Brexit: the Cameron veto myth

16/08/2020

Continuing work on TGD, I've been exploring the background to one of the most enduring myths of Cameron's premiership, his claim in December 2011 to have vetoed an EU treaty.

The story actually starts with the youthful David Cameron, the one who had once famously sneered at Blair from across the floor of the House of Commons, declaring: 'He was the future once'. But, when the general election polls closed at 10pm on 6 May 2010, he learned that his future was not just yet – at least, not in the way he had hoped.

The BBC exit poll forecast a hung parliament, with Conservatives the largest party. When all the results were all in, they held 307 seats, Labour 258 and the Liberal-Democrats 57, in a parliament of 650. Cameron was 18 seats short of an absolute majority.

The price of failure was a coalition with Nick Clegg's Liberal Democrats, which took five days to negotiate. When he walked into Downing Street as prime minister on 11 May, he told the nation that one of his tasks was "about being honest about what government can achieve".

Across the Channel, there was a small crisis in progress, threatening the collapse of the euro. As Cameron was sorting out his coalition, therefore, all 27 EU finance ministers – which included Labour's about-to-be deposed Chancellor, Alistair Darling – had been summoned to Brussels for the Sunday to approve the European Financial Stabilisation Mechanism (EFSM) – see previous week's post.

In the UK, some reports accused Sarkozy and Merkel of devising the scheme behind closed doors and attempting to push it through when there was no clear government in Britain. It invoked Article 122 (TFEU), intended to enable financial assistance to a Member State threatened with "severe difficulties caused by natural disasters or exceptional occurrences beyond its control".

Not specifically intended to defend the euro, the Article had the merit of requiring approval only by qualified majority voting; just the 16 eurozone leaders could ensure its passage.

The perspective in Brussels was somewhat different. The move was seen as a race to put a firewall together to protect the euro, before Monday morning trading began in Asia. After frenetic late-night talks, the instrument was approved in Brussels on 11 May. This, however, could only authorise €60 billion, as the funds raised used the EU budget as collateral.

The finance ministers needed more to calm the markets, so they created the European Financial Stability Facility (EFSF). This was to be an entirely new entity operating a Special Purpose Vehicle to raise funds guaranteed on a pro rata basis by participating Member States. The Facility could borrow up to €440 billion, although its mandate would expire after three years.

Collectively, the EU now had a loan facility worth €500 billion, which could be used to rescue eurozone countries, with the possibility of an even bigger "bazooka" in the form of €250 billion from the IMF.

The EFSF was incorporated on 7 June 2010 under Luxembourg law as a société anonyme but, conscious of the limited term and its slender legal base, EU leaders decided on a permanent mechanism. This, would require "a limited treaty change". The proposal was not universally popular, but Merkel was adamant it should happen: "We need a new, robust framework. It must be legally watertight and this will happen only with a change of the European treaties", she insisted.

Thus, when EU leaders arrived at the final European Council of a tumultuous year, they agreed on a treaty amendment to create a replacement, which they called the European Stability Mechanism (ESM). They planned to use Article 48(6) of the Treaty on European Union (TEU), the "simplified revision procedures", which allowed the European Council to amend certain provisions of the Treaty, without an IGC.

At the European Council of 24-25 March 2011, the leaders adopted a Decision amending the Treaty (Article 136 TFEU), allowing the ESM to be set up by 1 January 2013. Financial aid under the mechanism would be subject to economic and financial reforms, also known as "strict conditionality".

Cameron supported the amendment, not wanting to stand in the way of a treaty change which might help resolve the Eurozone crisis. But he was aware that some of his backbenchers might be asking, "If they can change treaties to sort out the eurozone, why can't we change treaties to get out of the Social Chapter, get rid of 'ever closer union', or get some of our national vetoes back?".

By now, with Merkel very much in the lead, serious attempts were being made to develop the "institutional architecture" needed to manage the euro. Conscious of this, in July Cameron told his backbench 1922 Committee that, as the eurozone moved 'towards much more single economic government, Britain should use the negotiations to win concessions, claiming "I got us out of the [euro] bailout mechanism", apparently as an illustration of what could be done.

The possibility of treaty change to protect the euro from future crises began seriously to emerge in October. Merkel and Sarkozy had discussed it and a draft position paper on European policy for the party congress of Merkel's Christian Democrats in November argued for change.

The next developments occurred at the European Council of 23 October, and then a Euro Summit on 26 October. The Eurogroup had asked for the exploration of 'the possibility of limited Treaty changes', with a view to strengthening economic convergence within the euro area, improving fiscal discipline and deepening economic union. The European Council in turn pledged to return to the issue in December, noting that any Treaty change must be agreed by the 27 Member States.

An "interim report" was to be presented by Van Rompuy to the December meeting so as 'to agree on first orientations'. This had Cameron at his press conference after the Council suggesting that this was the time to look to repatriating powers back to Britain. 'Obviously the idea of some limited treaty change in the future might give us that opportunity', he said.

On the last Sunday of the month, the prospect of a forthcoming treaty change resurfaced when Cameron was interviewed on the Marr show, Challenged on whether he would repatriate powers from the EU, he suggested that the Germans and others were going to be looking for treaty change for the Eurozone. 'If they do that', he said, 'there may well be opportunities for Britain to further our national interest'.

By mid-November, the idea of treaty change had been firmly lodged in the public domain, with Cameron being warned not to go too far in its demands on repatriating powers, otherwise he risked creating an unstoppable momentum behind a 'two-speed Europe'.

Two days before the 9 December European Council though, he was taunted by Ed Miliband during PMQs, demanding of Cameron, "what powers will he be arguing to repatriate?"

The day earlier, Van Rompuy's "interim report" had been leaked. Headed, "Towards a stronger economic union", it set out two options: limited changes to one of the Protocols in the consolidated treaty, requiring a unanimous decision of the Council; use of the simplified revision procedure which had been used for the ESM treaty, also requiring unanimous agreement.

There was no mention of a Merkel/Sarkozy option of a separate treaty agreed only between the eurozone members. What was very clear was that there was no treaty text for the EU leaders to consider, much less sign. The European Council was meeting only to consider the options.

Come the day, as had long been signalled, Cameron was asked whether, in principle, he would support the planned changes. Either option on the table would require his approval. However, feeling that the other leaders were "marginalising British concerns", rejecting any treaty changes he might propose, he declined to do so.

When the meeting broke up, Cameron then told the media that he had vetoed "an EU treaty". Of course, he hadn't vetoed one – there was no treaty to veto. All he had done was to signal that he would reject any formal proposals for treaty change.

But, although lionised by his Eurosceptic backbenchers and sympathetic media, he had achieved nothing. The following year, the Eurogroup produced an intergovernmental treaty called the Treaty on Stability, Coordination and Governance in the Economic and Monetary Union, also referred to as TSCG, or more plainly the Fiscal Stability Treaty- effectively a stricter version of the Stability and Growth Pact.

It was signed in March 2012 by all EU members with the exception of the Czech Republic, Croatia and the United Kingdom, and entered into force on 1 January 2013.

Cameron effectively confirmed the reality of a two-speed Europe and widened an already substantial gulf into an irreconcilable split. Looking back in his memoirs, he thought his "veto" was a very important moment and choice. In retrospect, it was. It was another milestone on the road to Brexit.

Also published on Turbulent Times.