Welcome to St Anthony's College for yet another of the Chancellor's seminars.
These are seminars of which we're particularly proud because they seem to us to exemplify very well what we do at this college and what Oxford does,
and that is have very, very good conversations and we will again have a very good conversation this afternoon.
For those of you who don't know the college and I suspect most of you do,
we are without boasting the most international college in Oxford, both in the range of subjects that we cover.
We have seven regional centres that look at much of the world. Not all that, but much of the world.
We have fellows and students who come at last count from I think, 68 different countries.
And so our reach, I think, is truly international and global.
And wherever you go in the world, you will find an Antonen where I think more powerful and stay out of politics and perhaps slightly more liberal.
Anyway, I'd like to you don't have to agree.
I'd like to welcome you all. And and I'd like to ask Jane Caplan, who's a director of European Studies Centre, to start the proceedings.
I'm welcoming you on behalf of the European Studies Centre, which is the proximate cause of today's event.
The Chancellor's seminars, which are run by the European Policy Centre, are a semi-regular event in our calendar.
They depend upon everyone's schedules, but they are always a high point of the of the European Studies Centre's academic year whenever they happen.
Today's seminar is going to be on British EU policy after the election and I would like to just
briefly introduce today's participants and whatever I don't say or pattern come out afterwards.
The chair of the proceedings is Lord Patten, Chris Patten, who hardly needs an introduction in this company.
Obviously he had a very long career nationally as a politician between 1979 and 1992, as a politician and a minister.
Then he had further careers as Governor of Hong Kong and New South Wales and European Commissioner of External Relations.
In between, he helped to bring peace to Northern Ireland, rather, in the news again today.
If anyone knows what's going on in relation to Southern Report,
please have a word with me after it because I'm keen to know when you meet his partners.
Sorry. I should also say, of course, that he's more locally speaking.
He's the chancellor of this university, and even how could I forget even more locally, but more centrally,
from a parochial point of view, he's the patron of the European Studies Centre and we welcome him in all his capacities today.
His partners in conversation today are Lord Hannay and Sir Stephen Wall,
who are both distinguished diplomats with long records of official engagement with the European community.
Lord Hannay, who is on the right of all Patten, is a diplomat who had responsibility for European communities at the Foreign Commonwealth Office.
He was then British ambassador to the U.S., ambassador and Permanent Representative to the UN and later a Special Representative for Cyprus.
So Stephen Wall, immediately to my right, his principal offices have also included ambassadorship to Portugal.
He was a permanent representative for this country to the EU, head of the European Secretariat in the Cabinet Office, an EU advisor to Tony Blair.
Today's topic British EU policy after the election could barely be more timely and riveting given our current by ARC.
Nor could today's speakers, I think, be buttered as guides to what to expect, or at any rate, what to look out for.
If they're not in the business of prediction, they can at least tell us what we should keep our eyes on.
So thank you very much, gentlemen, for coming today. And I'll hand over to our chancellor, our patron.
Thank you very much, Professor, and many thanks to the European Centre and Saint Anthony for your hospitality.
When we originally had the idea of holding this seminar and inviting David Hannay and Stephen Ward,
and I was just a tad concerned about the timing for this reason that it's sometimes erroneously
thought that diplomats don't have strong opinions or that if they have strong opinions,
they don't express them strongly. But both these colleagues today who've had stellar diplomatic careers not only have strong opinions,
but do express them ferociously, strongly and eloquently and convincingly.
And I have to say that the the few sparks of political life left in me made an uneasy glow when I thought about holding this seminar,
either during the election campaign or just before the election campaign,
with a great deal of possibility of people getting the wrong end of the stick.
But we had no idea when we when we chose this time after the election, that we would be fetching up with a kumbaya government,
with a government of of all the talents, which seems intent on on showing the rest of Europe how nice and decent, decent and congenial it is.
I don't think that will actually stop David or Steven expressing some robust views this afternoon.
And what we will do, if I may,
is is ask David to speak for about 10 minutes and then Steven and then allow ourselves to be provoked into some conversation.
David, you might start your. Thank you very much, Chris, and for inviting me down for this splendid occasion.
And as you said yourself, quite a lot has changed since you set the examination paper.
When I was asked if it was called, it said options.
What are the options for you policy for the new government. And at that time, I think it was sometime like back in February or March,
it was sort of fairly reasonable for anyone who was an observer of the British
political scene to surmise that there was going to be a hung parliament.
But I have to say that I didn't. And nor, of course,
to the two leaders of that coalition government at that time believe that there was
even the slightest chance that there would be the coalition government we now have.
And of course, they both campaigned in a sense that made it very seem very unlikely.
And so the fact that we've now got a fully fledged coalition is a complete role that saw this alliance since the time this this lecture was scheduled.
And the other thing that's happened since the time the lecture was scheduled is that we have a full blown sovereign debt crisis in Europe,
which was only very faintly discernible at the time.
I was invited. We were invited down here. It was really a cloud the size of a man's hand, a Greek man's hand, of course, at the time.
And now, of course, it dominates EU discourse.
And so it's a good reminder of Harold MacMillan's great saying about events steered by events.
The thing that he really worried about and in this case, things have changed a lot.
And he's trying to answer the question. I'll try and answer it in two different ways.
Firstly, from what I would call a narrow British political perspective, and then from a wider European perspective,
from the narrow British perspective, I would sort of divide the possibilities up into four options, not all as likely as the others.
The first pair are the totally conflicting,
contradictory options set out respectively in the two parties manifestos, and they are now allied in government.
The Conservative Manifesto option was really little more than a long list of the things the EU should not do or should stop doing,
or at least stop doing them in the UK. There was almost nothing constructive.
Repatriation referendum locks on the transfer of powers to the EU.
The Sovereignty Act, likely to challenge the primacy of EU law were the order of the day and the EU was to be dragged back into the long,
dark tunnel of institutional bickering from which it had only just escaped with the entry into force of Lisbon.
Down that road, in my view, they very little except confrontation,
isolation of the UK and probably ultimately humiliation of the sort we suffered in the 1970 475
renegotiation when a an outcome was reached which had to be dressed up as a mighty victory,
even though it wasn't anything of the sort. Luckily, little of this agenda apart from the referendum lock,
which I have to say I suspect is just as likely to lock in the people who introduce it as to lock out the people in Brussels.
Nevertheless, nothing apart from that has survived the triage of the coalition agreement.
But but where one thing and that is the possibility that much of that agenda will simply be stored away in a cupboard,
a club in the closet to be brought out again at the time of the next general election,
whenever that may be to use against both the Lib Dem partners in the Coalition and of course to ward off the horrors of UKIP and the BNP.
Now the second option, the Lib Dem manifesto was a pretty classical British pro-European one,
such as either the Conservatives or the Labour Party might have espoused at different times over the last 40 years,
but were no longer bold enough to do so.
No, the only trace of Euroscepticism was the admission that joining the euro was not for tomorrow or even next year.
That's Agenda two has not found much of a place in the Coalition agreement apart from a negative firming up of the self.
Denying approach to the euro.
The third and fourth options are more reactive than proactive and where I suggest a good deal more likely to transpire than either of the first two.
The third will consist could consist of steering a zigzag course between the first two.
Thus, any step deemed by any substantial Eurosceptic element in the Conservative Party as
pro-European or integrationist would be matched by some step taken to please them.
An opt out or a veto of something requiring unanimity.
That sort of policy, if implemented, will infuriate our partners as being both unpredictable and unprincipled.
The fourth option, and I think I could say I fear the most likely one to be adopted,
will be effectively to have no general policy towards the EU at all.
To elevate pragmatism into a defining principle.
To give up any attempt to shape EU policy formulation.
This approach, perhaps reflected in the void where EU policy should have been in the Queen's Speech,
would amount to conceding that the two parties in the Coalition found it just too difficult to formulate an overall EU policy in advance of being
forced to agree to elements of policy by the action of others the Commission or France or Germany or some other grouping of Member States.
The other member states would live with this, but they would neither respect it nor would they pay very much attention to it.
Well, turning now and you will gather,
that's a slightly gloomy view of the narrow political prospect of the options in the narrow British domestic party terms.
Turning now to the broader, more genuinely European agenda,
what strikes me looking at the what surrounds us is by how much they buy is that that there is that
this is a time when your British government could get its European act together and should be doing so.
For one thing, there is a leadership vacuum at the heart of Europe.
The French and Germans are frequently at odds, and the Commission has lost much of its lustre and influence.
It's a pretty odd time if you look at it in a historical context, for the British to withdraw into the wings.
Europe needs to regain some of the leadership role in climate change.
And I'll go over here now what I would think a broad European agenda could be,
it needs to to regain some of the leadership role in the climate change that slipped away from
its grasp at Copenhagen and to complete the flawed and inadequate outcome of that meeting.
And that's probably going to take longer than the period between now and the Cancun meeting in December.
It needs to continue to press for freer and fairer world trade towards and to revive
the Doha Round as part of a global exit route from the financial and economic crisis.
It needs to persevere with its own enlargement as a key element of stabilising the Balkans and fulfilling
the commitment to negotiate in good faith with non-member countries in the Balkans and with Turkey.
It needs gradually to make a reality of its common foreign and security policy,
both organisationally and by developing coherent, firm policies of engagement towards Russia and in the Middle East.
It needs an effective commission to roll back some of the state departures of the crisis we are going through to
complete the single market and to strike the right balance between regulation at the European level and free markets.
It needs to work for a rules based international community with effective multilateral institutions and greater representation of the emerging powers,
even if that has to be, in some cases, at Europe's expense.
It needs to restore its credibility as a partner in the transatlantic dialogue
with an American president who actually wants to see Europe punching its weight.
So there you are. That is an agenda.
Now, every one of those policy objectives is, in my view, entirely consistent with British interests and with the wider European interest.
So should we not be arguing for a policy option for our new coalition government that weaves
them together into a coherent whole and presents it publicly and presents it positively in.
In public as a way in which in a way which does not leave the field clear to a heavily Eurosceptic press and to a by now,
I would say rather mildly Eurosceptic public,
albeit one the public that is that doesn't seem to find these European issues uppermost in their minds when they come to vote.
Now, I admit I have so far flunked two important issues.
The first is Britain's role in the European financial crisis, the sovereign debt crisis.
I think that because I really cannot see how Britain can or should hope to play much of a role
in the debate now raging on how to tighten the disciplines of the Eurozone institutionally.
This is, I would guess, more likely to play out in some use of the Lisbon Treaties provisions for
enhanced cooperation rather than in any attempt to have overall treaty change,
which in any case, judging by the time it took to get Lisbon ratified, would at the very best take quite a few years,
by which time you would know very well whether or not the crisis had come to a bad or a reasonably benign end institutionally.
So I think the enhanced cooperation line is what is more likely than the other.
What we cannot afford. However,
during the period when the members of the eurozone are working out just how far they're prepared to go in the sense of greater discipline is carping,
criticism or schadenfreude. As our closest international trading partners go through what will be what is a pretty agonising experience?
They will be very sensitive during this period and we ought to be sensitive about their sensitivity.
The second issue I ducked is an old friend, or if you can call anything to do with the EU budget a friend.
It is something we are all, alas,
all too familiar with on which important negotiations and decisions will take place in 2011 and 2012, i.e. not very far away.
They won't be at all easy. They never are.
Why are they not easy? Because this is a zero sum game.
If you pay more, if you pay less, somebody else has to pay more.
It is an AR rule of EU budget negotiations.
All talk about larger cakes and that sort of thing goes for nothing.
Of one thing we can be pretty sure they will not in the present and prospective fiscal climate be any effective pressure for a much larger EU budget.
I hope we will moderate our language about CAP reform.
The normal British tone on that being that of rage and incomprehension.
And that upsets our partners no end and does not actually influence them in a helpful way.
It just directs their attention even more obsessively towards our rebate.
There is quite wide support for reducing the proportion of the budget that goes on agriculture steadily but not dramatically,
and increasing what goes into areas such as research and energy security.
And that would be very much in our interest and I hope therefore that we will approach this
negotiation in a much more calm and collegiate spirit than we have done on past occasions.
Some hope, you might say, but nevertheless I'm going to express it.
And I believe a relatively low key budget negotiation without excessive histrionics would be a
better option for our interests than in the organising another year or two of trench warfare.
Now, perhaps all this is a bit unrealistic, but I do feel it is time, as Chancellor Chris Patten has said and is doing to ask,
that we look at all the options and not stay stuck in the old grooves along which we've run too
long and which are well summed up in the four narrow options which I spoke at the beginning.
What I would like to add my thanks very much to to Chris Patten and his Anthony for the invitation and to all of you for for being here.
I think there's been actually a pretty fair continuity in British policy towards the
European community in the European Union since we since we joined the rhetoric changes.
But the reality is not the one that sometimes caricatured by our partners that all we want is a trading area.
I think we do want a political Europe as well as an economic Europe, but we want a Europe that is run by governments.
The view of successive British prime ministers.
It was Tony Blair's view and I worked for him and John Major's when I worked for him is that basically the European Union should be run by France,
Britain and Germany and the European Commission, of which Chris Patten was a distinguished member,
is there is a kind of super bureaucracy and I don't think this Government will be any different in that view.
Just to be look at a few of the things that are in the joint programme of the Coalition.
First of all, that there should be a referendum on future transfers of sovereignty from Britain to Brussels.
I think the Government's aim is hopefully to have legislation enacted by next
spring that would obviously encompass any future moves to change the Treaties,
with one notable exception, which is the governments. It is not the Government's intention to include in the requirement for a referendum.
Future treaty change is devoted solely to enlargement, which means they remain committed to the same enlargement agenda as their predecessors,
including to Turkey, of which I think the three of us certainly are strong supporters.
That means that the Government may actually, when it comes to the ratification of of the most likely imminent enlargement treaty,
namely to Croatia, may find itself having a row about Europe with its own Eurosceptic backbenches,
because one of the things that will be in the Croatian Treaty of Accession are all those protocols to the Lisbon Treaty,
which the Irish secured as the price for getting the second yes.
In that second referendum. And I think a lot of people on the conservative backbenches will argue that because
the Lisbon Treaty bits of these protocols form part of the Croatian accession treaty,
there should be a referendum. But the government, I gather, are determined to resist that.
The other area in which they will promise referendums is that of the Lisbon Treaty,
which basically enables what would previously have been done by treaty change
to be done by agreement of the Member States and ratification by parliaments.
And there are two areas where the Government will say that ratification by
Parliament alone is not enough and that there would have to be a referendum.
One is if there were to be a move on the part of our partners to move towards majority voting in foreign policy,
and the other is on setting the overall level of the European budget.
So that's one area and that's part of the most important. That's the thing the Coalition are agreed on.
Second area where there is still a resolution to be had between the Lib Dems on the one hand and the Conservatives on the other,
is the notion of a law enshrining sovereignty in in British law for the for the first time.
Now, there are various ways in theory that you could you could do this.
Some of those within the Conservative Party have advocated a sovereignty bill, want in some way to replicate the German constitution.
Another two problems with that. One is, of course, that we don't have a written constitution in the way that the Germans have or the
German constitution was there as a fact before Germany joined the European Union.
The second is that whenever there has been a potential conflict between European law and the German constitution,
the German body politic has moved to remove that possible friction.
That was the case, which are this and will be much more than I do in the mid seventies,
where a German trader found himself at loggerheads with European law but was supported by the German courts on the basis that he has
certain human rights that European law was infringing and because there wasn't a corpus of human rights law in the European Union,
the human rights should, under German constitutional law should prevail.
Now, the Commission said, you've got to be joking, and if you persist in that view,
we will clobber you, the Germans, as being in breach of your European treaty obligations.
And the Germans backed down and in the mid-eighties regularise the position.
And of course, one of the motives behind Germany's wish to see a charter of fundamental rights
was that there would be a body of human rights law within the European Union.
So in other words, the whole motivation in Germany is to avoid that conflict,
whereas one has to reckon that in our system quite a lot of the motivation would be to have as much Ashgrove as possible.
I think the kind of work that's being done at the moment within government.
It would be on a piece of legislation that would basically restate in one legal document, in one law,
existing European case law in terms of sovereignty versus national sovereignty versus shared sovereignty if.
And that, I think, is the way the conservative base of the coalition will want to go if they get agreement from their Lib Dem partners.
It remains to be seen how that again can be massaged and managed in terms of opinion on the backbenches within the Conservative Party.
The other area, which was an area of potential conflict in the Conservative Manifesto and much less so under the Coalition Agreement,
is the whole business of Britain opting in or opting out of cooperation in justice and home affairs,
in particular the fight against international crime, terrorism and and so on, where the Government have decided to take an ad hoc approach.
And I think the probably that we will find over time that policy doesn't much change between this government and its predecessor.
But there is a five year rendezvous under the Lisbon Treaty at which a decision
has to be taken as things move towards the full operation of community law.
As to whether you opt in on that basis, giving full jurisdiction to the European Court or opt out,
and that's obviously an issue further down the track.
Just briefly, one other area which is confronting the new government and it touches on the things
that David was was talking about in terms of where a government might position itself,
is the whole formulation of the European External Action Service under Cathy Ashton.
And this gives me the I don't know if any of you heard Cathy Ashton's European view of good will because there are not many good European jokes.
But this is one and I heard it from Cathy Ashton herself. So it's from the horse's mouth.
As you know, Henry Kissinger always said, you know, who do I bring up in Europe?
There's not one single person I can ring up. So Cathy Ashton says to Hillary Clinton, look, now you Americans, here is I am the person.
If you want one person to bring up in Europe, I am that person and I'll give you my mobile phone number.
So Hillary Clinton goes back to Washington, then she goes to see President Obama, says, look,
we've finally got the thing you've always wanted for this, this one European phone number.
So Obama says, right, well, let's ring it.
So Hillary Clinton does a number and she gets the voicemail and it says this is the voicemail of Cathy Ashton,
European High Representative for Foreign Policy for French European Foreign Policy Press one for German.
To literature anyway, I think.
I mean it's a lot of argy bargy going on and as usual as the argy bargy over turf is between the commission,
on the one hand, the Council on the other the European Parliament on the other.
Britain has its own particular position, which is for again reasons of perception and sovereignty.
These these European representations, these European embassies should not have anything to do with providing consular services,
at least not for British subjects, which seems to me to be totally daft.
You don't expect if you have a crash in France to be whisked off to a British hospital?
It seems to me that if you're in need of consular services, particularly in some area where Britain isn't itself represented,
to be able to rely on European consular services would be very sensible.
And it's also the British position that on those residual areas where there is still a national six monthly presidency,
then in international dealings, that presidency should take the lead, which again seems to me to be a triumph of ideology over over pragmatism.
I think, like David, it's my final point that there are two issues that will really bedevil the government.
One is the next round of negotiations on the European budget and the whole British rebate, the famous Margaret Thatcher rebate.
And I think the Government's position, not least because of our own financial position,
will be that we're not prepared to pay a penny more and they will certainly try in advance of that to get a group of countries,
including Britain, to be what is known as the 1% club.
In other words, that you maintain the ceiling of the European budget at its present level rather than increase it,
there's likely to be support for that.
But within that, most of our partners, for the reasons David gave, will want us to be reducing the amount of our rebate.
And the other is the whole question of the future of the of the Eurozone.
I mean, this government is nervous about economic governance done by the members of the Eurozone to the exclusion of of Britain.
So far that they've avoided that.
And obviously it makes a lot of sense on many issues from the perspective of our
partners to have Britain as a of one of the biggest European economies inside the tent,
although we can't be both inside the tent and not not paying.
But I think one of the things that this government will be nervous about,
as its predecessor, was, was the possibility of more things in governance terms,
in institutional terms, in terms of economic governance being done within the Eurozone to the exclusion of of us as non-eurozone members.
The main reason why John Major decided when he was prime minister to allow the single currency to go ahead,
albeit with an opt out opt in for Britain was because he was advised correctly that there was nothing to stop those who wanted to
go ahead and create a single currency to have a separate treaty outside the European Union treaties in which we would have no part.
And it's perfectly possible for the eurozone countries to do something similar again.
So I think that would be one of the things that that most whereas them other than that
I suspect that this government and I think this is very much the Cameron psychology and
certainly William Hague psychology will try on some of the areas that David has mentioned
like climate change to try and put themselves in a in a in more of a leadership role,
not least because they will be conscious of the deficit in terms of all the things which we find it difficult to participate in.
Thank you both very much indeed. I wonder if I could start with what you regard as almost an inevitable row that is over the budget and the rebate,
and given the views of others like the French on the budget and given the fact that public expenditure in every Member State,
not least this one, will be being squeezed over the next few years.
And given the usual calm and relaxed way in which the tabloids in this country deal with these issues.
Is it really possible for any government to deal with the budget and the rebate in a low key way?
Well, I think those. Low key and low key. I mean, of course, you're quite right.
There will be screaming headlines and much beaching of press and so on about what's the
united view of 26 member states that the rebate should either disappear or be much smaller.
So difficult for them to come to that view because as I said,
this is a zero sum game and if it disappeared or became much smaller, they would pay less.
So of course they'll be in favour of it.
But the most important thing to hang on to I've always found in these negotiations is to ensure that the rebate is a residual,
which is what it in fact is.
It is merely the consequence of a failure to reform the budget in a way which would make its impact fiscally more more equitable.
And that's to say that people would pay according to their means and receive according to their needs,
which it doesn't do at the moment, a transfer union.
Well, anyway, it's something, but since they're not going to move that way, then it is very important that it is a residual.
And isn't that we do not get into a situation where she's the first item on our agenda to get all 27 countries
to swear in not going to touch the rebate because they won't swear that they will go for it if they if we.
And also, as I say, I think if we adopt a somewhat less warlike approach to things like cap reform than we have in the past,
which has been completely unrealistic, a lot of it, and we should not be supported by the British farming community at all.
Anyway, then I think there is some chance that although tempers will get a little bit frayed,
the temperature can be kept under sort of manageable proportions.
Yeah. I think I mean, one of the reasons for not having too much of a go at the CFP is that actually you have to decide what your priorities are.
And on most realistic scenarios, the continuation of the British rebate is worth more to us in financial terms of the
kind of reform we might get in the short term on the Common Agricultural Policy.
And in any case, I think I'm right in saying that historically we've achieved more CFP reform through
the gas and now the WTO than we have by the kind of internal machinations of the EU,
except those machinations that in turn respond to the requirements of the of the WTO.
I think there are two things we want. One is I think it is it is quite important to have a narrative.
I mean, our original narrative I mean, David knows better than me here he invented it was that you had of the nine member states,
you had all but two who were getting more from the budget than they put in.
And of those, the two who were net contributors, Germany and the UK, Germany was wealthy and the UK in relative terms was not.
That's no longer the case.
But the other bit of the of the rhetoric invented by Margaret Thatcher was that countries of like prosperity should more or less pay the same.
Tony Blair used to say the same.
In other words, I mean, I used to say to Tony Blair when I worked for him that this wonderful rebate that Margaret Thatcher got and he said, Well,
if it's so wonderful, why is it that ever since we got it in 1984,
we have still being paid more, even with the rebate into the budget than the French,
even though for most of that period the French have been on in GDP per capita terms more prosperous than us in this financial period,
for the first time ever in the history of the European Union, France will be paying net rather more than that, but it will be to be pretty marginal.
So the first thing is to say that that the rebate simply deals and continues to deal with the historical inequity.
Now, the other thing I think is to look at yes, again, I mean,
I've always looked at in the past whether there is some kind of generalised
scheme and not a specific British scheme that might nonetheless deliver results.
Every time you've done the calculations in the past, the Treasury I've done the calculations.
The general scheme applying in theory to all member states hasn't really deliver the goods.
One of the disadvantages, though, of the present system is that we don't just have a rebate for the UK.
There are enormously complicated mechanisms whereby the Germans don't contribute some of our rebate,
the Dutch have some rebate, the Swedes have a rebate, so nobody apart from the experts can understand it.
So if you could devise a generalised scheme which continued to deliver for us while not being totally British specific,
that would again be a good part of a narrative to have rather than it just being 26 countries against us and the eurozone.
And does it matter to us if the countries and I rather doubt this will happen,
but if the members of the Eurozone adopt a Van Rompuy approach to economic governance in the Eurozone, I mean,
if they want to share if the Bundestag wants to share management of the German budget with the assembly,
and as you know, that's not something we would necessarily get excited about, is it?
No, I don't think so. I mean, I've been I've been rather wrong on this whole issue because I was in Brussels when we when we joined the
single currency and we did we did a paper from the UK representation for the benefit of the Labour government,
which basically said and this was our prediction,
that within a very short space of time the eurozone countries would be cooperating intensively across
the whole range of policy and then we would find ourselves excluded and and at a disadvantage.
And of course it simply hasn't happened. One reason is that, of course, the politics haven't followed the economics.
I mean, Margaret Thatcher's objection,
a part of our objection to the single currency was that she said you can't have a single currency without fiscal transfers from the rich to poor,
and you can't have those fiscal transfers without political union. And the political union is unacceptable.
And of course, one of the conditions of the establishment of the euro was no fiscal transfers within it.
And so you had that gap between a monetary union on the one hand, and a real economic and political union on the.
On the other. Now, maybe because of what's happened in Greece and elsewhere in a rather messy way,
the European Eurozone will lurch towards that economic governance.
I don't myself think that that means that we automatically lose out if it leads, which is, again,
to be the fear so far unrealised that you then get beggar thy neighbour policies,
i.e. why should you who are outside the eurozone not taking any of the responsibility for it?
Enjoy the benefits of the single market.
Then you are off to the races and you're off to something which potentially leads to the breakdown of the European Union as a whole.
But we haven't had that. We haven't had that so far.
The only the only thing on this where I think I've been right is where I followed the wise advice of one of the then British commissioners who said,
as far as Britain is concerned,
British public opinion will not be in favour of the euro unless unless we get to a situation where there is absolute crisis,
in which case, you know, we'd be we would be rushing to join it and any government would change its policy as a result.
But I do at the moment and again, I don't put faith in my predictions, but at the moment I don't see the circumstances in which that would happen,
providing we do the things domestically that we need to do to put our economy straight.
Yeah, I would I would respond more or less the same way.
Adding this I fear, I mean, someone like me would like to see Britain join the euro one day.
Of course, if the eurozone members on their own go ahead and adopt large elements of European governance,
economic governance, then it just makes it even less likely that we will ever join.
I think that could be extremely attractive to those who don't ever want us ever to join.
So I think that one part at least of the Coalition will find that quite comfortable
because it will seem to them to remove beyond any bounds of possibility,
beyond referendums, beyond anything else, the fact that we will join.
So that's the reason why I think we should we will take it fairly calmly, though I would say I would take it calmly, but with sadness.
The other thing is that there are institutional difficulties down the road or could be.
It really depends on whether if you're like to take the Merkel approach, you want to change the basic treaties,
in this case the Maastricht Treaty, or rather the consolidated treaty that now exists with Lisbon and all the rest rolled into it.
In which case, even though the British opt out would probably mean that Britain did not and certainly did not apply
the provisions you were writing in to itself in the same way as they were applied to the eurozone.
I suspect that would be very difficult here indeed,
particularly given the referendum law in which the Eurosceptics would insist that since we were theoretically subscribing to this increase of powers,
then we had to have a referendum on it and presumably they would campaign against.
I don't. However, that's why I said I think myself that the way this will go is is is a way in which either they use the enhanced cooperation.
Sorry for the jargon provisions of the Lisbon Treaty which and other earlier treaties which say that if a group of members
want to go ahead on their own in a direction which is consistent with the overall objectives of the basic treaty,
they can do so within the scope of the existing treaty and can subject themselves to tougher laws and so on.
I think that's the most likely way the German lawyers and constitutional court
will have a field day over all that about whether it can or can't be done.
And I suspect one of the reasons why Shively and Merkel talked about treaty change was because they they are
probably about as frightened of the German constitutional court as we are frightened of more treaty change.
But I guess that that will be the direction. In which he's more likely to go.
In which case I don't think he does pose great problems for us.
I think we would, of course, be excluded from these mechanisms.
But that exclusion might not prove to be particularly meaningful, since, in any rate, we are, strangely enough, there.
You don't hear that in the Chancellor of the Exchequer speech that what he's going to stand up next week and do is to say by the end of this
Parliament I will have bought Britain into conformity with the Maastricht criteria and waited to say it for a variety of slightly eccentric reasons.
I found myself listening to indeed watching John Edwards speech in the Queen's Speech debate a couple of weeks ago.
And John Redwood, as you know, is is limited in his enthusiasm for the European Union.
And he made his speech saying how much he wanted to see the Eurozone crisis ended speedily,
that the only way of doing that effectively was through fiscal union and the union of labour markets.
And of course, he would support that happening for the eurozone countries.
And of course, if that happened,
then we would need to repatriate a number of powers from Brussels and and regard ourselves as part of a customs union and no more than that.
So I think there is a I think on the Eurosceptic side, there is a certain enthusiasm for Europe heading in that direction.
Let me ask you both one more question before inviting questions and comments from from all of you, or at least some of you.
And it's generally an accepted observation of the commentariat that Germany has changed fundamentally in the last few years,
and that Germany now behaves in the European Union,
just like France or Britain,
that Germany no longer regards its own national interest as synonymous with whatever other people say is Europe's interest.
Do you think that's true?
And if it is true, what are the implications for our relationship with Europe and for Europe's development over the next years?
Well, I don't actually think it's true in its most simplistic form, as you put it, and as the tabloids would put it at all.
I think there is an underlying truth that Germany has moved away from a kind of almost automatic support for things that the European institutions,
Brussels, the European Parliament, the European Commission wanted to taking a fairly critical view of any proposal that
comes forward and deciding whether it was in the German interest to do that or not.
That to that extent I believe they have moved into a position which is more like the position of Britain and France, although the British position,
oddly enough, particularly when Euroscepticism is in the ascendant, has had an extraordinary capacity to be ideologically driven by.
Some of my friends in Brussels used to say to me, but I was there.
We were brought up school to believe that the British were pragmatic and that we were a lot of ideologues.
And now we find ourselves living in a European community in which you're the ideologues and we're the pragmatists.
There's a lot of truth in that.
But where I don't think the the story about Germany is true is I don't think that they are in exactly the same position as Britain and France.
Take, for example, the vexed issue in the common foreign and security policy area of the use of force.
There quite clearly not in the same position as Britain and France over the use of force,
whether they might agree in theory, in the particular circumstances, that force had to be used.
It wouldn't necessarily mean they would want to be the people who used it, whereas the British and the French,
if they came to the conclusion that force had to be used,
would have less difficulty about deciding that they were the people who should be part of using it.
So there is there are quite big, big differences there.
And I think the whole German scene is far more complex than anything that is perceived by the British tabloid press.
But that's not a big change since The Daily Mail was attempting to tell us what German policy was in 1895.
I remember rightly and contributed heavily to the run up to the First World War by by its efforts.
In so doing, though, they were given plenty of help from. The other side, too.
So I'm afraid the British press is not going to be a good guide to this.
But I think we ought to be very, very careful about stigmatising German policy in that way.
And also, quite honestly, the person who is who is always compared to is Helmut Kohl.
And Helmut Kohl actually was quite exceptional, even as a German chancellor,
Helmut Schmidt did not take that particular sort of line of, you know, of what comes what is done in Brussels is good for Germany.
He was much more critical and there were other German chancellors who who were too.
And Schroeder certainly didn't. So I don't think I really don't think I think it's oversimplistic.
Yeah. I mean, I remember being in meetings between John Major and Helmut Kohl.
Helmut Kohl said, you know, that I and Francis Mitterrand are the last generation who will have what,
in effect you might call the money vision of Europe. And it might survive for one generation after us.
But after that, it will it will go. I mean, I think two things happened, obviously,
which which affected German interest in European Union in the money sense and diminished German interest in the European Union.
One, of course, was the collapse of the Soviet Union and therefore the collapse of the government in terms of across its borders threatened Germany.
And the other was German reunification. But it seems to me that that Germany is no more self-interested than any other member state.
And Angela merkel had an element of self-interest,
given that the German banking sort of the Greek banking crisis would also have been a German banking crisis if the Greek economy had collapsed.
But beyond that,
it seems to me that actually a German sense of leadership responsibility within the European Union and commitment to it is still very strong.
But David, just just before bringing in others,
let me take some of your examples of what would constitute a positive leadership role for Britain in the European Union.
And we want to go further and faster on climate change.
How does German industry feel about that?
We want to go we want to press for completing the enlargement agenda, particularly involving, of course, Turkey.
How does Germany and France feel about that?
We want a more effective and coherent policy on Russia.
How does the German energy industry feel about that and about the Middle East?
How does Germany feel about that? And aren't those all examples where what you would regard as a very effective leadership
agenda for Britain in the European Union comes smack up against what Germany,
as well as in some cases France would be arguing in the council.
Yes, I think you've you've identified quite a few problems down that road.
It would depend, of course, on the tone in which it was pursued.
What I was pleading for, in a way, was to try to weave together these elements of policy into a coherent approach to the future of Europe,
one which we don't need to be ashamed of, in which we don't have to simply approach on a piece by piece basis.
But has in fact, it is what our German friends would call a gazumped concept.
And why not? Now we the things you've identified, for example, for example, the climate change.
It is, of course, a bit of a dirty little secret that if we went to 30% now after the after the recession has lowered our emissions quite sharply,
the amount we would be going to would be much less than if we had gone to 30% two years ago.
So the figures are all now out in the open.
In fact it's a little bit beyond what 20% would have been if the recession hadn't come, but not a huge amount.
So I think it's worth doing and I can't believe that it can't be managed in some way or another.
Turkey, I think, is a moving is a moving subject both in France and in Germany.
I don't think they're going to have a kind of conversion to Turkish membership overnight.
But I think some of the things that are going on in Turkish foreign policy now illustrating both how important
Turkey could be if it joined an enlarged European Union and also how risky it could be if we rejected it.
And I think that may have some effect.
The re-election or long re-election of President Sarkozy could be another one because he is really very far out in his opposition to this, his own.
Prime Minister doesn't agree with it. His own Europe minister doesn't agree with it.
The Socialist Party doesn't agree with it and could well be in the Allies in 2012.
And the German position is much more nuanced than the French position on this, particularly the SPD.
And of course, the steadily increasing, but still not huge numbers of ethnic Turks who vote in Germany.
So I don't know. I think I think that that would be manageable.
Similarly, on the Middle East, I think the former German position has,
like so many other aspects of Israel's foreign policy being systematically destroyed by the Netanyahu government and
is making it very difficult to sustain a position which says that we will never put the heat on Israel on anything.
So all these all these things and on Russia, as long as we what we need to, I would argue, get away from is two schools of thought.
One is you've got to be really tough with the Russians and behave as if it was the Cold War all over again and really sock it to them.
And the other which says you can't possibly say a single word of criticism to the Russians to they might turn the gas taps off tomorrow.
I think you could you could you ought to be able to produce a policy which is neither of those.
But you will not do so unless Cathy Ashton quietly gets together with the French, the Germans,
the British and the Poles and works out what that policy might be before public debate on it starts.
I don't think it's impossible to do. I think elements of it are probably coming along now.
We're going to see later this year whether the financing for Nabucco transpires or doesn't transpire.
If it does, we will have moved a big step towards diversifying our energy supply.
The whole question of interconnectors between member states, I believe quite a lot of them are now being built in fact,
and will make the member states much less vulnerable in this country, which only will need to get on with producing much greater gas.
Storage is absolutely ridiculous. We've only got about four days supply when the Germans have, I think 50 or 60 and so on.
There are many of these elements which could make that a less difficult to deal with and it's always a moving scene.
Stephen I just want to say one point on Turkey, which is I think I mean, I think if I if I'm right and I am right,
that the government's intention is not to offer a referendum on treaty change for the purposes of of enlargement.
That means there will be not only consistency of of British policy, in particular on on Turkey, but I think I mean,
it's one area where the Blair government showed real leadership in Europe and hopefully a Cameron government might do likewise because I mean,
I think it's one of those areas where both the Labour Party and the Conservative Party are
sadly way out ahead of public opinion in terms of their support for enlargement to Turkey.
And I think if we had a referendum in this country on Turkish accession, it would be very difficult to to win.
And I happen to believe that it is a very important national as well as European interest, that we should continue to encourage Turkey's accession.