As Italy and Spain wobble, Brussels plans a superstate

By Patrick O'Flynn

FIRST for the rather dramatic bad news: a United States of Europe will come into being by the end of the year, perhaps even by the end of the summer.


Now for the good news: Britain won’t be part of it.

Europe’s finance ministers are even now preparing a “big bang” solution to the debt crises that are sweeping peripheral members of the eurozone.

As financial markets target Italy and Spain and amid the first stirrings of mass popular discontent in those countries, there is a realisation among the European political elite that ad hoc bailouts of the type used to shore up Greece, Portugal and Ireland won’t work with these much larger economies.

A rational response would be to allow all these countries to re-establish their former currencies and let devaluation shrink their debts and kickstart growth. But there is an iron will among the Eurocrats not to let that happen because if it does then the dream of a federal Europe will be gone for ever.

So in Brussels and Berlin and Paris work is already proceeding apace on a plan to solve the failure of partial economic integration (monetary union) by leaping into full integration (fiscal union).

Fiscal union will mean centrally imposed public spending controls and, crucially, the acceptance that the treasuries of all eurozone countries will have ultimate liability for each other’s debts.

This in effect will make mighty Germany guarantor of all weaker eurozone members.

Under its own terms it will work because speculators will suddenly have little reason to fear a default by any of the southern European countries or Ireland.

But the cost in terms of lost democracy would be enormous.

Not only will the eurozone countries have lost control of their interest rate, exchange rate and money supply, they will also have ceded permanently the ability to decide on public spending levels, tax rates and budget deficits.

Their democracies will be hollowed out as all important economic decisions will require the consent of unelected officials in Brussels or Frankfurt (where the European Central Bank is based) with no recourse to domestic opinion.

Worse still, the old saying that he who pays the piper calls the tune will be borne out. To convince German public opinion to take on this new guarantor duty, Germany will have to become the dominant force behind monetary and fiscal policy throughout the eurozone.

It will, however reluctantly, have gained greater European domination through financial measures that ever it did by force of arms.

And this “great leap forward” must be made soon or not at all because the speed at which the financial markets sniff out weakness means that Italy and Spain cannot be left in limbo for long or the break-up of the euro will ensue.

David Cameron knows all about these preparations for fiscal union. Indeed, the Prime Minister admitted as much last week in little-noticed comments he made in an interview with the Spectator magazine.

Mr Cameron correctly asserted that “no one in Britain, however sceptical they are about the euro… should have any doubt about the immense commitment there will be from other European countries to make the euro work”.

He added: “We would be kidding ourselves if we thought somehow they’re sitting around thinking, gosh it’s not going very well, how are we going to get out of this one? That’s not what they’re doing. To them the euro is absolutely central to their vision of their membership of Europe – and they will, I think, do pretty much anything to make that work.”

Mr Cameron predicted that the eurozone would move “towards much more single economic government”. That will need a new European treaty and the Prime Minister has pledged to use our veto over such a development to win back British sovereignty from Brussels.

As he put it: “There will be opportunities for Britain to maximise what we want in terms of our engagement with Europe.”

This is tremendously significant because in the old days British governments were fiercely opposed to what was known as a “multi-speed Europe” in which we would tootle along in the slow lane while others zoomed ahead towards full integration.

Now our Prime Minister is actually predicting imminent zooming ahead towards integration among eurozone members and saying that as this happens we will be in reverse gear – winning sovereign powers back from Brussels. This is not just a multispeed Europe, it is a multi-direction Europe.

And the question the Prime Minister will have to answer soon is as follows: if the eurozone creates a United States of Europe while we obtain more independence from Brussels, then what argument can there be against Britain leaving the European Union altogether?

Perhaps we could revert to the European Free Trade Association and sign our own trade deal with Brussels.

Our EU membership will be rendered almost meaningless by a wholly integrated core from which we are mercifully excluded.

All full EU membership will entitle us to is obligations to make massive net payments to Brussels and to be bound by job-destroying EU regulations.

As our political class desperately resists demands for a referendum on departing from the EU, a startling new possibility is emerging: that well before we see Britain leaving Europe, we are going to see much of Europe leaving Britain.