EU intransigence - Division and weakness in Britain

by Alex Davidson

Capitalist rivalries within Europe, the intransigence of the EU, the sharp divisions within the British Tory Party and the political weaknesses within Labour have all been further exposed in the two years since the Referendum vote on Britain leaving the European Union.

The divisions within the Tory Party are not new and reflect divisions within the British ruling class. As a party they have been divided over the EU prior to its inception as the Common Market and through its evolution into the EU, and this has continued with varying intensity over the decades since. 

British capitalism’s declining position following the Second World War, and the advance of socialism, was the context for these divisions. There was the view that socialism in Europe could only be stopped by a strong relationship with the nuclear-armed and militarily superior United States. Whilst maintaining the special relationship with the US, Britain also strove to play a central role in Europe, mainly through NATO, and at the same time tried to continue as a world power with its interests outside of Europe, mainly in its ex-colonies.

Churchill had proclaimed this as the “three circles” theory, which held that Britain was assured of a unique influence in international affairs owing to her triple role as main partner of the United States, chief Western European power and leader of the Commonwealth[i], the assumption being that all three roles could be harmoniously combined.

As compared with the other Western powers, the wealth and strength of Britain in the immediate post-war period rested to a unique degree in its overseas extra-European interests – on the large accumulations of British capital in Australia, Canada, South Africa, Iraq, Iran, Kuwait, India, Malaysia, Rhodesia, Ghana, Nigeria and many other, mainly ex-colonial, countries.

However, by the early 1960s, it had become more apparent that Britain was no longer strong enough to ride three horses at once and had to decide which of them was likely to carry it farthest. The decision to give priority to London’s Western European interests over the preservation of special trading and financial links with the Commonwealth was taken by the Macmillan Government in the early 1960s although not without dissent within the Tory Party. However, the question of priority between Western Europe and the United States remained unresolved and has been a continuing cause of division within the Tory Party.

FRANCE - GERMAN COOPERATION

Following the end of the Second World War there was a marked shift towards cooperation between France and Germany, the main fruits of which were, first the creation of the European Coal and Steel Community in 1951, followed by the European Economic Community (EEC) in 1957.   

Behind this lay, on the French side, a tendency in financial and business circles to favour partnership with their German opposite numbers. It is important, in this respect, to recall that from the early summer of 1940 until the end of the war, all but a small fraction of French big business went over from alliance with Britain to alliance with Germany. On the West German side, the crushing defeat in 1945, the consolidation of socialism in Eastern Europe and the formation of a socialist state in East Germany, narrowed the territorial base of German capitalism, and impelled business and financial circles towards penetration of the Western European market through partnership with France.

Meanwhile, Britain was concentrating on its ‘special’ relationship with the United States and its role in NATO. In response to increasing French-German cooperation and the development of the European Economic Community, Britain led the setting-up of the European Free Trade Association (EFTA) [ii] as a rival to the EEC. Harold Macmillan, then British Prime Minister, speaking shortly after the signing of the Rome Treaties but before the European Economic Community (EEC) had been brought into existence, issued a general warning. “Let us be under no delusions,” he said. “By far the biggest danger would be if this great European unit came into being and we did nothing about it and were left outside.” [iii]

Britain’s applications in 1958 and again in 1963 to join the EEC were vetoed by France. French President De Gaulle, who saw Britain as a capitalist rival in coalition with the United States, albeit as a junior partner, stated that, if Britain were admitted, the cohesion of the EEC would be destroyed and “it would ultimately appear as a colossal Atlantic Community dependent on and directed by America, which would soon swallow up the European Community”. [iv] De Gaulle’s aversion to the United States playing a bigger role in Europe was reflected in France’s withdrawal from NATO’s military mechanisms and the expulsion of its high command and U.S. contingents from French territory.

This reflected the conflict between French Europeanism and British Atlanticism and their inter-imperialist rivalries.

It was not until 1972 that Britain gained entry to the EEC. A referendum was held in 1975 as to whether Britain should remain in the Common Market. The Tory Party was in favour of remaining but some leading Tories campaigned to withdraw. The then Labour Government was divided over the issue and Cabinet Ministers campaigned on both sides of the campaign. The Left and the vast majority of trade unions saw the EEC as a capitalist club and were for leaving. The mainstream media was unanimous in their support for remaining. The result of the referendum was 2 to 1 for remaining.

Since then, the UK, under various governments, has sought special arrangements with the Common Market and the EU. The Tories, in particular, have resisted further integration of the EU structures. Disputes with the EU over the years were common. Coming out of the Exchange Rate Mechanism (ERM), various opt-outs including that of the Social Chapter and the Schengen Agreement, and staying out of the Eurozone and therefore the Euro were all examples of Britain’s discomfiture.

The current state of negotiations over Britain’s withdrawal from the EU reflect these continuing inter-capitalist rivalries. However, the dominant position in British ruling circles, particularly the City, has been to remain in the EU. Frankfurt would happily take over London’s role as Finance capital.   

NEGOTIATIONS WITH AN INTRANSIGENT EU

Divisions within the Tory party were very open during the 2016 Referendum campaign with leading Tories on both sides of the debate.

Following the Referendum’s Leave result, David Cameron resigned as Prime Minister and after a short but bloody leadership contest Theresa May emerged as Prime Minister. She took both sides of her party into her cabinet and shortly thereafter called a snap election, convinced that the Tories would destroy the “unelectable” Jeremy Corbyn and increase their majority. The Tories won the election but failed to gain a majority and Corbyn strengthened his position as leader of the Labour Party.

Following the election, negotiations with the EU were not making much progress with the EU holding to its principles of the free movement of goods, services, labour and capital.

In response to the EU’s intransigence and with time running out, May held a special meeting of her cabinet at the Prime Minister’s country retreat, Chequers. The “Chequers deal” was effectively still-born with the resignations of David Davis and Boris Johnson from the Tory cabinet and then it was declared “dead as a dodo” following its rejection by the EU as “unworkable”. As Donald Tusk, European Council President, put it, “Everybody shared the view that while there are positive elements in the Chequers proposal, the suggested framework for economic cooperation will not work, not least because it is undermining the single market.”

However, May plodded on, like the obedient vicar’s daughter that she is, devoid of any imagination as to an alternative approach. Meanwhile the EU behaved in its accustomed way in dealing with wayward members, and stood by its position of key principles being non-negotiable.

Will May be able to get a deal with the EU? If she does, will she be able to sell it to her party without a rebellion from the Brexiteers? If she gets a deal or if there is no deal will she be able to win a majority in the House of Commons? The answers to these questions will come soon. Then there will be other questions. Will she be able to remain as Prime Minister? Will there be a General Election? Will the forces (largely those who want to remain in the EU) be able to get a second referendum?

Many commentators have been bemused by the incompetence of Britain, with its long history of empire, in the negotiations with the EU but fewer have commented on the intransigence of the EU.

It is well to recall the EU’s negotiations with Greece in 2015 over the bail-out to see how the EU negotiates.

GREEK LESSON

Yanis Varoufakis, the Greek Finance Minister at the time, described the negotiations thus:

“…there was point blank refusal to engage in economic arguments. Point blank. … You put forward an argument that you’ve really worked on – to make sure it’s logically coherent – and you’re just faced with blank stares. It is as if you haven’t spoken. What you say is independent of what they say. You might as well have sung the Swedish national anthem – you’d have got the same reply. And that’s startling, for somebody who’s used to academic debate. … The other side always engages. Well there was no engagement at all. It was not even annoyance, it was as if one had not spoken.” [v]

When Greek Prime Minister, Tsipras, called the referendum on the Eurogroup’s effectively unchanged bail-out offer including more cuts to pensions, tax increases, and more privatization, the Eurogroup issued a communiqué [vi] without Greek consent. This was against Eurozone convention.

When Jeroen Dijsselbloem, the European Council President, tried to issue the communiqué without him, Varoufakis consulted Eurogroup clerks – could Dijsselbloem exclude a member state? The meeting was briefly halted. After a handful of calls, a lawyer turned to him and said, “Well, the Eurogroup does not exist in law, there is no treaty which has convened this group.”

 “So,” Varoufakis said, “What we have is a non-existent group that has the greatest power to determine the lives of Europeans. It’s not answerable to anyone, given it doesn’t exist in law; no minutes are kept; and it’s confidential. No citizen ever knows what is said within . . . These are decisions of almost life and death, and no member has to answer to anybody.” [vii]

The Eurogroup does not exist in European law. Without written rules, or legal process, the Eurogroup makes important decisions that are subsequently rubber-stamped at the EU’s Economic and Financial Affairs Council (Ecofin).

Varoufakis wrote: “The lack of written rules or legal procedures is not the only problem. There are two other problems that Europeans should know about. One is that the troika [viii] dominates the Eurogroup and imposes a decision-making process in which the finance ministers are neutered, forced to make decisions on the basis of next-to-no information. The other is the outrageous opacity of the Eurogroup’s proceedings.

Every Eurogroup discussion, in every meeting, proceeds in the following order:

First (whatever the topic under discussion; e.g. the Greek ‘bailout’, the French national budget) the representatives of the troika speak, beginning with the EU’s Economic and Financial Affairs Commissioner (Pierre Moscovici), moving to the President of the ECB (Mario Draghi, or Benoît Cœuré in Draghi’s absence) and finishing off with the representative of the International Monetary Fund (Christine Lagarde, or Poul Thomsen in her absence). Only then do finance ministers get an opportunity to speak, with the minister of the member-state whose ‘case’ is under discussion going first. This means that, before any of the finance ministers speak, the troika has already shaped the ‘climate’.

Remarkably, when the ministers get to speak, they do so without a single sheet of A4 in front of them containing information, data, briefings etc. on the issue under discussion. For example, while discussing the Greek crisis, during the meetings in which I represented the Greek government, I was not even allowed to email to my fellow finance ministers our proposals. They, therefore, passed judgment on the Greek proposals without ever having seen them. All they had was what the troika representatives said and what I had said. Their word against mine!

After the first Eurogroup I ever attended (which lasted ten hours, all of which were focused on Greece), I asked my secretary for the transcripts of the meeting, so that I could remind myself of who-had-said-what-when, before I could brief the rest of my government. To my horror she came back to me with the extraordinary news that: ‘There are no minutes, records or transcripts’.

This was unbelievable. The room in which the Eurogroup meetings are held is full of microphones, cameras and screens reproducing every speech made in real time. That there was no record of the meeting is both unbelievable and scandalous.” [ix]

EU NEO-LIBERAL POLICIES

The details of the final deal forced on Greece confirmed the worst fears. For the privilege of remaining in a currency union that had already devastated Greece’s economy, Greece surrendered what remained of its financial sovereignty. In exchange for rescue loans of €82-86 billion, the Greek government was forced to agree to an even larger package of pension cuts and tax increases than those its citizens had already rejected.

But the most humiliating part of the agreement was the forced fire-sale privatisation of Greece’s state-owned assets that were to raise €50 billion. The sales were ensured by strict eurozone monitoring.

The first sale of Greek assets, to meet the terms of the bail-out programme, was that of Greece’s 14 regional airports to the German company, Fraport, in a deal worth €1.2 billion for a period of 40 years with an option of a further 10 years. The Greek state earned €450 million every year from these airports so Fraport got ownership on the cheap. A majority of shares in Fraport are held by the German Federal State of Hessen and the city of Frankfurt. This means a large chunk of the revenue from the most profitable of Greek airports now goes to the public budget of Germany for the next 40 years.

This was followed by the sale of the ports of Piraeus and Thessaloniki. A 67% stake in Piraeus port was sold to the Chinese Ocean Shipping Company (COSCO) in 2016 for €368.5 million. A subsidiary of COSCO already owned two of Piraeus port’s three container terminals. Piraeus port received an annual lease of around €35million from the COSCO subsidiary for the two container terminals. 67% of this money now goes to the majority shareholder of Piraeus port, that is, from one of COSCO’s pockets into another.

The EU humiliated Greece, plundered its assets and reduced millions of Greek citizens to poverty, unemployment and hardship. Greece could not have done worse if it had left the Eurozone and the EU.

Britain is not Greece. Britain is a far larger capitalist economy and is not beholden to the EU. However, it should have been cognisant as to how the EU operates. The EU’s negotiating stance, or rather non-negotiating stance, towards Greece should have made the British aware of how the EU would behave in their negotiations.

Of course, the dominant British ruling class position of wishing to remain in the EU, or as close to it as possible, makes for a weak negotiating hand. The British negotiators, divided over what they wanted from the negotiations, were up against an intransigent EU. 

The Labour Party and the trade unions should also draw lessons from the tragedy of Greece and other countries in the EU such as Portugal, which have suffered from the EU’s austerity policies. Unfortunately, the political weaknesses within the Labour Party, especially the lack of understanding of imperialism, has led many to view the EU as some kind of beneficent internationalist organisation.

The Rail, Maritime and Transport union (RMT), which is currently, and very successfully, taking industrial action to ‘Keep the Guard’ on the train is very clear about the disastrous impact of privatisation on the railway system and the case for leaving the EU.   

THE EU AND RAILWAY PRIVATISATION

In October 2015 EU Transport Ministers endorsed the EU’s Fourth Railway Package. The European Council followed suit, agreeing that mandatory competitive tendering should be the main way of awarding public service contracts.

The European Parliament then “rubber-stamped” the EU’s Fourth Railway Package, which means that train operators must have complete access to the networks of member states to operate domestic passenger services. A number of EU member states including France, Germany and the Netherlands have used EU rail directives to build up a large portfolio of franchises across the EU, giving them a head start in the scramble to dominate the complete opening of rail markets across Europe.

These state companies have been skimming the profits in order to invest in their own networks and strengthen their market position. The new EU rules demand that railway companies have access to all EU domestic passenger rail markets from January 1st 2019 in time for railway timetables starting on December 14th 2020.

Railway privatisation in the UK was a laboratory experiment that was designed in the EU. As railway passengers in Britain well know it has been an expensive and unmitigated disaster. A vast majority of the public are for taking the railways into public ownership and it is one of the most popular of the Labour Party’s policies. However, if Britain remains in the EU that policy will be contrary to EU diktat. 

This is but one example of the EU being on the side of the big transnational companies or, to put it another way, being for the few against the many.

[i] Churchill, Winston, Speech at the Annual Conservative Party Conference, 9 October, 1948.

[ii] EFTA comprised Britain, Sweden, Norway, Denmark, Switzerland, Austria and Portugal.

[iii] The Times, 23 May, 1957

[iv] De Gaulle’s statement at press conference on 14 January, 1963, quoted in McLean, Donald, British Foreign Policy since Suez, 1970, pub. Hodder and Stoughton.

[v] Yanis Varoufakis interview with New Statesman, 13 July 2015.

[vi] The communique effectively stated that the EU would ignore the result of the Greek referendum.

[vii] Yanis Varoufakis interview with New Statesman, 13 July 2015.

[viii] The Troika comprises the EU Commission, the European Central Bank (ECB) and the International Monetary Fund (IMF).

[ix] Varoufakis, Yanis, The Eurogroup Made Simple, Democracy in Europe Movement 2025 (DiEM25), March 2016.

https://soundcloud.com/user-109302865/podcast-7-eu-intransigence-divisions-and-weakness-in-britain

Winston Churchill and Charles de Gaulle

Angela Merkel with Donald Tusk

Michel Barnier

Jean Claude Juncker