World

The trouble with Europe: a conversation with Roger Bootle

Britain has a future in the EU—but on certain conditions

June 18, 2015
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Last year, the economist Roger Bootle published a book entitled "The Trouble With Europe". In an interview with Bootle in May 2014, I suggested the book wasn't an "artefact of standard-issue euroscepticism"—this wasn't Farageisme "pur et dur". But Bootle did argue that the European Union is a "malfunctioning construct for today's world" that, he believed, "needs either to undergo fundamental reform or to break up." 

Bootle has now published a new edition, substantially updated to take in a number of significant developments over the intervening 12 months—notably the election of the Syriza government in Greece, the Scottish independence referendum and the intensified interest in Britain's constitutional future that followed and David Cameron's pledge to hold an in/out referendum on the UK's membership of the EU. I talked to Bootle last week about how, if at all, his views had been affected by the momentous events of the past year.

JD: When we spoke last year, you said: “My book is arguing that life outside the EU might not be a bed of roses, but nor is it a path to disaster either. I’m not saying, ‘A plague on all your houses, let’s pull out immediately.’ I think we have to try first to reform the EU along the lines we want.” More than a year on, the prospect of an in/out referendum is now concentrating minds. How optimistic are you about David Cameron’s chances of extracting the kinds of concessions you were describing there?

RB: I think I’m a bit more optimistic than I was. First of all, it’s quite clear that David Cameron’s political position is a lot stronger than seemed likely. Another coalition government would have been altogether a different kettle of fish. Secondly, I suspect that on the Continent there has been quite a lot of movement. This may partly be because the powers that be don’t [want] to have both a Brexit and a Grexit on their hands. So I suspect that things are looking a bit rosier for the prospects of significant changes. As for whether the changes that are possible are going to be big enough, I’m not sure I’m not that much more optimistic. I suspect what we’re going to get is some sort of undertaking on Britain being excluded from the pursuit of “ever closer union”.

The real sticking point is going to be the power of national parliaments to overrule European directives. Clearly, that’s what the strong eurosceptics in Britain want. I think they [the EU] are not going to be able to concede that and that’s where the dividing line is going to be.

Do you think the domestic political situation in other member states—I’m thinking of the rise of populist euroscepticism of various kinds—changes things at all?

I think it does change things compared to four or five years ago. But I don’t think much has changed since I started writing the book. For example, Alternative für Deutschland in Germany hasn’t been a fantastic success—it hasn’t made the kind of inroads that Ukip has made here. The most worrying country has got to be France. We could end up with a Front National president—I don’t think that’s at all beyond the realms of possibility. So all of that does make Germany more inclined to do what it can to keep Britain in.

How has the discussion about the future constitutional shape of the UK since the Scottish independence referendum affected the European debate in this country?

I don’t think it has done so directly. What has happened is that the Scottish debate has led us to focus more on the question of relationships between centre and periphery and to come to terms with the question of some sort of recasting of those relationships—such that one can then imagine a similar recasting of the relationship between Westminster and Brussels.

What about the rise of Ukip? Although it got 4m votes at the general election, it ended up with only one seat in the House of Commons. What role do you see Ukip playing in the run-up to the EU referendum?

It’s difficult to be sure about this, because Ukip itself is now in some disarray at the top. Moreover, surely the best interests of the No campaign would be best served by Ukip not leading it? Bearing in mind how ill-disciplined Ukip has been in the past, I think it’s going be important that although its support is leant to the No campaign, it doesn’t perform too prominent a role in it.

Connected to the rise of Ukip is the emergence of immigration as the principal focus of the European debate. Do you think immigration will be the most salient issue in the referendum campaign, rather than issues of self-government and national sovereignty?

I suspect it is going to be, if not the most important, then one of the most important [issues]. It’s the thing that people care about a lot. I don’t think people can get particularly worked up about the role of the EU in influencing various regulations. The cost of the Common Agricultural Policy and the UK’s budget contributions—OK, you can reframe that in terms of how much the average UK citizen is paying for all that, but all the evidence suggests that in the end [people] don’t think that amounts to an awful lot. But as far as immigration is concerned, Nigel Farage has managed really convincingly to get across to people the idea that we cannot control immigration as long as we are members of the EU. You may not like that case, but it’s intellectually honest and it’s powerful.

You emphasise deteriorating economic performance inside the Eurozone in the new edition of the book. Two related questions here: (1) do you think that under-performance can be reversed and (2) does it pose, not to be too melodramatic about it, an existential threat to the eurozone?

I’ve argued for a long time that it’s in Greece’s interest to come out of the eurozone. And if it does that, then I do think there is an existential threat to the eurozone because I suspect other countries—notably Spain, Portugal and Italy—will probably either be forced out or will choose to leave as well. This is, of course, widely regarded among the so-called cognoscenti as a disaster. I think it’s exactly the opposite—I think it’s a salvation. Eurozone economic performance is appalling and has been appalling since the thing was formed. That’s not accidental. It’s appalling for systematic reasons, specifically, the linking together in this rigid system of two very different sorts of economy. One lot, in the north led by Germany—and this isn’t only about German success and competitiveness; it’s also about German saving and non-spending behaviour—and the other, in the south, countries that tend to lose competitiveness strongly and get locked in a state of depression. I think this is a beautifully mismatched union and I can’t see much hope for that area while the [monetary] union continues. So I think the prospect of a breakup [of the eurozone] is something that should be looked on favourably for the economic future of those countries—and also of the UK. One of the questions I touch on in the book is how a breakup of the eurozone would affect the self-confidence of the EU, its credibility, the belief of its citizens in the EU.

Perhaps the most significant development since we spoke a year ago has been the election of the Syriza government in Greece led by Alexis Tspiras. How has that changed the dynamic?

It’s brought all the issues I mention in the book to a head. We’ve finally got a government in Athens that’s prepared to confront the creditors. It looks to me that soon they’re going to be experiencing a train crash. I don’t see how a suitable compromise can be reached.

Yet unlike other populist parties in Europe—Podemos in Spain, for example—Syriza says it wants Greece to retain the euro.

This is an interesting issue. I’m given to understand that in private some leading members of Syriza are less committed to staying in the euro than they might sound. The problem is that to ordinary Greeks, bearing in mind their history, being in the EU is a pretty important thing. Having joined the euro is a symbol of Greece being a full member of this association. To come out of the euro would be perceived as a mark of shame, as well as bringing with it certain economic and financial dangers. Given that’s what most Greek people think, and given what Syriza said to the electorate, you can see why they’ve got to make an effort to stay in the euro. But that may not be what they genuinely want or believe any more.

One of the things I find interesting is that governments rarely choose to make abrupt changes of currency regime—it’s usually forced upon them. It happened in Britain in 1931, when we were forced off the gold standard. It happened again in 1992, when we forced out of the ERM. On both occasions, we should freely have chosen that result, but our governments expended much effort and great treasure in trying to stay in. It’s an interesting psychological phenomenon. I think it’s because these abrupt currency changes are seen by governments as being about more than economics. They invest so much prestige in these projects that they find them very difficult to break.

You said to me last year that you were “less concerned” about Greece than you were about Italy. Is that still the case?

Yes. That’s not to say that Greece won’t be the first to leave—the odds must be strongly in favour of that. Italy’s the big one. It’s got serious industries. There would be major implications if Italy went—after all, it was a founder member of the EEC. If Italy were to leave, I think the pressure on Portugal and Spain would be unbearable.

The corollary of full fiscal and political union, without which the Eurozone cannot survive in the long term, is the formalisation of the relationship between core and periphery. Do you think that EU leaders would countenance a formal recognition of the existence of what are sometimes called the inner and outer “rings” of the EU?

In order to do that, they really have got to reimagine the EU. And in order to keep Britain in, this is one of the key requirements. I don’t see why the leaders of the European Union couldn’t countenance that. It’s not what they hoped for, but they’ve got to get real. It’s a way to keep Britain in and to allow them to pursue the degree of integration they apparently want.

Would it benefit the UK to stay in a formal outer ring rather than leave altogether?

It depends on what the arrangements are. I’m not clear in my own mind which way I will vote in the referendum. My view is that it depends on what the terms are. If I think that our position has been pretty much guaranteed, safe from both a prejudicial arrangement of the relationship between the inner and outer rings, and safe too from the creeping process of ever closer union, I might consider voting to stay in. It seems to me that the leaders of the enterprise have got to countenance, for the sake of its own survival, some other form of membership. But this may be what’s worrying them: let’s suppose that that outer ring status worked well for Britain—you could imagine some other countries opting for that. Denmark could go that way. Sweden. But then they [EU leaders] might feel they’ve ended up with a kind of pick-and-mix union.

How worried do you think the leaders of the other member states are by the threat of Brexit?

I think they are quite worried. They certainly ought to be. I think the British people tend to underestimate the importance of their own country. We’re not top dog, but we’re not tiny either. We’re Europe’s single biggest export market. Politically and diplomatically we still count for quite a lot. The Germans have got to be worried about the shift in the political balance within the EU if we were to leave—not least because of the wrangle there’d be about who’d pick up the tab for Britain’s lost budget contributions. That would be an almighty row! Although they’ve got more worried about this recently, I suspect they’re not taking it seriously enough, because I think the prevailing view is still that if Britain left the EU, this would be a daft thing for Britain do and would bring with it very heavy costs. That judgement, I think, is wrong. Britain would do perfectly well [outside the EU].

The new updated and expanded edition of Roger Bootle's "The Trouble with Europe" is published by Nicholas Brealey (£9.99)