Labour’s rout in the European Parliament elections may change the dynamics of Britain’s relations with the European Union and sharpen the debate about economic policy convergence and tax harmonisation.
The Tories motivated their voters more than other parties precisely because Labour allowed the case for constructive engagement to go by default.
Polls show the British are not keen on the euro, although the long-term decline of sterling does not make the pound the virility symbol Eurosceptics would have us believe. Polls also show that most people expect us to join in due course.
There is not the enthusiasm in Britain for the Europhile vision of ‘My country – Europe’, but there is a thoroughly pragmatic understanding that Britain’s future is inextricably bound up with the future of the EU and a recognition that sitting on the touch line will diminish our influence.
The government’s wait-and-see strategy will not win the case. For most businesses and citizens the lower inflation, lower interest rates and competitive exchange rates that are enjoyed within the euro zone are extremely attractive.
Taking action to bring our rates into line can only be popular in the present climate. We have the lowest long-term interest rates for 30 years.
Converting more short-term debt into long-term debt would help convergence of interest rates.
If we set out a timetable for joining, the markets would go a long way to helping the exchange and interest rates to move to a level which would enable us to join with the least disruption. That requires an early referendum.
It is not realistic to expect businesses to reorganise at great cost if the endgame is uncertain.
Meanwhile, the government has yet to prove that being constructively engaged in the EU does not mean we cannot assert our own interests. On many issues we can find allies and on key issues – like a withholding tax – we can use the veto.
The stability pact is not a straitjacket. It balances good economic discipline with political flexibility. It is time Blair’s government grasped the nettle.
Malcolm Bruce is Liberal Democrat MP for Gordon and the party’s spokesman for Treasury affairs.
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