The Staggers

The New Statesman’s rolling politics blog

Cameron's prescriptions for Europe miss the point (again)

The Prime Minister wants to talk about growth, but recognising the impact of German plans for collective austerity is taboo.

By Rafael Behr Published 26 January 2012 17:30

David Cameron wants Britain to play an integral role in reforming the European Union. He really does. His speech in Davos today explained how he is committed to reviving the continent's flagging economies with an agenda for boosting growth - deregulation; liberalisation, competitive taxation.

This is a familiar tune. Britain's position under Labour wasn't so very different - accepting a degree of political integration as the necessary price for creating an open, free trading space of continental scale and hoping, over time, to make that space look more like the UK economy and less like the French one.

The problem now, as I wrote in my column this week, is that the kind of diplomacy that is required actually to drive that agenda in the European Council - involving compromise, long-term nurturing of relationships with EU leaders; demonstrations of commitment to the European project - is also the kind of behaviour that the Conservative party generally finds unacceptable in a leader. In other words, Cameron can say this stuff, but he is no closer to getting it done if he can't build the strategic majorities among fellow EU member states to make it happen.

But there is another problem. Cameron's analysis of the EU's growth problems necessarily has to exclude discussion of the effect on demand of choreographed mass austerity - to concede that point would be to admit that the same force is in play in Britain. But clearly this is an issue. In his speech, the Prime Minister praised efforts by eurozone countries to bring their public finances under control - the drive for a fiscal compact led by German Chancellor Angela Merkel - but warned that it was not enough. He encourages the single currency bloc to consider issuing euro-bonds and effecting transfers between states - a true fiscal union, in other words. He essentially told Merkel to dip into her budget to save the euro.

If Cameron understands the inadequacy of Merkel's plans at the level of budget imbalances inside the eurozone, why does he not understand the related problem of German-enforced austerity for the continent draining aggregate demand? Why does he insist on offering only long-term supply-side solutions to the problem of European growth? The answer, I suspect, is that the government does understand the issue but it is taboo because of the coalition's political commitment to make austerity a morally inviolate part of domestic economic policy.

There was a meeting last week of the Franco-British Colloque - a top-level club of politicians, academics, business leaders etc to discuss cross-channel issues. It meets annually and this time the gathering was held in the UK. George Osborne was there and, someone who was present tells me, in the discussions of the EU's growth problem, the Chancellor effectively acknowledged the macroeconomic case against collective European austerity. He simply couldn't accept that it was relevant to the policies he is deploying in Britain. Treasury economists will surely be telling him the same thing: Merkel's fetish for fiscal conservatism is going to drag Europe down.

If Cameron wants to take a lead in promoting growth in Europe he could start by making that point. He can't of course, at least not without repudiating the central tenet of his government's economic policy.

Special Offer: Get 12 issues of New Statesman magazine for just £12

Tags: Europe Eurozone Tories & Europe

More from Rafael Behr

23 comments

Thu, 2012-01-26 17:47 — Arturo Bandini (not verified)

In short, dishonest and intellectually bankrupt - a true statesman.

Thu, 2012-01-26 18:13 — Luddite (not verified)

So what's the lefts alternative too responsible government?

Thu, 2012-01-26 18:14 — John Moss (not verified)

The West is bust having spent 50 years spending more than it got in in taxes.

Much more free trade might help, but I can't see Merkozy scrapping Cap and lifting import barriers. Shame really, African growth would be phenomenal

Thu, 2012-01-26 18:23 — Anthony (not verified)

Rafael Behr missis the point(again) ! VOTE UKIP .

Thu, 2012-01-26 20:34 — matthew fox (not verified)

Responsible Government Cloddite?
At least you can spell it, shame you haven't got a clue what it means.

Didn't no one tell you unemployment is at 2.685 Million? UK Manufacturing and Construction declining in the last quarter of 2011.

I see the CBI published a survey yesterday, showing Manufacturing suffering from falling orders Cloddite.

Thu, 2012-01-26 20:52 — Indu Pendent (not verified)

@rafeal
What a load of old cobblers.

First of all, first and foremost in fact, we need politicians who put Britain's interest first ahead of their own domestic careers.

We saw the last elite's penchant for champaigne and canopes brunches attending important meetings in a 1st class travel lifestyle to make them look good as individuals.

The Labour elite were prepare to say anything, do anything and give away anything away to make themselve look liked by the French. The other Europeans see UK Labour as a weak - they got use to Britain accepting everything with no more than a token negotiation for domestic presentation - look how much Labour gave away for little in return.

I dont ever hear anyone dissagreeing with this.

Cameron's reputation as a strong independent leader has been enhanced domestically and internationally by his enough is enough veto. And also by the AAA for which Labour, before its U turn, pursued policies that would have lost us it.

You might hate Cameron but at least support him to get the best for Britain which he has done so far.

Thu, 2012-01-26 21:15 — representingthemambo (not verified)

Interesting. quite shocked that Osborne has actually admitted that austerity isn't working.

What this illustrates above all else is that the cuts are political. The Tories have taken advantage of a crisis to ram through a series of policies that in reality they have no mandate to implement and will make Britain a far more unpleasant place to live for most people. As Osborne's admission has illustrated, the cuts aren't about good economic policy. They are about politics, ideology, and governing in the interests of their mates.

http://representingthemambo.wordpress.com/

Thu, 2012-01-26 22:16 — Tesco Shelf Stacker (not verified)

Indu Pendent - "Cameron's reputation as a strong independent leader has been enhanced domestically and internationally by his enough is enough veto".

The only problem is - there was no veto. There was not even a treaty on which Cameron could exercise his veto. Cameron simply walked out and left the rest to get on with it - and it would not suprise me that even the 'walk-out' was stage-managed ...to satisfy the tory eurosceptics. Cameron is not a eurosceptic tory - he is a blairite who would have not looked out of place in New Labour - he also happens to be a very good PR man ... I don't trust him an inch.

Thu, 2012-01-26 22:20 — Indu Pendent (not verified)

@representingthemambo

Got questions for you. The main cuts are being put through by slowing the recruitment into the public sector with minimal state redundancies.

Suppose we have 600,000 public sector roles on an average £26k per year (they cost the state £52k per year employ after pensions and overheads). If we cut the roles,

1) what is the saving to the tax payer and deficit?
2) should we move unemployed people on £7k pa plus top up benefits back into the roles?
3) Do you know why the UK has such a low fiscal multiplier?
4) Do you know why the stimulus impact of QE1 did not last?

Is the answer non-political and objective that its all Osbornes fault?

Thu, 2012-01-26 22:27 — E Hart (not verified)

Cameron has nothing if not gall. He is personally presiding over a disaster but contrarily he is quite right to point out the errant ways of the Eurozone. Regrettably, his call for "leadership" has fallen on his own deaf ears and everyone else's.

We are all going to be crucified on the cross of expansionary austerity.

Thu, 2012-01-26 22:31 — Indu Pendent (not verified)

"Cameron simply walked out and left the rest to get on with it."

Perhaps better than conceding by joining on bad terms in order to look good to domestic consumption of voters.

We seem to have a culture in the UK that we always have to say yes and do what the Europeans tell us otherwise they will not be our firends.

In reality, each country is selfish in it for itself and will come to Britian if its in their interests too irrespective of what the UK gives away. We have to be in Europe but seriously tough with the other countries otherwise they will take advantage as they have done.

Thu, 2012-01-26 22:37 — Indu Pendent (not verified)

@matthew fox
Were you and your friends so diligent in holding Labour to account for the fastest decline in UK manufacturing since the 1970's?

Do you see what you want to see and vote blindly?

Thu, 2012-01-26 23:03 — matthew fox (not verified)

Inastew, have you missed the latest CBI survey showing orders falling for UK Manufacturing companies?

With the trade deficit with non eu countries widening, what happened to the export led recovery?

Fri, 2012-01-27 09:06 — frances smith (not verified)

cameron isn't the first prime minister that has tried to impose a belief system on a country. his rigid right wing self righteous view of the world is not unique to him.

but it is interesting, because he is in a situation where his beliefs are so out of step with what is actually needed to solve the problems of the uk economy that there is no way that his solutions can do anything but fail.

so to some extent we have no option but to sit back, open our psychology text books, and watch the thatcher myth, that the conservative party are so attached to, as the solution to every thing, fail miserably.

as cameron denies that the greedy rich are the problem not the solution. we will have to watch him deny reality more and more to maintain his belief system.

scary, but interesting, the conservative belief systems is falling apart before our eyes.

he is in the process of proving that he is wrong, so the question is how long he can go on claiming he is right.

Fri, 2012-01-27 11:26 — Awake!

Oh dear
Who's really missing the point?
Here is a headline from 3 minutes ago
'*REHN SAYS EXPECTS GREEK DEAL 'IF NOT TODAY, THEN OVER WEEKEND'
*REHN SAYS GREEK DEAL WILL COME IN JANUARY, RATHER THAN FEBRUARY'
What greek deal is this one?? Ah yes, the one that was 'sorted' 2 years ago...
So ACTUALLY, here is the poinbt- Europe is the joke of thye world right now, being laughed at by Australians, Chinese South africans , Indians (i have been here in the last 8 weeks)- THEY ARE LAUGHING AT EUROPE
Cameron and Osbourne have got Euriope as -smile , agree, disggree walk out- it dosen't matter,m there will be a new idea along in 5 minutes-or govt