view of the principle of a European single currency, its existence is our present-day reality - as is the fact that the success or otherwise of the European project is now increasingly bound up with that of the currency. It makes little sense to advocate the UK’s rejoining today’s EU if that prospectus does not also include - front and centre - joining the euro.


2. The banking union
   
   The banking union is said to be the most significant EU integration step in the last 20 years, yet it has received rather little attention in the UK - either before or after Brexit. Designed to break the vicious circle between banks and sovereigns in euro area member states seen at the height of the financial crisis in the early 2010s, membership is mandatory for members of the euro and optional for other EU countries. On their path to joining the single currency, Bulgaria and Croatia joined the banking union in 2020, while Denmark and Sweden have both flirted with the idea of joining at various times in recent years. (In the meantime, Sweden-headquartered bank Nordea moved its headquarters to Finland in order to be within the banking union.)
   
   There are substantive reasons for wanting to be inside the banking union - including from a financial stability perspective, and in order to benefit from a consistent application of the single market’s so-called ‘single rulebook’ for banking regulation - but it is also the case that the members of the banking union (that is, the members of the euro area plus their closest economic partners) are increasingly setting the broader EU agenda, at least in the realm of financial services. A Swedish government enquiry into whether Sweden should join the banking union reported in 2019:
   
   “Even if Sweden can refer to its formal influence in negotiations about directives and regulations, it may be more difficult, in practice, for a Member State that does not participate in the banking union to make its voice heard. There is, in general, a risk that Member States that choose to remain outside areas of cooperation in the EU become marginalised in negotiations.”
   
   The banking union is currently regarded as incomplete, yet slowly and inexorably it has been both broadening and deepening. Later in 2022, the so-called common backstop to the Single Resolution Fund is due to come into force. Meanwhile, discussions continue on an acceptable initial incarnation of a European deposit insurance scheme. Observing from the outside the increasing degree to which the banking union is becoming an integral component of the EU’s single market - the single market in financial services in particular - it would seem bizarre to advocate the UK’s rejoining the EU but that it should continue to stand aside from the banking union.


3. NextGenerationEU
   
   Perhaps more widely known about in the UK is the agreement that was reached by EU member states in the summer of 2020 - in response to the COVID-19 pandemic - of an economic recovery package of €750 billion, funded by joint borrowing. Although not the EU’s first foray into common debt issuance, NextGenerationEU, as it is known, is on a much larger scale than anything the union has carried out previously.
   
   While ostensibly a one-off programme in response to the particular circumstances of the pandemic, NextGenerationEU has been described by some as the first step towards a genuine fiscal union - something which many have always held to be a necessary complement to the EU’s existing monetary union.
   
   We will never know this for sure, but it seems hard to believe that NextGenerationEU - which covers all EU member states and not only members of the euro area - would have been agreed to had the UK still been a member of the EU. While still some distance from the fiscal union of the United States - or indeed that of any individual EU member state - the EU is now a fiscal union in a way which it was not when the UK left the union on 31 January 2020. Are those of us in the UK’s pro-European movement ready to be honest about that, and to advocate for membership of it?

The EU either is already or is in the process of becoming a monetary union, a banking union, and a fiscal union. The completion of the banking union and the further development of the fiscal union may be years away, but so is a potential UK re-accession, and in the meantime the direction of travel is clear - all three of these unions are becoming ever more integral to the very nature of what the European Union is.

It seems implausible that the 27 EU member states will welcome with open arms an applicant UK that looks a lot like the UK that left - millions of grudging Europeans reluctant to acknowledge their EU citizenship and identity, and always wanting to opt out of fundamental parts of the project. If our argument for rejoining involves harking back to the allegedly ‘best deal’ that was the UK’s previous membership, rather than embracing and advocating for the EU of the 2020s, it seems doomed to failure.

Postscript

This post was written before Russia’s invasion of Ukraine. In the last few weeks, the UK and the EU have been working more closely together than at any time since Brexit - perhaps most visibly demonstrated by the attendance of the UK foreign secretary at an EU Foreign Affairs Council meeting in early March. However, such close working is not the same as being inside the institutional structures of our continent’s preeminent political union.

One observer remarked that the EU’s view of its role in the world has changed more in the last four weeks than it did in the previous four decades. As well as monetary, banking and fiscal unions, the EU is becoming a hard-power actor. But the UK is not at the table as it deliberates that change.

War and peace, democracy and the rule of law, health security, energy security, climate change: these are the big issues of our time, and our continent needs a coherent response to all of them. That response will be led by the EU.

In time, the UK should once again play its full part in the councils of the EU, helping to shape that response - but to do so will mean accepting the fundamental tenets of the contemporary EU as we find them.

An edited version of this post was published on the London4Europe blog.