John Redwood: UK must decline EU’s wild ride to political union

IT’S official. They do want a United States of Euroland. The French President asked for one this week, saying the Euro area now needs its own Treasury, budget and parliament. More importantly, on the EU website there is a blueprint for political union for the EU, or at least for the Euro members of the EU and those who have to join the Euro in due course.

It has long been permitted to talk of political union on the continent, just as surely as it has been regularly denied in the UK. On June 22 the “five Presidents” of the Euro area (EU Commission President, Eurogroup President, the President of the Euro Summit, the President of the ECB and the President of the European Parliament) set out their vision of how to deepen economic and monetary union. Their wishes include a common Euro area Treasury with binding commitments to converge the economies of the zone, controlling and disciplining fiscal policies for each nation
and completing a financial union.

They recognise that there is too much divergence of economic performance across the zone and they are not happy with 18 million people unemployed in the area. They are concerned about the lack of social cohesion and the shortfall in democratic accountability. It’s good they have noticed these obvious weaknesses of the Eurozone. Their solution is more central control, moving gradually to a common Euro area budget and Treasury. They do not go into the detail of how this would imply substantial transfers of money from the richer to the poorer parts of the zone, but that has to follow. It is a clumsy way to do it, to lend money to a country like Greece, only to accept the debts have to be cut or written off later, as it should have been a grant.

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The Euro has always been an orphan currency in search of a country to be its parent. The five presidents wish to work towards a United States of Euroland to act as the sponsor of the currency, and to direct the economic policies of the differing regions of the zone. They aim for a White Paper in 2017. They wish to direct national economic policies more strongly through the European semester process.

They seek an Advisory Fiscal Board to creep towards controlling state budgets more directly, and a common macro economic stabilisation function with access to finance. That sounds like a complex way of saying there has to be a larger EU or Euro area budget, with more money going to the areas with economic problems.

They want the Euro area to have a single representative on the IMF and to speak with one voice in world economic forums. They want to supplement the economic changes with stronger social policies. They are vague over how democratic accountability can be strengthened, mentioning both the European Parliament and national Parliaments.

All this points to the creation of a United States of Euroland. Single currencies need single budgets, single social policies,and massive transfers of money within the zones to enable them to work. The EU first created its currency and is now belatedly trying to create the country to back it. The UK should understand the force of this movement, and should be clear it cannot join any part of it.

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The UK now needs to stress to the EU that they cannot use the EU budget for these purposes. There will have to be a separate Euro area budget to take in extra tax revenue from the Euro area and to distribute it for their common welfare and regional policies.

This provides the Prime Minister with a golden opportunity to negotiate a new relationship with the rest of the EU. As the Euro takes over the drive of the EU and threatens to influence or control many of its policies, it should be obvious to all that the UK needs to loosen its ties and allow the Euro area to proceed as it sees fit.

This week’s row over lending money to Greece is an exchange in a much wider argument. The UK should not be able to delay loans to a troubled Euro country, but nor should we be involved in any way with lending or with the terms of the loan. Similarly if they want common taxes, as they say they do, we should be no part of that.

A successful negotiation requires two sides with something to gain. We now know what the Euro group
has to gain – the freedom to complete their union. They
must be told that that means the UK will want a relationship based on trade, friendship and willing co-operation, not one based
on shared government and majority votes we might lose. Why would they refuse? They need to complete their union to assist their currency, and
that requires dealing with a UK that wishes to be no part of the Euro and political union project.

The Euro area is on a wild ride to political union. The UK has to decline to join them.

John Redwood is a Conservative MP. He was a Cabinet minister in John Major’s government.