John Baron MP: The Prime Minister must seize the moment and recast our relationship with the EU forever

With the Prime Minister having used our veto, John Baron MP argues that this is now a once in a lifetime opportunity to fundamentally renegotiate our relationship with the EU on the basis of trade and not politics. John is the Member of Parliament for Basildon and Billericay.

There have been some seminal moments in the history of the European Union, and the Prime Minister’s wielding of the veto last night may turn out to be one of them. We are on the cusp of a once in a lifetime opportunity to recast our relationship with the EU for the better. The Prime Minister must now seize this moment.

This fundamental renegotiation of our relationship needs to be based on free trade, competitiveness and growth, and not on political union and dead-weight regulation. This is not some grand utopian vision – it exists today. Switzerland in particular has an excellent relationship with the EU, enjoys easy access to its markets without burdensome regulation, and prospers as a result.

Such a relationship would reflect the fact that the British electorate in 1975 voted for a free-trade area and not a political union. It would recognise the fact that people are fed up with mindless interference from the EU; that our businesses, especially SMEs, are fed up with the endless tide of EU regulations which hamper their competiveness; and that taxpayers are fed up with the costs of EU membership – some £40 billion over the next seven years. It would also reflect the fact that the Conservative Party is increasingly fed up of promises to ‘reign in the EU’, only for yet more sovereignty to be parcelled off to Brussels.

Talk of the repatriation of powers would not be my first option. Our record on this matter is not a happy one. Much was made of our opt-out of the Working Time Directive. Yet it has been brought back via the back door, to the extent that we are yet again seeking concessions from the EU.

Instead, we need a fundamental renegotiation of our relationship with the EU. This relationship would recognise that we want good relations with our European neighbours, but that it would be in our interest to better engage with the faster-growing world outside the EU.

There has been no shortage of myths surrounding this debate. Our line is that our prime objective must be to save the Euro. People are finally realising the concept is fundamentally flawed: binding divergent economies into a single currency without a fiscal union is, and was, a mistake. You can not have monetary union without fiscal union. Eurozone leaders are now waking up to this fact.

But if the concept was flawed, so has the proposed solution thus far. Without fundamentally addressing the core cause of the problem – which is a lack of competitiveness – proposed solutions will remain sticking plasters. The only action that can provide medium-term relief will be if the ECB becomes the lender of last resort and starts the printing presses, in order to buy distressed Eurozone debt. Perhaps talk of greater controls and discipline as part of a fiscal union is a precursor to persuading the German people to accept this course of action despite its inflationary risks.

Talk of disaster if the Euro were to break up is over-egged. We hear it mostly from the Eurozone leaders themselves. Perhaps this is because they see the Euro as a vital step towards the real objective, which is political union. The evidence suggests otherwise. Since 1945, there have been over 80 cases where countries have left a currency union: in the vast majority of cases, those countries have benefited.

The Eurozone would be no exception. The likes of Greece and Italy would benefit from devaluation, as this would make their economies more competitive. Slavish adherence to the Euro closes this option, thereby resulting in more severe austerity packages. This can not be good economics at a time when consumers and governments are already struggling to par down debts. If the Euro were to fragment, consumers would still want their German cars and their French wine, not to mention Greek holidays – which of course would be cheaper come devaluation.

One other factor that is conveniently missed. Those pedalling the Euro story claim that it would be a disaster if debt had to be written down. But the market has already significantly written down that debt. Weak prospects are already reflected in prices.

Then we are being told that this summit can only serve to save the Euro. That there can be no other discussions. But the objective to save the Euro and our wish to discuss a new relationship are by no means mutually exclusive. If the 17 – or the 23 – wish to pursue their own agenda, including fiscal union, then let them. But this is no reason why we can not pursue a new relationship.

Finally, suggestions that the drive towards fiscal and political union by the Eurozone does not really affect us is poppycock. Such a treaty within a treaty will fundamentally and materially affect our relationship with the EU. For a start, the institutions of the EU will be used by this redefined centre, and will be slanted accordingly. Early indications suggest a referendum will be needed – and expected by the British people.

We are told this is not the right time to renegotiate our position. But then it has never been the right time during the last 40 years. If now is not the time, it never will be – not whilst the Euro is in existence. To suggest that we will be able to repatriate powers sometime in the future defies our experience of the last 40 years. This is the defining moment. The Prime Minister has been bold enough to wield the veto, but this is the beginning of the process, not the end. He must now rise to the challenge.