If you’re not at the table, you’re on the menu
by Charmele Ayadurai
As Europe grapples with the sovereign debt downgrade and the possible ‘significant amount of tens of billions’ aid to Greece, the world is questioning when the continent is going to take more decisive action to stem the debt crisis that began in Greece in 2009 and has since spread to Portugal, Ireland, Italy and Spain and now threatens France and even economic powerhouse Germany.
By the end of winter, the patriotic of Europe will stand loyal only to their regional football teams. Although they will cheer themselves hoarse at the European Championships, they will not be wrapping themselves up in their national flags nor will they be voting positively in their countries’ electoral polls.
The forecast for the United Kingdom is looking equally gloomy as the Liberal Democrats mourn their failed efforts to stop David Cameron from sleepwalking through the exit doors of the European Union. The Tory right-winger played up by declining EU membership, earning himself the moniker ‘destroyer of the 27-nation bloc’ and further complicating the country’s already complicated relationship with the EU.
This latest snub will be the second for the United Kingdom after it opted to stay out of the single currency union at the Maastricht Summit. The rift between the UK and Europe could very well widen into permanent divides. As French President Nicolas Sarkozy said in an interview in Le Monde, there are now ‘clearly two Europes’.
The prime minister’s solo stand is disastrous for British jobs, trade and foreign investment, and most importantly, strength in numbers when it comes to direct influence and tackling problems like climate change, health and safety issues, as deeper integration takes place in the single market. The UK will furthermore lose its seat in the Council of Ministers and European Parliament. In other words, it will lose its rights to decide and update regulations, which play an important role in the operation of British firms and the economy.
The UK conducts more than half of its trade within the EU and could suffer on a broad range of financial regulation issues if the other countries decided to move forward as a 26-nation bloc. The UK’s trade ties with the continent were built on six decades of common laws, standards and regulations. Jeopardizing these ties will result in less trade.
The UK’s annual trade with its 26 EU neighbours is between £140 billion and £185 billion, which is somewhere between 50 per cent and 60 per cent of all imports and exports. By comparison, it does £33.5 billion in business with the United States (15%), £5.1 billion with China (2.3%) and £3.6 billion with Canada (1.6%). The stakes are huge for the UK.
The UK however doesn’t have to take the ‘for richer or poorer’ oath to enjoy the benefits of the single market as what Norway and Switzerland are experiencing. The sovereign debt crisis and the tax on financial transactions are a good enough excuse to attract investment from abroad. The UK will play the rose between the thorns, at least for now.
Despite numerous attempts to view the mounting debt crisis from different positive angles, ‘the English outpatient’ was adamant to determine her own fate than leaving it to others. Cameron voiced his concerns that the offered treaty did not have proper safeguards for the UK. Thus, by deciding that isolation was the only viable course of action, his proffered hand for a handshake was promptly rebuffed by the French president.
Prior to the Brussel summit, Sarkozy was confident that the UK and France would come to an agreement based on their long-standing relations and having proven stronger whenever they pulled in the same direction despite their numerous tit-for-tat verbal rows throughout history.
Meanwhile, the opposition Labour Party criticised Cameron’s decision, claiming that the UK has put itself on a thin ice. They said Britain would soon become a nation ‘hovering somewhere in the Mid-Atlantic being shunned by Europe,’ which is not surprising when it comes to the Tories, given that Margaret Thatcher was a fierce Atlanticist and loved dealing with American administrations, particularly that of Ronald Reagan.
In Europe’s hysterical attempts to bubblegum the Euro Zone together, Europe has missed the mark entirely in their diagnosis of the crisis by not utilising their resources well to compete with China and Eastern Europe. Greece, Portugal and Spain are cutting spending and raising taxes instead of investing in people and capital or improving technology in a way that will make them more competitive. Therefore, Cameron’s judgement in keeping the UK out of Europe’s ill-advised profligacy might be right after all.
However, Cameron’s actions to whip up a storm complicate the path for the rest of the 26 nations to foster greater fiscal union. His bid to demand guarantees and assurances that future EU rules would not hurt the financial hub (which contributes roughly one-tenth of the country’s economy) was rejected by German Chancellor Angela Merkel and Sarkozy.
The western economies have always stuck together and saved their economies from total collapse through international cooperation. They paid a hefty price for their isolationism in the 1930s and Europe has had a soft spot for the UK ever since Margaret Thatcher negotiated lower EU membership fees in 1984. However, reports suggest Cameron was not happy to take up an agreement that did not offer any exemptions to the UK. He was not ready to trade momentary political gain for a long-term loss.
Mass protests, strikes and violence were the major highlights of the Europe 2011 calendar. What will 2012 hold for Europe? Was declining the EU membership a viable course of action for the Brits? These most awaited answers will reveal themselves soon. As Merkel said, “We will use the crisis as a chance for a new beginning.”
Charmele Ayadurai is a Banking and Finance lecturer at Curtin Sarawak. Prior to joining Curtin Sarawak, she worked at Barclays Bank and Natwest Bank in the United Kingdom as a trainee associate, and having obtained her Masters degree, ventured out to work with UNISYS, an American insurance company as a lead verifier, and later on as a business development manager cum entrepreneur with TC Autos. In Malaysia, she has worked as a business development associate with OSK Investment Bank Berhad. She can be contacted by e-mail at email@example.com.