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General Election 2015


Cameron's EU referendum cul-de-sac

(6 May 2015)

The outcome of the UK general election will be anxiously anticipated in capitals across Europe as it is probably the most crucial election in the history of the UK's troubled membership of the European Union. Dr Christian Schweiger explains why.

David Cameron's promise to hold a referendum on the future of British EU membership by 2017, if he is re-elected as prime minister, has turned out to be a rather inconsiderate gamble which may eventually come to haunt him.

The other 27 European Union (EU) member state governments have to this date rejected Cameron's demands for the renegotiation of the principle which allows the freedom of movement for people who live and work in the Single European Market.

The prime minister has made clear that he intends to present a British opt out from the freedom of movement as the main trophy to the British electorate in the 2017 EU referendum.

The consensus amongst the rest of the EU seems to be that there is currently no necessity to negotiate substantial treaty change and even less to renegotiate the membership terms of individual member states. Even those who in the past supported British calls for renegotiation, such as the authoritarian Hungarian prime minister Viktor Orban, have recently remained silent.

Most significantly the German chancellor Angela Merkel is standing firm against any notion that the freedom of movement could be open for renegotiation. Cameron had considered fellow centre-right leader Merkel as his ally in the demands for EU reform. The German weekly Der Spiegel however recently reported that Merkel would be prepared to risk the UK's exit from the EU rather than to make concessions to Cameron over the freedom of movement. From Merkel's perspective Cameron has moved the UK towards a position where it is close to the 'point of no return' towards exit from the EU (Der Spiegel, 3 November 2014).

David Cameron will therefore more than likely be forced to call a referendum on the EU practically empty-handed if he wins a second term as prime minister on May 7.

Cameron’s promise

Even if Cameron managed to convince fellow EU leaders to embark on substantial institutional and policy reform, it is obvious that major treaty changes are unlikely to occur within the next two years. EU negotiations tend to be slow and unpredictable with often minimal results when measured against the ambitions that governments had initially set out. 

Cameron’s promise to the British public that he can achieve substantial renegotiation of the British membership terms by 2017 is therefore unrealistic and will ultimately ring hollow. The prime minister will have no option but to campaign against Britain staying in the EU if he is indeed unable to present the British public with a substantial renegotiation deal on the freedom of movement or at least on another major aspect of the country's EU membership.

To backtrack from the referendum promise will also not be an option for Cameron in his second term as prime minister. Such a move would lead to civil war within the Conservative Party and most likely result in a leadership challenge, where Cameron would most likely be replaced by the more eurosceptic Boris Johnson as leader and prime minister.

If Cameron remains in Downing Street after May 7th with the support of the UK Independence Party (UKIP), he will be under sustained pressure to hold the EU referendum. As a coalition partner, UKIP would not allow Cameron to present a half-baked compromise renegotiation deal to the British electorate.

The formation of a Conservative-UKIP coalition, or a Conservative minority government led by Cameron, would consequently have significant implications for Britain's future in the EU and ultimately also for the EU’s internal power balance. The exit of one of the three largest member states will be regarded as a major setback for the European integration project and could plunge the EU into an identity crisis.

On the other hand it would also pose an opportunity for the remaining 27 member states to reconsider the EU’s overall direction and purpose without the relentless pressure from London to give way to British demands.

The UK’s exit would initially strengthen Germany’s currently dominant position in the EU even further. It would also provide the ideal opportunity for Poland to establish itself as a leading player in the EU’s shifting variable leadership geometry alongside France and Germany. Poland's former foreign minister Radoslaw Sikorski, who previously used harsh words to condemn Cameron's pressure for renegotiation, repeatedly indicated that his country would be prepared to fill the leadership gap that would emerge as a result of Britain's exit from the EU.

Domestic implications

Cameron's referendum gamble is also likely to have profound domestic implications.

The timing of the planned referendum in 2017 makes it inevitable that the first half of the next parliament following the general election will be dominated by the referendum campaign.

The uncertainty about the outcome of the referendum poses a fundamental risk to the British economy.

Major domestic and foreign businesses, mostly in the financial sector, have already indicated that they would relocate if Britain exits the EU. Douglas Flint, the chairman of the UK's biggest bank HSBC, has just announced that it is considering moving its headquarters out of London due to the long-term economic risk of Britain leaving the EU after a referendum (The Guardian, 'HSBC warns of economic risk of UK pulling out of Europe', 24 April 2014).

Previously a number of major US banks, amongst them Bank of America, Citigroup and Morgan Stanley, had already announced that they are in the process of preparing their relocation to the Republic of Ireland in case the UK does to decide to leave the EU (Financial Times, 'US Banks plan ahead for UK exit from the EU', 17 August 2014).

A survey conducted by the Confederation of British Industry (CBI) shows that the majority of companies questioned consider Britain leaving the EU to be detrimental to trade relations and overall levels of external investment (CBI, '8 out of 10 firms say UK must stay in the EU', 12 September 2013). The CBI consequently warns that exit from the EU would result in a 'significant period dislocation' during which the British government would have to try to try to negotiate new trade deals.

Overall the CBI assessment is that none of the alternatives to full EU membership, including membership of the European Economic Area (EEA), 'is able to improve the overall balance of advantages and disadvantages to EU membership' (CBI 2013 Our Global Future: The Business Vision for a Reformed EU , p17).

A new referendum on Scottish independence?

Apart from profound economic implications, the EU referendum will also have substantial effects on the future constitutional setup of the UK. Given the higher levels of support for EU membership in Scotland, the referendum on EU membership is likely to widen the growing rift between the English and the Scots further.

If the decision to leave the UK is predominantly carried by English votes in a referendum, demands in Scotland for another referendum on Scottish independence will inevitably grow. Under such circumstances the SNP government in Edinburgh would have an easy ride in convincing Scottish voters of leaving the UK in favour of an independent Scotland joining the EU.

While it is by no means certain that a 2017 referendum on EU membership will result in a negative vote, David Cameron's decision to promise the referendum has made it much harder for any future British government to brush the issue aside. A Labour-led government under Ed Miliband will almost certainly come under sustained media pressure to eventually call the referendum.

A swift return to normality in Britain's relations with the EU is therefore unlikely.

A more constructive approach and compromising negotiation position in the EU under a new British government, which also actively promotes the benefits of EU membership at home, could nevertheless help to resolve the current stalemate and may help to convince the British public to stick with the EU once a referendum is held.