Wales in a two circle Europe

David Marquand queries what the non-English nations will do if the UK opts to stay outside a newly integrating European Union

According to the pundits, Britain is not going through a ‘constitutional moment’ and is not about do so. For the foreseeable future, they conclude sagely, there is no chance of a comprehensive change in the constitutional architecture of the United Kingdom. More small-scale, piecemeal changes can be expected, but a constitutional Big Bang of the sort Charter 88 once dreamed of is for the birds. And what is true of Britain is, by definition, true of Wales.

I am not so sure. Two crucial developments have called the pundits’ conventional wisdom into question. The first is the SNP’s staggering success in the recent elections to the Scottish Parliament; the second is the current crisis of the Eurozone. Whatever may be true of England, Scotland is most certainly approaching a constitutional moment of some sort, and no matter what happens the rest of Britain, including Wales, is bound to be affected.

It is now virtually certain that the Scottish Government will hold a referendum on independence before the end of the current UK Parliament, and only slightly less likely that the Scottish people will be able to vote, not just on full-scale independence, but on ‘independence lite’ or ‘devolution max’ – in other words on fiscal autonomy within the United Kingdom. If the Scots vote for full-scale independence, the constitution of the rest of Great Britain will be up for grabs, with results that no one can foresee. But even if they reject full-scale independence and settle for independence-lite, the structure of the British state will be transformed – far more drastically than it was by the devolution statutes of the 1990s. Less obviously, a vote for the status quo would be equally portentous. It would be a vote against more powers, not just for Scotland, but for Wales and Northern Ireland too.

The long-term constitutional implications of the crisis of the Eurozone are harder to read, but they, too, are likely to be more portentous than most people on the British side of the English Channel yet realise. Built into the very structure of the Euro was a deadly flaw. Monetary union without fiscal union was always a nonsense. As far back as mid-1970s, when what is now the EU was still the European Community, the authoritative MacDougall Report showed that monetary union would be unfeasible over the long term without fiscal transfers from the more to the less advanced and competitive parts of the Community. This is what happens more or less automatically in modern nation-states by way of the national budget. I suspect that Helmut Kohl, the chief political architect of the Euro, knew this perfectly well. He didn’t say so because he didn’t want to frighten the horses, and thought monetary union would in any case evolve into fiscal union as time went on.

Unfortunately, he didn’t anticipate the heady boom of the late 1990s and early 2000s, or the frenzied euphoria that accompanied it. While the boom lasted, complacency reigned. Everyone (notably including the British political class) thought the cycle of boom and bust, which has been intrinsic to capitalism for more than 400 years, had miraculously come to an end. The Eurozone seemed to be in robust health, and it would have seemed indelicate to point to its in-built flaw.

Then came the crash and the flaw was exposed. Another flaw came into view as well: the yawning economic and fiscal gulf between weaker, largely Mediterranean countries on the southern periphery of the EU, and the stronger, more competitive heartland. Whatever may be in doubt about the current crisis, it is clear that it won’t be resolved without significant transfers from the richer heartland to the poorer periphery. And in a crisis when everyone feels poorer and more vulnerable, voters in the heartland jib at that suggestion.

That is where we are now. Assuming Europe’s rulers don’t want to plunge the continent, and perhaps the world, into a crisis of mammoth proportions, they have two choices. The first is a two-circle Europe, with a much more tightly integrated inner circle and a less integrated outer one. The tight inner circle would consist of the original ‘Six’, minus Italy, but plus Austria, probably Poland and conceivably the Czech Republic and even Spain. There, the always inherent political logic of monetary union would finally prevail. Fiscal union would accompany monetary union; for all practical purposes so would political union.

The loose outer circle would consist of the rest of the current EU. Moderate euro-sceptics in the outer-circle countries would probably rejoice at first. They would look forward to a future of continent-wide free trade without tiresome Brussels rules or supranational institutions. But the rejoicing would not last. The tight inner circle would necessarily determine the fate of the entire internal market, including the loose outer circle. To protect themselves outer-circle countries would almost certainly engage in competitive devaluations and resort to de facto protectionism. An impoverished, resentful and fragmented group of countries in Europe’s periphery would contemplate a tight group of rich neighbours across a gulf of jealousy and incomprehension. In the outer circle, the dynamic of the European project would go into reverse. The miracle of 60 years of peace in what had previously been a blood-soaked continent would be in jeopardy. It would be an unmitigated tragedy for the whole of Europe, and perhaps the world.

The other choice is to use the opportunity created by the second most shattering crisis in the history of capitalism to launch a European New Deal, based on the principles of solidarity and justice, covering the entire territory of the enlarged EU. It would be designed to combat the deepening depression through an enlarged European budget, on Keynesian lines, and to replace the depression-fostering fiscal orthodoxy that now reigns almost everywhere. At the moment, all the main European capitals are dominated by latter-day incarnations of Herbert Hoover. It’s time for European Franklin Roosevelts to take over.

Sceptics will say this is impossible. Sceptics thought the American New Deal was impossible before it got going. Sceptics in Europe thought the same before Monnet and Schuman launched their plan for what became the Coal and Steel Community and later the Economic Community. Such a New Deal offers the only real opportunity to create a social Europe able to counter the toxic mix of euro-scepticism and racism that now threatens to tear the Union apart.

It would obviously necessitate fiscal union, governed and legitimised by democratic institutions in place of the technocratic ones that run the EU at present. That, in turn, would involve a giant step towards European federalism in place of the present uneasy half way house between federalism and confederalism. Probably the UK would stay out.

The great question is what the non-English nations of the Kingdom would do. Would they allow England to exclude them from the European destiny to which their histories and cultures entitle them? Or would they embrace Europe and escape from the decaying hulk known as the British state? These questions are not on the political agenda now, but the odds are that they will sooner or later reach it. It is time they figured in the conversations of all the nations of the Britannic Isles.

Professor David Marquand is a political writer and historian. His latest book is The End of the West: The Once and Future Europe, published by Princeton University Press earlier this year. This article appears in the current Winter 2011 issue of the IWA’s journal Agenda.

8 thoughts on “Wales in a two circle Europe

  1. I agree with the analysis but I think it is entirely incorrect to say the future of the Celtic nations (N.B.) is ‘not on the political agenda’. It is on ours, big time. The London chatterati merely focus on, well, London. When Scotland votes for member-state status in 2015 – merely three years away – it will be like, to quote Joseph Haydn when he’d heard Beethoven’s Eroica Symphony, “From today, everything is changed”. This event will launch Jill Evans’ Flotilla Effect in other sub-state nations like Catalunya, Flanders, etc., as they seek to emulate the Scots. The big question for us is whether the national movement here is ready for demise of the Anglo-Scottish union. With one or two honorable exceptions, there’s not much sign of it. The writer does not seem to be aware of the work that the European Free Alliance has done on the concept of internal enlargement . Ukipia – the UK minus Scotland – would have no say in the matter of member-state status.

  2. Syd, it is impossible to predict the outcome of the Scottish referendum, but many people speculate that the voters might ‘split the difference’ and opt for Devo Max. Even if they do opt for independence, Scotland’s legal position vis-a-vis EU membership looks uncertain. Maybe it will have to make a new application? If Scottish independence does indeed trigger nationalist sentiment in other EU member states, they are perhaps unlikely to welcome Scottish entry to the EU.

  3. Rhys, you are correct in saying that an independent Scotland would have to apply for EU membership but the SNP will do that. The UK’s membership would cease on the day of Scottish independence, probably about 2016 or 2017 if Scotland votes Yes. The UK Conservatives would never renegotiate membership for the remainder of Britain, or whatever it will be called. There would also be a huge rise in calls for an independent England. Unless Wales shows it’s hand soon it will be left behind. All political parties in Wales must say where they stand, although I suppose only Plaid Cymru will eventually act on preparing for the future. UKIP will be pleased with the rise in Euroscepticism, and as an essentially English party they would be delighted if Scotland left the Union, and England gained a Parliament. Labour, Conservatives, and the Lib Dems will just try to bury their heads and probably will not realise the significance of change until it is too late. The events in Brussels today have altered everything. The UK will undoubtedly break-up, and in 10 years time it is a strong possibility that the only British presence at the EU table will be an independent Scottish Government.

  4. The question as to what happens when a sub-state nation – Catalunya, Euskadi, Flanders, Galiza, Scotland, Wales, etc – declares independence and applies to become a member-state of the European Union has been extensively examined by Plaid Cymru’s grouping, the European Free Alliance.

    The latest development is the workshop “Stateless Nations to Member States” organised by the EFA parliamentary group led by Jill Evans MEP in parliament on 9th November last. Its proceedings will be published soon. In the meantime the best academic source is the book “Internal Enlargement in the European Union” published by EFA’s European political foundation, the Centre Maurits Coppieters:

    There’s lots going on which is totally off the radar of the UK nor Welsh media. My point is that every step forward that each sub-state nation takes has a positive effect on the others. That’s Jill’s ‘flotilla effect’. For us, despite Plaid Cymru’s ‘lost ten years’ on this issue since British devolution, think of the shock here when Scotland votes. One axiom of our politics is that voters here will always want what the Scots have, no less. Post 2015 our political class will all be Welsh nationalists.

  5. What do I know about Scottish public opinion? Not much but I do know that, oil or no oil, Scottish public finances are in horrible state, like those of the UK as a whole, only a bit worse. If the unionists marshall their facts and figures correctly they should have no problem in scaring the recession-scarred Scottish public witless at the thought of independence. And no-one wants to define devo-max, including the SNP. Alex Salmond says it is not his business to do so. The Scots, unlike the Welsh, have a reputation for hard-headed practicality and stinginess rather than being unworldly Celtic dreamers. I would not rule out a vote for the status quo….

  6. It would be nice to see a European New Deal. But there has never been a German FDR. The only German government to follow a Keynesian policy was the Third Reich, not a precedent current German poiticians wish to follow in any sense. While Germany dominates European counsels a New Deal is a remote possibility. I hope David Marquand is not holding his breath.

  7. Martin, I don’t think that the UK’s membership of the EU would cease upon Scottish independence – as I understand the debate, the UK would still exist and retain its international treaty rights and obligations, it’s just that one part would have seceded. However, I’m not a lawyer and the interpretation of the legal niceties governing these matters – the Vienna Convention et al – could differ.

    Whatever happens, if there are radically new constitutional arrangements in these islands then I hope that arrangements can be made to enable citizens of one part of Britain to retain the freedom to travel, trade and access public services in another part. In the case of Wales this is particularly vital because – as I said in another thread – the degree of economic and social integration with England is much greater than is the case for Scotland (e.g. >100,000 commuters crossing the border every day, as noted in the Holtham Report).

  8. Thanks for pointing out that report by the EFA, Syd. I’ll definitely be having a look at that. Jill Evans’, or rather Adam Price’s “Flotilla Effect” also makes very interesting reading from a small country perspective.

    As for the future of the Celtic nations not being on the political agenda, well of course it is. Independence, or devo max for Scotland will have constitutional implications for the whole of the UK and I hope people in Wales are beginning to think about this, and about what they want. It will also be very interesting to see what Spain does, if Scotland gets independence. As far as I remember, they have still not recognised Kosovo as an independent state, due mainly to the effect that might have on Cataluna and the Basque Country. It cannot therefore recognise an independent Scotland, so where does that leave Scotland in terms of EU membership?

    Rhys: In Europe thousands of people cross borders every day in order to work. Swedes to Denmark, Danes to Sweden, Poles and Czechs to Germany, Germans to Austria etc. It’s really not an issue in Europe, so I can envisage an ex-UK having its own Schengen area that applies only to these shores.

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