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Stop Europe's politicians destroying Europe's future

IT looks as if the European Question will skewer this government as surely as it skewered John Major's and poisoned the last few years of Margaret Thatcher's. It is the Irish Question de nos jours.

Yet oddly there is nothing particularly new about it. For centuries the British have been manoeuvring to avoid continental imperial projects of one sort or another. "Balance of power" diplomacy was our way of getting one or other of the parties to join with us in restraining such imperial urges - whether it was the French or Spanish Kings or the Pope or Napoleon, or more bloodily Kaiser Wilhelm II and Hitler (where the balance had to be provided by the New World). The remarkable thing is how successful (if often at a high price) this balancing of power in Europe was.

Europe remained a region of more or less independent states, with a common Christian allegiance. The Pope, having no legions and insufficiently powerful champions to create a Papal empire, settled for influence; and, as Professor Deepak Lal of UCLA has recently shown, these conditions of competitive independence generated the flowering of culture and industry of the Renaissance and later the Industrial Revolution.

Until now. For the architects of the European Union and latterly of monetary union and the social agenda, with its planned charter of fundamental rights, have made no secret of their objective to create a United States of Europe. It is possible they may not succeed - but it is complacent to assume so and deluded to maintain that they are not trying. Any such USE requires a federal constitution and any such constitution acquires its own dynamics towards centralised power. In the case of the United States, that tendency was interrupted by the Civil War, the bloodiest one in history; that war disposed of Southern independence.

What should we do? Both the Blair and Major governments have followed the Foreign Office tactic of "being at the heart" of Europe in order to find allies for "our way" - the balance of power game rejoined. It does not work. Most of all, it has failed in the economic sphere. The costs of the European way to our economy are now very probably greater than the benefits of the EU.

On top of the Common Agricultural and Fisheries Policies, we have a huge regulative incursion into our labour market in the form of the working time directive and the burgeoning social chapter, with pan-European bargaining and union rights next on the list.

We are also probably losing out through EU protection of manufacturing in which we are large net importers. Politically, the explicit aim of continental politicians has been to use the euro as a stepping stone to political union, in which central powers are to spread from the single market to justice (Corpus Juris), the European army and a European foreign and defence policy; again, we are being pushed constantly on to the back foot, conceding issue after issue to our serious detriment.

Plainly, many in this government like much of this EU agenda. These are their socialist friends. And yet they cannot possibly want to submerge our country politically in this new imperium. Even if they did, were they to betray any such views, they would be ejected from office by an outraged people.

The irony is that at one time it seemed as if it could be so different. Think back to the mid-1980s when none other than Margaret Thatcher, with EU Commissioner Lord Cockfield, were pushing for the single market. The idea was to build a free-market Europe, outward-looking and internally competitive. Into such a framework in fact the euro might in the fullness of time have fitted well.

For a flexible Europe would have had other modes of adjustment to shocks than interest rates and exchange rates. This European "Model A" is reminiscent of the world under the gold standard at the turn of the last century, in which relative prices and wages adjusted to stabilise regional shocks while money provided a stable unit of account.

Model A is out cold and counting. The way that Europe's political elite sees to "make the euro work" is the way of "harmonisation": since flexibility is politically unattractive for social reasons, the object is to make the economies as similar as possible to reduce the "asymmetry" of shocks. But unfortunately this "Model B", besides being both politically and economically damaging to Europe as a whole, would spell the end of our own economic competitiveness, not to speak of our political freedoms.

Here is a list of suggested British actions. First, insist that any "clubs of further integration" take place outside the Treaty of Rome. Any "pioneer group" inside the treaty would be used as a precedent by the European Court for forcing "pioneer practices" on "followers", would divert the EU resources that we provide from their Treaty purposes, and would mean that within the affairs of the EU there are "second class" signatories. Second, adopt Mr Hague's inspired proposal that any further treaty alterations must have the approval of the British people in a referendum. By resisting grandiose plans for alteration, we raise the chances of Model A.

Finally, Britain should open a second front in this great war of EU attrition. Many in Europe disagree strongly with the political vision of Model B. They want an enlarged, outward-looking, non-dirigiste Europe in which there is no need for yet more majority voting - the single market is enough. Chirac and Schroder have their grand summits; so should we. Let us create a grand commission of economists and politicians from all parts of Europe to root for Model A.

Britain's agenda should be not merely to join Nafta but to encourage others in the EU to do the same - to slam shut the door marked Fortress Europe. It should be to abolish the social chapter and charter of fundamental rights as gross intrusions into national affairs, and to enshrine tax competition, not harmonisation, into the principles of competition in Europe.

All over Europe I meet people who agree that this is the right direction for Europe but feel powerless against the unscrupulous political elite. We should organise them and give them focus and edge.
 

Patrick Minford is professor of economics at Cardiff Business School  

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