Bloomberg View

Bloomberg View: David Cameron's Reckless Bravery


Bloomberg View: David Cameron's Reckless Bravery

Illustration by Bloomberg View

Prime Minister David Cameron’s long-anticipated and much-hyped speech on the U.K.’s place in the European Union turned out to be both domestically astute and a gamble with Europe whose outcome is hard to predict.

Speaking at Bloomberg LP’s European headquarters in London, Cameron promised first to renegotiate the terms of the U.K.’s membership in the EU, and then by 2018 to hold a referendum for Britons to choose whether to accept the new deal and remain members or pull out.

Cameron, perhaps inevitably, based his address on the iconic speech that Margaret Thatcher gave in the Belgian city of Bruges in 1988. He made some of the same valid points, including that the U.K. has big goals within the EU—to persuade other members to create an effective single market, for one, and to go on allowing new members to join, for another.

Much has happened since Thatcher’s time, though. As Cameron said, the euro area crisis has pushed the 17 countries involved to integrate their fiscal and economic policies, even to take steps toward a banking union. He is right that the U.K. and other EU countries that have no intention of adopting the euro need to make sure the settlement works for them, too. The question is how.

Cameron proposed a wholesale renegotiation of the U.K.’s membership and a new two-speed EU structure to accommodate the change. That last idea has long been favored by EU enthusiasts, because it would allow the euro area to integrate tightly enough for the currency to survive while other countries stand aside. This would be healthy for all concerned.

The flaw in Cameron’s argument is that he can’t be sure of delivering on any of his promises. His broad commitment to renegotiating U.K. membership may even prevent him from doing so, because other EU members may not agree. French Foreign Affairs Minister Laurent Fabius was quick to respond to the speech by saying the U.K. cannot pick and choose a la carte from the EU, and that if it left he would simply “roll out the red carpet” for businesses to relocate from the U.K. to France.

Cameron is right, of course, that the EU needs to change to become more competitive, and with the right approach he may get German support. Many EU rules need to go: for example, the working time directive, which is hated by U.K. employers because it restricts the hours that employees can work. Yet the odds are slim that a socialist government in France will agree to let the U.K. opt out of a rule that it sees as leveling the playing field—no matter how absurd it seems in the age of competition with China.

Peter Mandelson, a former trade commissioner in Brussels, said Cameron asked all the right questions, but to get the right answers he’ll need to make strong alliances and extend U.K. influence within the EU. Threatening to leave the bloc if the U.K. doesn’t get to tear up treaties it signed, in what would look to others like a giant act of buyer’s remorse, is unlikely to make that happen.

Cameron now has to come across to other European leaders as someone trying to improve the EU as a whole, not a blackmailer trying to squeeze a special deal for the U.K. He needs to spend the next few years being a model European.

To read Pankaj Mishra on Indian cell phone service and Edward Glaeser on housing bubbles, go to: Bloomberg.com/view.


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