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Brexit
would spark decade of ‘economic limbo’, claims top Tory
Europe
minister says under EU rules UK would be cut out of single market
before it could negotiate new deals
Toby Helm and Daniel
Boffey
Saturday 27 February
2016 23.01 GMT
The UK would face a
decade of massive economic uncertainty with potentially disastrous
consequences for business and the pound if it were to vote to leave
the EU, the Europe minister says.
The dramatic warning
from David Lidington, a key figure in David Cameron’s renegotiation
of EU membership, is part of a frontal assault launched by Downing
Street and the Foreign Office aimed at discrediting the campaign for
Brexit, now headed by Boris Johnson and Michael Gove.
In an interview with
the Observer, Lidington, who has served a record period of six years
in his post and has more experience of EU negotiations than most in
the cabinet, says the UK would be thrust into economic “limbo”
for up to 10 years if the UK were to leave, as it tried to disengage
from the EU on favourable terms and then establish a set of highly
complex replacement trade deals across the world.
The intervention
came as finance ministers of the G20 group of leading industrial
nations meeting in China listed “a shock of a potential UK exit
from the European Union” as one of the biggest risks to the world
economy this year.
David Cameron said:
“With so many gaps in the ‘out’ case, the decision is clearly
one between the great unknown and a greater Britain.” Writing in
the Sunday Telegraph, he said Brexit would create “huge amounts of
uncertainty” and added: “It would be our children’s futures on
the table if we were to roll the dice.”
Echoing a view
shared by the prime minister and George Osborne, Lidington said that,
according to the EU rulebook, the UK would be cut adrift from
European treaties, and therefore the single market, two years after a
vote to leave – before it would have had time to negotiate
replacement trade deals.
“Trade deals
between the EU and other countries and bilateral trade deals of any
type normally take six, seven, eight years and counting,” Lidington
said. “Everything we take for granted about access to the single
market – trade taking place without customs checks or paperwork at
national frontiers, the right of British citizens to go and live in
Spain or France – those would all be up in the air. It is massive.
It is massive what is at risk.
“You would be in
complete limbo and I think what that would do for the pound and for
business confidence would be very serious indeed. It could last a
decade.”
Boris Johnson
performed a sudden U-turn over Brexit, ruling out the possibility of
a second referendum after a Leave vote – something he, Gove and
other Outers, including former Tory leader Michael Howard, have
recently suggested would be possible.
Johnson told the
Times he wanted the UK to “get out and then negotiate a series of
trade arrangements around the world” and that “out is out”.
As part of a
coordinated assault, foreign secretary Philip Hammond accused the
Leave camp of confusion and of having no clear idea of what would
follow a vote to get out of Europe. He told the Observer: “The
Leave campaign has come up with 20 possible options, but they all
contain significant risk to the British economy. Leave campaigners
now have to answer these key questions: what does leaving look like?
How many years would it take to put in place a new deal with the EU?
And what will happen to our security cooperation arrangements with
the EU?
“Until we have
their answers, a vote to leave is a leap into the dark that would put
the security of Britain’s future at risk.”
A document published
on 28 Februaryby the Britain Stronger in Europe campaign says Brexit
campaigners have floated 30 different models of independent statehood
from Peru to Iceland, suggested as worthy of replication. The
document highlights differences among Out camp leaders over whether
the UK would end freedom of movement or continue to make a
contribution to the EU budget.
It claims that
Matthew Elliott, the chief executive of the campaign group Vote
Leave, has said that the UK “would still retain its membership”
of the single market but also that “the benefits of the single
market are far outweighed by the costs”.
In response, Elliott
said: “If we vote to remain, we will keep giving away power and
money every year. If we vote to leave, we will take back control and
spend our money on our priorities.
“We will be able
to kick out those who make our laws. We will be able to have a
fairer, more humane and more sensible immigration policy. We will
have a new UK-EU partnership based on free trade and friendly
cooperation. We will regain our independent voice on international
bodies such as the World Trade Organisation, where we have given away
our seat to Brussels. We will have more international influence to
argue for greater international cooperation.”
In his Observer
interview, Lidington said the Out campaign was peddling two
contradictory arguments. “Their first belief is that inside the EU
we cannot achieve any meaningful change and that too often the other
countries are in some sort of nefarious conspiracy against our
interests.
“But their second
belief – which they hold equally firmly – is that outside the EU
these very same countries and government would rush to give us some
new deal that had all the benefits of EU membership … I think the
Leave campaign is still in a state of confusion about what it
actually means by leave.”
At the G20 finance
ministers meeting US Treasury secretary Jack Lew expressed clear
support for Britain’s continued membership of the EU. “Our view
is that it’s in the national security and economic security
[interests] of the United Kingdom, of Europe and of the United States
for the United Kingdom to stay in the European Union.
“This is an issue
that will be decided by the voters of the United Kingdom in June and
we certainly hope that [they]reach that conclusion,” he added.
Ukip leader Nigel
Farage said the G20 statements were “no surprise” and examples of
“mates helping each other out”. “I’m not surprised that big
government gets together to support David Cameron. This is big banks,
big business, big government all scratching each other’s backs. I
don’t think that impresses voters,” he said.
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Welcome
to a two-speed Europe
Desperate
to keep the UK from leaving, Europe is inching towards a dual-track
reality.
By MATTHEW
KARNITSCHNIG 2/23/16, 5:30 AM CET Updated 2/25/16, 5:47 AM CET
BERLIN — Europe’s
leaders emerged from last week’s marathon session with David
Cameron hoping they had just avoided a messy divorce.
They may yet
discover that staying together can be just as traumatic.
Most of the focus in
the wake of the deal has been on whether British voters will endorse
the plan hammered out at the Brussels summit. As important as the
deal is to the U.K., its impact on the EU may be even greater. Put
simply, the agreement effectively rewrites the rules for member
states’ dealings with Brussels.
“What it does is
set a precedent that everything is up for renegotiation,” one
Brussels official said.
Until now, members
have generally been compelled to accept the full canon of EU rules
and regulations, notwithstanding a few notable exceptions, such as
the U.K.’s right to opt out of the euro.
The EU’s agreement
with London goes much further, however, creating the political
equivalent of an open marriage. While the two sides would retain
their legal union, they wouldn’t be chained to one another. Such
arrangements may sound good in the abstract. In practice, they can
prove tricky.
After the summit,
Cameron left no doubt about what the deal would mean: “Britain will
be permanently out of ever-closer union, never part of a European
superstate … Britain will never join the euro and we’ve secured
vital protections for our economy.”
Welcome to a
two-speed Europe.
The idea of a
closely integrated core Europe surrounded by more loosely linked
affiliates isn’t new. Many would argue the dual-track already
exists with the eurozone. But nearly all the non-euro countries,
including all EU members in Eastern Europe, are obliged to work
towards membership in the currency area. So to the degree that the
two-speed Europe exists, it has been, at least nominally, temporary.
The EU’s proposed
arrangement with the U.K. would go a step further by
institutionalizing the so-called à la carte approach to membership.
Instead of a core
group of like-minded countries coming together to embrace closer
integration, one country is pulling way, opening the door for others
to do the same.
With nationalism on
the rise across much of Eastern Europe, it’s not inconceivable that
countries such as Hungary and Poland will also ask for exemptions
from joining the euro or other aspects of the EU.
Over time, such
moves could further undermine public confidence in the EU, eroding
its legitimacy.
Two speeds, no
agreement
Many die-hard
Europeans have long-argued a two-speed solution is the only way
forward. Influential European politicians from Germany’s Wolfgang
Schäuble to Italy’s Romano Prodi have endorsed the idea. The
challenge has been in agreeing on what it means.
There’s consensus,
for example, that the eurozone needs a finance minister. When it
comes to defining the role, however, Berlin, Paris and Rome remain
far apart.
So far, steps toward
a two-speed Europe have been made under duress, such as when the
eurozone created a bailout fund. With the common currency under the
threat of collapse during the debt crisis in 2011, the then-17
eurozone countries agreed to pool resources to create the bailout
fund. The U.K. refused to participate, however, forcing the euro
countries to conclude the agreement outside the European treaty.
Unless the Stay camp
wins by a wide margin, Brexit will likely remain on the political
agenda in the U.K.
Now, desperate to
keep the U.K. from leaving, Europe is again inching toward the
two-speed reality.
But this isn’t the
model Europe’s idealists had hoped for. Instead of a core group of
like-minded countries coming together to embrace closer integration,
one country is pulling way, opening the door for others to do the
same.
Even if the British
voted to remain in the EU, it’s far from certain the agreement
would actually work.
One aspect of the
deal, for example, would allow London to object to regulatory moves
in the eurozone that it believes could place the City at a
disadvantage. But the remedy for such disputes is vague, suggesting
they could easily escalate, again pushing the relationship to the
brink.
More generally,
unless the Stay camp wins by a wide margin, Brexit will likely remain
on the political agenda in the U.K., especially given the support the
Out camp has received from popular establishment politicians.
Time for
integration?
In some respects, a
positive outcome would be the perfect moment for the core EU to
pursue integration. One factor holding countries like Germany back
has been the fear of offending the U.K.’s sensibilities. By clearly
defining the U.K.’s position, the deal would appear to remove that
obstacle.
The question is
whether the U.K. would remain sanguine about a more tightly
integrated EU once it became a reality or see it as a threat.
For now, that
scenario remains remote. Europe, divided by the refugee crisis and
its economic travails, is in no position to pursue “ever-closer
union.”
Despite those
challenges, many Europhiles welcome the deal. The EU has been hobbled
for more than a decade by uncertainty over the U.K.’s role and the
pace of integration, they argue. Even if more countries follow its
example, there is no other way for Europe to move forward.
“There will still
be a core. The rest will opt out of certain aspects and won’t have
as much influence, but I don’t think it’s that dramatic,” said
Thorsten Benner, co-founder and director of the Global Public Policy
Institute, a Berlin-based think tank. “That’s sensible and it’s
the only way this can work.”
Authors:
Matthew Karnitschnig
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