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Distorted view of EU history

Distorted view of EU history

Why the UK’s persecution complex hinders a Yes vote

by Niels Thygesen in Copenhagen

Tue 22 Dec 2015

The UK’s desire that the European Union be recognised as a ‘multicurrency bloc’ is misguided and unworkable. This is an example of the UK’s near-obsessional view that any euro area initiatives aimed at strengthening the single currency are motivated by other EU members ‘ganging up’ against the UK and its access to the European single market.

At the root of this lies a distortion of history. The UK is practically the only country in the EU that regards the euro as a minor add-on to the single market. This is not true: the euro was developed with the dual purpose of reinforcing the single market and of making euro members more robust in the face of external disturbances. Both considerations are still valid.

The facts are straightforward: the euro is the currency of the EU. Two nations – Britain and my own country, Denmark – required a derogation from introducing it according to the originally foreseen schedule. That remains the situation today. There is no inherent conflict between the onus on non-euro members ultimately to join the euro, and the goals of the single market: the two run in the same direction. 

Mario Draghi, the European Central Bank president, is fully justified in defending the perspective that all EU countries, unless specifically granted a derogation, should adhere to the single currency. There should and can be no illusions: outside the UK (and Denmark) the other seven EU member states face continuing pressure – gentle but firm – to adopt the euro as soon as they are economically ready.

In a similar way, the notion that the International Monetary Fund could somehow be brought in to protect UK financial interests against other EU members’ ‘discriminatory practices’ (read the OMFIF article here) is as fanciful as it is unfeasible.

It is not the task of a global institution to act as a mediator between the perceived interests of participants in a regional grouping of its members.

Anyone who regards the UK as requiring this kind of safeguard appears to be suffering from a peculiar British persecution complex about allegedly unfair treatment from the rest of the EU.

There are, indeed, disagreements between the UK and other EU countries on aspects of financial regulation and supervision. These apply to areas like ring-fencing of risk, remuneration of senior financial staff, and capital requirements. These disagreements are settled according to EU rule-making procedures to which the UK is a party.

Far from being the target of discrimination, Britain has secured further protection at the European Banking Authority by the special provision that decisions can be passed only if they are backed by a ‘double majority’ of euro and non-euro participants. This stipulation not only brings unnecessary complications but is also undemocratic.

According to the UK view of how the EU behaves, most EU initiatives are regarded as the product of an anti-UK caucus – in short, part of a ‘ganging up’ syndrome. The UK seems to regard banking union – or early steps towards it – as intended to serve only to reinforce the euro area (which it clearly does) and not also as an important measure to deepen the single market. I fail to understand why setting up common supervision as the first step of a banking union is discriminatory.

All this is tied up with the debate about a possible British exit from the Union. I am growing pessimistic about the chances of getting an agreement to prevent that happening. As long as the UK persecution complex persists, UK voters seem unlikely to regard whatever renegotiation deal the UK government secures as sufficient to assure a Yes decision in the forthcoming referendum.

Niels Thygesen is emeritus professor of economics at Copenhagen university and a member of the OMFIF advisory board.

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