Friday, May 22, 2015

After a deal: How to keep Iran honest?

A nuclear deal with Iran may be concluded before the deadline of June 30th. But the deal could undermine stability in the region, not promote it, unless the US and Europe are willing to contain Iran and reassure its neighbours.

Western and Iranian negotiators say an agreement on Iran’s nuclear programme is within reach. A deal that puts a brake on Iran’s nuclear programme would be a momentous achievement, but only if it can be verified and enforced.  It may not be. The prospect that an agreement could bring Iran in from the cold – after lifting international sanctions and restoring trade and diplomatic relations –   yet still leave room for it to cheat, is making Tehran’s neighbours nervous. Without Western willingness to contain Iranian influence, a deal will make the region more volatile.

There are two reasons why a comprehensive deal might fall short. The negotiators on both sides still have hard work to do. On April 2nd, the United States, France, the UK, Germany, China and Russia (otherwise known as the EU3+3), and Iran announced that an accord had been reached on the political contours of a final, comprehensive deal. This political framework, however, has many loose ends. Iran says an agreement will expire after 10 years, but the US says some restrictions on its nuclear programme should apply for up to 25 years. Iran says research and development on advanced uranium centrifuges can continue under a deal. The US disagrees. Iran does not want to give inspectors access to military sites. The US, and the International Atomic Energy Agency (IAEA), the UN’s nuclear watchdog, insist it should. They also say that Tehran must be more transparent about the possible military dimensions of its nuclear programme. If these issues are not resolved, a deal would either have little value or collapse.

Another reason for pessimism is that the deal may be skewed in Iran’s favour. The political framework agreed on April 2nd says Iran will freeze – not dismantle – its enrichment capability and reduce – not remove – its uranium stockpile. In return the UN, US and Europe will cancel most sanctions (except some proliferation-related sanctions and those linked to its missile programme and sponsorship of terrorism).

The problem is that those sanctions worked; they brought Iran to the negotiating table. But once sanctions are lifted US and European leverage will vanish. Any Iranian violation of the agreement will be difficult to detect, and even more difficult to respond to through a concerted international effort. US officials are overconfident when they suggest that it will be possible to create a reliable system to ensure that sanctions could reactivate, or ‘snap back’, automatically. The negotiators will have trouble devising a procedure that is immune to a Chinese or Russian veto in the United Nations Security Council – a necessary condition to put the sanctions back in place. The Security Council is more divided than five years ago as relations between Russia and the West have soured. The Russian ambassador to the UN, Vitaly Churkin, said on May 13th that there could be "no automaticity, none whatsoever" about re-imposing sanctions. In short, the West will have to compromise at the UN to get a deal.

The West could still re-impose its own sanctions, but once a nuclear deal has been reached, it may also be difficult to maintain transatlantic unity. Iran has the fourth-largest oil reserves and the second-largest reserves of natural gas in the world. It is actively promoting a bright economic future – fuelled by its ample hydrocarbon reserves – that European firms can be a part of. And a future pipeline connecting Iran’s gas fields to Turkey’s trans-Anatolian pipeline would contribute to the EU’s energy security. As more European firms enter the Iranian market, and in the absence of blatant Iranian violations of the nuclear agreement, European governments might favour protecting their commercial and energy interests over a unified transatlantic response to an ambiguous violation of the deal.

Ultimately, however, the US and Europe hope that their concessions during the negotiations will encourage Tehran to help stabilise the Middle East. The EU’s foreign policy chief, Federica Mogherini, said on April 28th that she was convinced a deal could “open the way to a different role of Iran in the region”. The West hopes a nuclear deal turns Iran into a helpful partner – but hope is not a strategy.

The US and Europe are right that Iran is needed to fight the Islamic State terror group, reach a solution in Yemen, and bring Syria’s civil war to an end. But it is risky to assume that Iran will suddenly change its colours after a nuclear agreement and become more helpful on all regional security issues. Why would it? Despite years of tough sanctions and economic stagnation, Iran is now a rising power in the Middle East. Its population is young, well-educated and large; second only to Egypt in the region. It has a strong sense of national identity and culture; huge hydrocarbon reserves, and a regional network of allies and militant groups, such as Hezbollah. Iran’s influence in the region has increased since the fall of Saddam Hussein. With a hand in Lebanon, Syria, Iraq, and Yemen, its reach stretches from the Eastern Mediterranean to the southern entrance of the Red Sea and the Straits of Hormuz. Riyadh, highly insecure and deeply suspicious of Iranian intent, feels encircled. Even in the Persian Gulf, a vital international waterway, Iran is flexing its muscles: on April 28th the Iranian navy forced a Danish container ship to divert its course and two weeks later it fired warning shots at a Singaporean cargo ship. The Sunni Arab world and Israel are rightly concerned about Iran unshackled from its sanctions; it will make Iranian assertiveness in the region more likely.

Viewed from the region, the nuclear deal is another sign of US withdrawal from the Middle East. Just as in Syria, where the West pushed to rid Syria of chemical weapons but did little to end the civil war, Sunni Arab states – including Saudi Arabia, the UAE and Kuwait – think that the West is negotiating with Iran about weapons, while doing little to challenge Tehran’s ambitions. Over the past two years, countries around the world have sought assurances from Washington. In areas of intensive geopolitical competition from East Asia to Eastern Europe, countries like Japan and Poland have asked questions about US commitment to their security, and received some reassuring answers from the US. Now it should be the turn of America's allies in the Middle East. At a Camp David summit on May 14th, President Obama made his case for an Iran nuclear deal to several Gulf leaders. The success of his efforts remains uncertain.

Paradoxically, an agreement that was meant to avoid another war in the Middle East may add to the region’s turbulence, unless a balance of power can be maintained. The Gulf countries and Israel primarily look to the United States to deter Iran. Washington will most likely give them some security assurances and sell them more sophisticated military equipment. But Europe has a role to play too.

European countries should help make sure Iran keeps its end of a nuclear deal by taking a tough line on sanctions; providing enough resources to spy on Iranian nuclear facilities, and improving the ability of Gulf countries to stand up to Iran. The EU should insist on gradually phasing out the sanctions, not removing them instantaneously. Measures such as those that blocked Iranian shipping companies from accessing the European reinsurance market and underwriters have been central to the sanctions’ overall success. The EU should only remove these measures if Iran meets clear commitments; for instance on reducing its uranium stockpile or disabling its enrichment cycle. Importantly, if needed, the EU should be willing to reactivate the sanctions unilaterally (or with the US), even without a UN resolution.

Paris, London and Berlin will actively promote their defence exports, seeking to persuade countries in the Middle East that stronger forces are necessary to keep Iran at bay. In May, France announced the sale of fighter jets to Qatar, and negotiations on a similar military package continue with the UAE. Germany has sold four advanced submarines to Israel. Saudi Arabia is the UK’s largest defence technology export market. But alongside selling more kit, Europe should help improve the ability of Arab militaries to counter threats from Iran by improving their professionalism and skills.

The UK, in co-operation with allies, should continue to use its intelligence capacities to monitor Iran’s nuclear supply chain. This would help to verify Iranian nuclear commitments. If the West is to keep Iran honest, Tehran has to know that its activities will be very closely scrutinised. The UK and other European governments should also direct more intelligence resources to disrupt Hezbollah’s military wing; that organisation has been on the EU’s list of terrorist organisations since 2013.

France, more than any other European country, has stood up for Arab interests during the Iran talks. It has also gained Arab credit for showing its resolve against Islamist terrorists in places like the Sahel. On May 5th, President Francois Hollande became the first foreign head of state to attend the summit of the Gulf Co-operation Council (GCC), a political and economic forum for Arab Gulf countries. Paris should use that diplomatic credit to persuade Arab Gulf countries not to over-react to a nuclear deal, and to make clear that they should end support for Sunni militant and terrorist groups: the prospects for stability in the Middle East will not be helped by continuing sectarian violence.

The EU’s high representative, Federica Mogherini, has an important role to play too. She chaired the nuclear talks and her shuttle diplomacy was essential to agreeing the political framework in April. But her triumph will only last as long as an agreement holds. Her diplomatic access with the Iranians should allow her to push Tehran to stick to a deal. But perhaps her biggest challenge is that she should convince Iran to play a constructive role in places like Syria, Iraq and Yemen.

An ugly consequence of a nuclear deal is that it may encourage Arab countries to seek the same nuclear technology that Iran has. A nuclear agreement will most probably legitimise Tehran’s right to uranium enrichment, so Saudi Arabia has said it wants a nuclear fuel cycle too. This poses a serious problem to the West: an agreement meant to avoid the spread of nuclear technologies, may do just that. Riyadh could get the technology from Pakistan, which is widely believed to have developed nuclear weapons with Saudi financial assistance, and has a poor record on nuclear non-proliferation. But Laurent Fabius, the French foreign minister, also discussed nuclear power projects when he visited Riyadh in April. So the West faces a choice: it could decline Saudi requests and push Riyadh towards Islamabad, or it could help Saudi Arabia develop civilian nuclear technology and keep an eye on its nuclear programme. The latter option is preferable.

A nuclear deal may still collapse. But if a deal is reached, Europe should engage with Iran, but be willing to contain it too.

Rem Korteweg is a senior research fellow at the Centre for European Reform.

Monday, May 18, 2015

The Riga Summit: Enter, pursued by a bear

The Eastern Partnership summit in Riga on May 21st-22nd will be a gloomy affair. Russia’s aggressive behaviour has put EU member-states on the defensive. Enthusiasm for further integration between the EU and its Eastern neighbours is on the wane. But Europe should be bolder: a grey zone to its east is not in the EU's interests.

The Latvian Foreign Minister, Edgars Rinkēvičs, said in February that the EU’s meeting with its eastern partners would be a “survival summit”. The run-up to the meeting suggests that the Eastern Partnership will still be in a critical condition after Riga. The six partners (Armenia, Azerbaijan, Belarus, Georgia, Moldova and Ukraine) are a disparate group, and EU member-states are divided in their views of the partnership’s future. Here are five steps to save the Eastern Partnership.

First, decide what the goal of the partnership is. The EU has never seemed sure. Within the EU, some countries, primarily in Central Europe, have wanted to give the Eastern partners a perspective of eventual EU membership; others have not. Partners are equally divided: Georgia, Moldova and Ukraine have been more or less enthusiastically pro-EU; Ukrainian presidents (even Viktor Yanukovych) have been talking publicly about Ukraine’s long-term intention to join the EU since at least 1996.

President Aleksandr Lukashenko of Belarus, on the other hand, has been under some form of EU sanctions since 1997. Azerbaijan, with its large hydrocarbon reserves, has little interest in the trade privileges offered by the Eastern Partnership and still less in good governance, human rights and democracy. Armenia is balanced uncomfortably: too dependent on Russia for defence against Azerbaijan to sign an association agreement against Moscow’s will, but keen to benefit from any EU assistance available.

There has been protracted wrangling ahead of Riga over how to refer (or to avoid referring) to the possibility of enlargement. At the last summit, in Vilnius in 2013, the EU and its partners acknowledged “the European choice of some partners” and said that the partnership had a particular role in supporting “those who seek an ever closer relationship with the EU”. At the time of writing, even this vague wording seems to be in question.

The Treaty on European Union says clearly that any European state which respects EU values “and is committed to promoting them may apply to become a member of the Union”. By refusing to refer to this language, even indirectly, the EU reinforces two Russian arguments: that the EU does not want the Eastern Europeans as members under any circumstances; and that Eastern Europe is a region of “privileged interests” for Russia, in the phrase used by then-President Dmitri Medvedev in 2008. The EU should come off the fence, and say that it will keep the door to membership open, however long it takes partners to get through it; and that Russia has no right to close it.

Second, differentiate clearly between the partners. The pre-summit press release talks confusingly of the EU’s “determination to pursue closer, differentiated relations”. But there is no point in wasting limited EU resources on countries which are not committed to the partnership’s principles of democracy, the rule of law and good governance. Georgia, Moldova and Ukraine are at least making efforts to improve. Georgia and Ukraine will be disappointed that one of the most attractive elements of the partnership, visa-free access to the Schengen area, is still out of reach, for technical reasons. The principle of ‘more for more’ should be more than a slogan: EU programmes and funding should flow to the countries that have made the most progress.

There are good reasons for the EU to want a strong relationship with a major energy producer like Azerbaijan, but the Union should not behave as though Azerbaijan is gradually converging with European norms and values. The 2014-2015 progress report on Azerbaijan presented by the European Commission and the European External Action Service is stark. It talks of deteriorating conditions for civil society, the detention of human rights defenders and restrictions on freedom of expression and association. Notwithstanding the EU sanctions against it, Belarus is in fact a better performer on human rights than Azerbaijan, and should get a little more love from Brussels.

Where a government is a difficult or uncooperative interlocutor, the EU should focus more attention on civil society organisations – including through increasing the resources available to the European Endowment for Democracy. Support for civil society does not have to mean support for the political opposition or confrontation with the existing regime: it can cover help and advice for environmental groups or groups working to protect the rights of vulnerable minorities; all help to increase the resilience of society, and to prepare for the possibility of political evolution.

Third, communicate better. The then-foreign minister of Sweden Carl Bildt said in Vilnius in 2013 “Putin makes you an offer you can’t refuse; the EU makes you an offer you can’t understand”. The EU’s public diplomacy effort in Eastern Partnership countries needs to be turbo-charged. The Union has to do a much better job of countering ignorance, misunderstanding and misinformation and telling the positive story of the benefits co-operation with the EU will bring. Eighteen months after the first Maidan demonstrations, the EU delegation in Kyiv still has a website with information in English and Ukrainian only. It was left to the British Embassy in Kyiv to produce a Russian-language pamphlet setting out the advantages to Ukraine of its association agreement with the EU. The Ukrainian President’s website is in Ukrainian and Russian; if Petro Poroshenko thinks it is politically acceptable to speak to Russian-speaking Ukrainians in their native language, why does the EU not do the same?

Russian anti-EU propaganda has had the field almost to itself throughout the Eastern Partnership region, and it shows in the opinion polls. In Moldova, a poll in April showed 58 per cent in favour of joining the Russian-led Eurasian Economic Union (with 26 per cent against) and only 40 per cent in favour of joining the EU, with 42 per cent against. That is a remarkable statistic, considering that Russia has blocked Moldovan agricultural exports since July 2014, while the EU has increased Moldova’s access to European markets and given Moldovans visa-free access to the Schengen area.

Fourth, stop thinking that the Eastern Partnership is a purely technical exercise. For the countries that have signed association agreements, the process of harmonising local laws and regulations with European law is indeed a complex, tedious, legalistic marathon; and only a handful of people will ever read the whole text of the agreements, or need to. But Putin is right to think that if the EU’s partners implement the new laws and regulations and live up to their commitments under the agreements something dramatic will change in Europe.

The Eastern Partnership was never intended as a geopolitical project, but if it results in some of its members adopting the vast majority of the EU acquis communautaire, it will produce a decisive break between them and their Soviet past. The EU needs to understand that Putin sees the adoption by Russia’s neighbours of EU standards, open markets and above all the rule of law as inherently threatening to his interests.

Fifth, ensure that Ukraine succeeds. Ukraine's population is around 50 per cent greater than the other five partners combined; its GDP is almost equal to that of the other five. While it would certainly not be good if reforms stalled in Georgia or Moldova, failure in Ukraine would be fatal to the Eastern Partnership and deeply damaging to the EU itself.

The EU's interests lie in having neighbours that share its values and its ways of doing business. It needs to be ready to react to Russian moves to destabilise the countries of the region with much more speed and determination than it showed in Ukraine in 2014.Then, its sanctions were initially too weak to make Russia rethink its aggression, and its support for Ukraine too modest to match the scale of the economic, political and military challenges Kyiv faced.

Though in 2004 Putin said that Russia would welcome Ukrainian membership of the EU, since 2013 he has exerted enormous, destabilising efforts to ensure that Ukraine cannot benefit from its association agreement with the Union, let alone make progress towards membership.

German chancellor Angela Merkel and French president François Hollande made a serious error in Minsk: they supported the idea of talks between the EU, Russia and Ukraine “to find practical solutions to the concerns raised by Russia about the implementation” of the EU-Ukraine Deep and Comprehensive Free Trade Agreement (DCFTA). The DCFTA will force Ukraine to make painful reforms; but it also offers a long-term route to a better-managed, open and ultimately more successful economy.

Russian intentions towards the DCFTA are neither reasonable nor honourable. If Russia wants to ensure that its goods remain competitive on the Ukrainian market, it should negotiate its own free trade agreement with Kyiv; it has no more right to seek amendments to the DCFTA than the EU has to demand changes to the arrangements for the Eurasian Economic Union. But the proposed amendments put forward by Russia go further. They are clearly intended to wreck the DCFTA and to ensure that Ukraine cannot profit from it; they would damage both EU exporters and Ukrainian consumers. The EU should make clear that it will not postpone the implementation of the DCFTA any further: it will start on December 31st 2015. And the EU and its partners should be prepared to stand up to any Russian retaliation. As wildlife experts advise, “if a bear approaches or charges you, do not run”.

Ian Bond is director of foreign policy at the Centre for European Reform.

Thursday, May 14, 2015

Cameron’s EU reforms: You can’t always get what you want

David Cameron has outlined six areas for EU reform. In five, compromise is possible. But restricting in-work benefits for new EU migrants requires treaty change, which is not on offer. Thus he faces confrontation with the anti-migration wing of his party or with the EU – and he should choose to face down the former.

David Cameron has made treaty change the totemic issue in his quest to renegotiate the UK’s relationship with the European Union: he believes that he must have it to convince his party that the EU has been reformed. But he is engaged in two negotiations – one with his own party and eurosceptic press, and the other with the rest of the EU.

Cameron’s problem is that Britain cannot get the treaties changed before the referendum, since other member-states do not want to re-open them, especially if Britain might leave anyway. Germany’s finance minister, Wolfgang Schäuble, said on May 12th that treaty change would not be possible by the end of 2017, Cameron’s deadline. Many governments would need to hold referendums on an amended treaty, and do not think they could win them. And Britain does not seem to realise that other governments face political constraints too: a treaty tailored specifically to Britain’s interests would be an impossible sell to their voters.

Charles Grant has already set out a five-point plan for winning a referendum. This insight looks in more detail at the six areas of reform that Cameron has outlined in articles and speeches. In five of them there is some possibility of compromise if Cameron backs down on treaty change (which will be tricky enough, because he has made it so totemic). But on the sixth – stopping EU migrants from claiming benefits for the first four years of residence – compromise between the EU and Britain looks very difficult. This is the area where British public opinion is most hostile to EU rules, where Cameron has been most specific in his demands, and where treaty change is most needed to secure them.

Cameron’s first demand is a safeguard for the single market to prevent the eurozone from caucusing, and potentially damaging the interests of the euro ‘outs’. Ultimately, this issue is something of a red herring, since the eurozone is – on average – more economically liberal than it used to be. But there is a case to be made that financial rules made in the eurozone’s interest could damage the City of London: the European Central Bank’s attempt to repatriate euro-denominated clearing and settlement is one example. Britain and other outs could be given observer status in the Eurogroup to act as advocates for the single market in eurozone meetings. The Fresh Start group of Conservative MPs has proposed that Britain should be able to refer new financial rules it disliked to the Council where unanimity would apply, handing the UK an effective veto. But any new legal safeguard of that sort would require treaty change, and would receive little support in the rest of Europe.

Second, Cameron has said he wants a stronger role for national parliaments. One idea, floated by Britain’s Europe minister, David Lidington, is for national parliaments to be able to club together to give Commission proposals a ‘red card’. Currently, they may give proposals a yellow card, which forces the Commission to reconsider, but a red card would make it drop a proposal. While a ‘legal’ red card would require treaty change, the Commission could promise to treat all new yellow cards as red ones. This would not require treaty change, and the other member-states could agree to write this into the next treaty. Meanwhile the UK could use the current yellow card system more effectively if it improved its own parliamentary scrutiny procedures.

The third demand is that powers should flow back to the member-states. This is already possible under the Lisbon treaty, if member-states agree to do so. But which powers? The British government’s own balance of competences review did not find any that should be returned to Westminster, so it will be difficult for Cameron to convince the others that it is necessary.

The fourth demand – removing the ‘ever closer union’ text from the treaty – is symbolically important to British eurosceptics, for whom the phrase threatens inexorable progress towards a European super-state. Dropping it entirely would obviously require treaty change, and other member-states would oppose this. But Britain might be able to secure an opt-out, with a so-called ‘interpretative protocol’ to make clear that it did not apply in Britain’s case.

Fifth, on promoting free trade and extending the single market, there are several policy changes that are already underway. Cameron wants TTIP and other free trade agreements to be ‘turbo charged’, but that is up to the European Commission and the countries they are negotiating with, not the UK, since external trade is an EU competence. On trade within the EU, there are already plans to open capital and digital markets, so it would be difficult for Cameron to claim that this was the result of his negotiation. And the same is true of better regulation, although Frans Timmermans, the commissioner in charge, should take up some of the proposals of Cameron’s business task force and give Britain credit for the reforms.

The electoral threat of UKIP – and defections to the party from his own MPs – forced Cameron to be specific about EU migrants’ access to benefits in a speech in November 2014, and it is in this sixth area that trouble awaits.

In that speech, Cameron demanded that EU migrants should not have access to either unemployment or in-work benefits for four years. The former will be easier than the latter to renegotiate, but still extremely difficult. The right of unemployed people to move to another country and claim unemployment benefits, though not unlimited, has been endorsed by the European Court of Justice in case law. To deny workless EU migrants unemployment benefits, a new directive would have to be passed through the EU’s ordinary legislative procedure, which could take years. And this would require the Council and Parliament to agree, and the latter has been very hostile to the idea.

Changes to in-work benefits would require treaty change, since they would in effect skew labour markets in favour of domestic workers. As CER’s Camino Mortera-Martinez pointed out, article 45 of the Treaty on the Functioning of the European Union says that there will be no discrimination between EU workers “as regards employment, remuneration and other conditions of employment”. Should in-work benefits be considered as such? There are very good reasons to think that they should.

Consider the average Central and East European migrant working in the UK (all data are from Britain’s quarterly Labour Force Survey). He is male, aged 32, has one child, and is either married or cohabiting. He works full-time, and his household’s earnings are 60 per cent of the British median. He lives in low-cost private housing in the south east of England. Overall, his weekly earnings after tax are £265 per week. This would be barely enough to cover his rent, bills and council tax. Under the new universal credit, that income would be topped up by £305 per week, to allow him to cover his other costs.

Many in Britain might consider withdrawing benefits a fair outcome, believing that if a migrant cannot support himself then he should return to his home country. But the legal test is whether this constitutes discrimination under the treaties. It must, since the equivalent British worker – or EU migrant who has been in Britain for more than four years – would receive more than twice as much income, and would be much more willing to do the job. Newcomers, especially those with children, would be discriminated against in the bottom end of the labour market.

The Financial Times and others have argued that it is not against the EU’s fundamental principles to restrict benefit access. This is, at a stretch, true of unemployment benefits, because European judges have been responsible for extending rights, not the member-states, and the treaties give rights to workers, not the unemployed. But restrictions on access to in-work benefits will discriminate against immigrant workers, which free movement rules are supposed to prevent. Thus this reform would require treaty change. Treaty change requires unanimity. And it is difficult to see Central and East European governments agreeing to it.

Free movement is the least popular part of EU membership among Britons (at least, in relation to other EU citizens coming to the UK – around 2 million British citizens live in other EU countries), but Cameron should seek to divert attention from the issue rather than pander to these views. Optimists point to the opinion poll lead for staying in the EU, and to Cameron’s strengthened authority in his own party after his shock election victory. But a drawn-out wrangle on migrants’ benefits could see the polls swing back in favour of Out. Cameron’s best hope is to ally himself with the pro-business wing of the party, which is more in favour of open labour markets, focus his reform proposals on steps to promote jobs and growth in the EU, and face down the Conservatives’ anti-migration wing. That way, he might just get what he needs.

John Springford is a senior research fellow at the Centre for European Reform.

Friday, May 08, 2015

A five-point plan for Cameron to win an EU referendum

The politicians hardly mentioned Europe during the campaign, yet the most important consequence of Britain’s general election will be a referendum on EU membership. Prime Minister David Cameron plans to negotiate reforms to the EU and then hold an in-or-out referendum before the end of 2017. What does he have to do in order to win a referendum on keeping Britain in the club? What is he likely to ask for, in terms of reform? And what would be the impact of ‘Brexit’ on the rest of the EU?

The voters defied opinion polls and delivered a shocking result: the centre-right Conservatives performed much more strongly than expected in England, the centrist and pro-EU Liberal Democrats lost most of their seats, and the Scottish National Party (SNP) won almost every seat north of the border. The anti-EU United Kingdom Independence Party (UKIP) won 13 per cent of the votes but only one seat. The centre-left Labour Party – which according to the final opinion polls had a good chance of forming a government – finished almost a hundred seats behind the Conservatives.

At least three factors explain the Conservatives’ triumph: Cameron was a more convincing leader than Labour’s Ed Miliband; the economy’s recent strong performance strengthened the Tory reputation for economic competence; and in the closing stages of the campaign, the Conservatives played on fears that a Labour government propped up by the SNP would be bad for the English.

But although Cameron is the clear winner, he may face some of the problems faced by John Major after he – also in defiance of opinion polls that proved wildly wrong – won the 1992 general election. Major had a majority of 20, soon eroded by by-elections and deaths, which enabled his party’s eurosceptic right-wing to make his life a misery. Cameron’s majority is 12. For the past five years his Lib Dem coalition partners have given him a clear parliamentary majority, and thus some protection from Tory eurosceptics. But now they will be urging Cameron to make maximalist demands of his European partners; they will shed few tears if such demands cannot be met, since that would only reinforce their point that Britain should leave the EU.

Cameron will have to fend off the Conservative hard-liners if he wishes to keep Britain in the EU. He can face them down if he wants to: his surprise victory has given him considerable political capital. He does not need to consult backbenchers on the finer points of his negotiating strategy. If Cameron wants to, he can negotiate some modest improvements in the way the EU works. But he will need to be diplomatic and constructive. The British brand in the EU is much more toxic than many people in the UK appreciate. Here are five pieces of advice for Cameron.

First, do not over-bid. If Cameron tries to make fundamental changes to the way the EU works, he will fail. Britain’s partners have no appetite for treaty change: a new treaty would need to be ratified in all 28 member-states, some of which would have to hold referendums. The process of changing the treaties would take many years, and most governments – including Germany, which leads the EU – fear that reopening the treaties would be like opening Pandora’s Box. There is no chance of a new treaty being ratified by 28 countries before the end of 2017. The best that Cameron could obtain would be a promise of very minor treaty changes, to be ratified at some point in the future.

Second, make the case for EU membership. Cameron did so with his Bloomberg speech of January 2013 – but never followed up, because he did not want to annoy his party’s eurosceptics or potential UKIP voters. Britain’s partners will not take Cameron seriously until they see that he is prepared to explain to the British the benefits of EU membership – and thus be ready to make enemies in his own party. Cameron surely understands that during the referendum campaign the Conservative Party will inevitably split into two hostile camps – and that that may in the long term damage its unity (just like Labour’s EU referendum in 1975 presaged the split of 1981, when a group of pro-Europeans set up the separate Social Democratic Party).

Third, take initiatives in the EU and seek to lead in areas where Britain has expertise. One reason why British influence has dwindled in recent years is that it has often sat on the sidelines and appeared happy for others to lead. Britain’s EU partners would listen to it with more respect if it made concrete proposals in areas such as foreign and defence policy, co-operation on policing and counter-terrorism, climate and energy, or trade and the single market. Many other member-states would welcome a more pro-active Britain.

Fourth, work hard at building alliances and making friends. Cameron has very few close friends in the EU. When the European Council voted on Jean-Claude Juncker’s appointment as Commission president last June, only Hungary’s Viktor Orban joined Cameron in opposition. Angela Merkel is something of a friend, on a good day, but she and Cameron are prone to misunderstand each other (as in December 2011, when he wrongly thought that if he signed the ‘fiscal compact’ she would give him a protocol protecting the City of London). Other leaders tend to complain that Cameron is a very transactional politician who does not invest sufficient time in building relationships with them. Britain’s relations with several Central European countries have frayed in recent years, largely because of the Conservatives’ anti-immigration rhetoric. Of course, the problem is not just Cameron. Under the last Labour government, too, many of the EU’s smaller members complained that British ministers and officials seldom took them seriously, for example by making the effort to travel to discuss areas where they could work together.

Fifth and finally, a point that my late colleague Philip Whyte often made is that clubs have not only rules but also mores. British politicians tend to forget that their rambunctious style of domestic politics – involving confrontation, rudeness and a win-or-lose psychology – goes down badly in the EU. The EU works through long negotiations and compromises that end in everyone feeling that they have got something. Sometimes Cameron gets this: two years ago he worked patiently with Germany and other partners to get a good deal on the EU budget, shrinking its size. Sometimes he does not: prior to the appointment of Juncker, other leaders reported that Cameron had threatened to campaign to take Britain out of the EU if the Luxembourger was appointed. Such threats alienate potential allies.

Cameron has to take two decisions very quickly: when should he hold the referendum, and what should he ask for, in terms of EU reform?

On the first point, there is a strong case for bringing the referendum forward to the second half of 2016. The longer it is delayed, the more the climate of uncertainty will afflict the British economy and potentially deter foreign investment. Furthermore, newly-elected governments usually have more credibility and popularity than tired governments in mid-term. If the referendum happened at the end of 2017, some voters might vote against the EU only because they were fed up with Cameron. Then there is the electoral cycle of other key countries to consider: both Merkel and France’s President François Hollande face elections in 2017 and will be unwilling to make big concessions to the UK in the period leading up to them.

On the second point, Cameron’s EU partners will, of course, urge him not to ask for too much. Many in his own party – and the UK’s eurosceptic media – will tug him in the other direction, arguing that unless he extracts major concessions from other member-states, the British people will never agree to stay in the club. Cameron and his officials have given several hints of what Britain’s priorities would be in a negotiation with EU leaders:

* He will ask for limits on the in-work and out-of-work benefits available to migrants from EU countries. As my colleague Camino Mortera-Martinez has written, several of his demands would be difficult to achieve and require treaty change. See Cameron's migration speech and EU law: Can he change the status quo?

* He will try to shift the institutional balance in the EU, so that the Commission becomes less dependent on the European Parliament than it has been in recent years, and closer to the Council of Ministers. Part of this rebalancing would involve giving national parliaments a bigger role in scrutinising subsidiarity and proportionality in EU rule-making. See Not in front of the MPs: Why can't parliament have a frank discussion about the EU? by Agata Gostyńska.

* He will try to introduce safeguards for the single market. There is a potential risk that the 19 countries in the euro will club together, caucus and seek to impose their views on the broader 28-country single market. In fact such caucusing has not yet happened, but Cameron will ask for new mechanisms to ensure that it cannot.

* He will urge the EU to pursue British priorities on economic policy-making, such as negotiating more trade agreements, extending the single market into services and the digital economy, and improving the quality while minimising the quantity of regulation. In fact the Juncker Commission is doing most of these things already, but Cameron will need to dress this up as a triumph for his agenda.

* He also is keen to get some sort of opt-out from treaty language on ‘ever-closer union’. And he may seek radical changes to Britain’s relationship with the European Convention on Human Rights (though this is separate from the EU).

None of this would be easy to negotiate, but on most of these dossiers Cameron will find allies as well as opponents. So far, Britain’s partners have not taken the question of Brexit very seriously. They have been pre-occupied with the problems of Russia and Greece. Many EU leaders were praying for a Labour victory. They have not given much thought to the areas in which they could help Cameron to achieve some of what he wants. A successful British renegotiation will require moderation and constructive diplomacy on their part as well as that of Cameron.

Other leaders will now have to consider the impact of a British departure on the EU. Economically, the EU would lose its biggest champion of free trade and the single market (which is why some protectionists would welcome a Brexit). In terms of foreign and defence policy, the British – despite recent defence cuts, and their reluctance to become involved in the diplomacy over Ukraine – have serious capabilities; without the UK, the EU would find it harder to become any kind of power. If the EU lost one of its two countries with seats on the UN Security Council, other powers would take it less seriously.

And then there is the transatlantic relationship: though UK-US ties are weaker than they were, the British have so many economic and cultural links to the Americans that they can often explain the EU to them; and they can help continental Europeans to understand the US. For example, the UK has played a key role in forging transatlantic agreements on counter-terrorism. Finally, there is the German question. Germany’s weight in the EU often dominates economic decision-making, and is increasingly important on foreign policy, too. A Brexit would leave Germany even more preponderant, which would concern a lot of other countries – as well as a number of Germans.

Brexit is far from inevitable. Recent opinion polls in Britain suggest that more voters wish to stay in the EU than leave. But for a referendum to be won, Cameron needs to become more strategic and less tactical. And Britain’s EU partners need to help him to frame a deal that he can sell to the British people.

Charles Grant is director of the Centre for European Reform

Wednesday, May 06, 2015

The evil of two lessers

Britain faces some major challenges. The recovery is unbalanced, and productivity growth has been weak. Poor infrastructure, patchy skills and constrained housing supply are holding back the economy. The Union itself is in danger, with the rise of the Scottish National Party. And relations with the EU and the US are at a low point. Yet neither the Conservative party nor Labour has a compelling strategy for tackling Britain’s problems.

There are only two possible governments after Britain’s general election on Thursday: a minority government led by the Conservatives or one led by Labour. Neither main party will command a majority at Westminster, even in coalition with the Liberal Democrats. Both have ruled out going into coalition with the Scottish National Party (SNP), which will be the third largest parliamentary force following the election.

The UK faces major challenges. While its economy has grown swiftly since 2012, so has its current account deficit. Productivity growth has been weak, and there are serious supply-side problems, especially in infrastructure and housing. Britain’s influence with both the EU and the US has diminished as the country has withdrawn to the margins, and the future of the UK itself is in danger. Which of the two possible governments is more likely to tackle the political and economic uncertainties facing the country?

Assuming (as the polls suggest) that the Conservatives emerge as the largest party, they will have first crack at forming a coalition. One involving the Conservatives, the Liberal Democrats and Northern Ireland’s Democratic Unionists might get close to the 323 seats needed. But although the Liberal Democrat leader, Nick Clegg, has indicated that he would back another coalition with the Conservatives, he could struggle to bring his party with him, opening the way for a Labour-led coalition.

A coalition between Labour and the Liberal Democrats is unlikely to command much more than 300 seats, and so would fall even further short of a majority. However, the SNP is likely to secure nearly 50 seats. Ed Miliband has ruled out a formal coalition with the SNP, but one can imagine an informal arrangement, whereby a Labour-Liberal Democrat coalition governs with the tacit support of the SNP.

The UK’s economic performance compares well with the eurozone since the trough of the downturn. However, this partly reflects the fact that the British government has (sensibly) eschewed the draconian fiscal austerity seen across much of the eurozone. As a result, the UK’s fiscal deficit in 2014 was the second-highest in the EU after Spain. Furthermore, Britain’s current account deficit has widened sharply, to 5 per cent of GDP in 2014, in the process ending the coalition’s hopes of rebalancing the economy away from consumption in favour of investment and exports (see Chart 1).

Chart 1. Government, current account and private sector balances
Source: Office of National Statistics, Haver Analytics. Private sector and government are calculated as four-quarter rolling averages.

To a significant extent, the British government is powerless to do anything about the external imbalance. The UK’s exports to non-EU markets have grown strongly in recent years, but exports to the EU have fallen, since demand in the eurozone has been weak (see Chart 2). Indeed, the UK’s trade with non-EU markets is broadly in balance, with the deficit mainly accounted for by the EU, suggesting that the origins of the deficit lie as much in weak demand in export markets as supply-side constraints at home. Stronger eurozone growth should start to rebalance trade with the EU, although the current strength of sterling against the euro suggests that progress will be slow.

Chart 2. UK exports to the EU and the rest of the world
Source: UK trade info

However, policy differences between the Conservatives and the Labour Party could influence the outlook for the UK economy. While the UK faces several more years of fiscal consolidation regardless of the outcome of the election, the Conservatives are also likely to cut spending on education and infrastructure – two of the UK’s key weaknesses – by more than the Labour party. While Labour has announced that it will balance the current budget (that is, the budget excluding investment spending) by 2020, the Conservatives are committed to balancing the overall budget (including investment spending) by then, implying much tighter policy than under Labour.

The Conservatives’ ‘reform and referendum’ EU strategy is economically risky. It proposes minor changes – some of which might help the economy (such as deepening the single market, and striking more trade agreements with non-European countries) and some of which might not (making it easier for national parliaments to block legislation to deepen the single market). But the loss of foreign direct investment deterred by a referendum campaign would far outweigh any benefits from such tinkering. And if ‘Brexit’ does happen, it could result in considerable damage to Britain’s manufacturing base, and to the City of London, since it would raise barriers to competition between firms in Britain and the rest of Europe, rather than reducing them. It would also hit the poorest regions of the UK hardest.

Britain has a productivity problem. Output per hour remains lower than it was in 2007. The pick-up in economic growth since 2012 has been founded on a growing labour force rather than productivity growth. Neither of Britain’s biggest parties has a coherent set of policies for dealing with the supply-side problems responsible for this trend, and some of their proposals might worsen it.

Both Labour and the Conservatives promise to intervene in prices – for domestic energy, rail travel and housing – in a clumsy attempt to tackle the ‘cost of living crisis’ brought on, in part, by a failure to address the underlying supply-side constraints. Labour has proposed a price freeze on household energy prices and controls on rents. The Conservatives have promised to cap rail fares and provide subsidised finance for homebuyers. These policies would discourage investment in energy and rail capacity, reduce the number of homes to rent, and inflate house prices.

Despite Conservative claims that Ed Miliband is suspicious of markets, it is Labour that promises more forceful attempts to promote competition. It wants to compel the big six energy companies to build a Chinese wall between their generation and supply businesses, and to make companies buy and sell energy on exchanges. It promises two new challenger banks ‘on the high street’ (although it has not specified how it will create them) and is more likely to take concrete steps to alleviate the UK’s chronic housing crisis.

The Conservatives will do very little to address Britain’s biggest supply-side problem – the constrained supply of housing. The party plans 200,000 new ‘starter homes’ for young people over the next parliament, although its dire performance in this regard since 2010 strongly suggest this target will not be met (see Chart 3). But it will ensure ‘local people have more control over planning’ and promises to protect the green belt (the areas of largely agricultural land that surround Britain’s largest cities and which may not be built upon). It will pump up house prices by extending the ‘help to buy’ scheme, which offers subsidised finance for first time buyers. And it will reduce the availability of affordable rental housing by forcing housing associations (private charities that provide Britain’s cheaper rented accommodation) to sell to tenants, with the government subsidising their purchases. This set of policies would make the situation worse, not better.

By contrast, Labour promises 200,000 new homes a year. Although it is short on the specific policies to deliver them, its track record on housing is far stronger than the Conservatives: two-thirds as many houses were built in 2014 as in 2007. However, Labour has not said how it would tackle the issue of excessive business rents, which are as important a supply constraint as private housing. And while it promises a so-called ‘mansions tax’, which will hit the owners of expensive homes, Labour has no plans to reform Britain’s low and regressive property tax rates.

Chart 3. Housebuilding
Source: Department of Communities and Local Government

What impact will the election result have on the outlook for constitutional reform? The rise of the SNP in Scotland after the country voted to stay in the UK at last September’s referendum is, at first sight, perplexing. But the Scots were promised more devolution in the referendum campaign, only for David Cameron to announce the morning after the vote that more devolution would only happen if Scottish MPs were stopped from voting on English matters in Westminster. Since then, the Conservatives have portrayed any Labour government reliant on SNP support as a betrayal of the English, and Ed Miliband has felt compelled to say that Labour will not deal with the SNP if Labour forms a government. If the Scots return 45 to 50 SNP MPs to Westminster, and both major British parties shun them in an attempt to court English votes, Scottish voters will be disenfranchised and the Union will be further weakened.

There is one way out of this: reforming the voting system to make it more proportional, and devolving more powers to Scotland, Wales, Northern Ireland – and to the English regions. Proportional representation (PR) would ensure that parliamentary representation was more closely aligned with voter preferences, and would mean that more voters’ views were represented in parliament and government, since coalitions would be more likely. And crucially, it would prevent Scotland from becoming a permanent SNP fiefdom. The SNP has taken over from Labour as the beneficiary of first-past-the-post in Scotland. With PR, there would be far more Labour, Liberal Democrat, Green and Conservative MPs in Scotland, slowing or stopping the drift towards independence.

In many ways, Conservatives’ attitudes towards the EU are the mirror of Scottish Nationalists’ attitudes towards the UK. Both want sovereignty returned to ancient parliaments, and both consider themselves to have bad deals in their respective unions. Labour is the best hope for constitutional change. Having lost most of the Scottish MPs, it will no longer be a beneficiary of the current first-past-the-post voting system, and could hope to be the dominant political force in most the UK’s devolved regions.

Finally, could the election reverse Britain’s increasing international marginalisation? The current coalition has presided over a dramatic worsening of Britain’s relations with the EU. This has partly been the result of David Cameron’s decision to concede a referendum on membership of a ‘reformed’ EU. As there is no appetite on the part of the rest of the EU for a treaty change to accommodate major concessions to the UK, the relatively minor reforms Cameron is likely to achieve will not be enough to assuage the eurosceptics in his party. Even if Britain votes to stay in the EU, a referendum campaign will ensure that British politics is inward looking until the vote is held, further weakening Britain’s already diminished status in the Union.

A Labour-led government would be better placed to improve relations with the EU. Crucially, it is highly unlikely there would be a referendum. Nor would Labour seek to renegotiate the terms of the UK’s EU membership. Britain’s relations with a number of EU governments could improve significantly: the Conservative-led coalition has focused on relations with Germany almost to the exclusion of relations with other countries because it believes that Germany is key to a successful attempt to renegotiate membership. A Labour-led government is also more likely to reboot Franco-British military co-ordination, which has been badly neglected by the current government since François Hollande became the French president. However, even under Labour, it is far from clear that Britain would revert to a more assertive role in the EU, given the need to manage what promises to be a tricky domestic situation.

Not only has the current British government damaged relations with the EU, but it has undermined relations with the US. The UK’s waning influence in the EU combined with big cuts in defence spending, and a growing reluctance to participate in international military operations, has made the UK a less important partner for the US. However, this is unlikely to change much regardless of the outcome of the election. A Labour-led government would at least remove the spectre of a referendum and with it the biggest threat to British influence in the EU. But neither party is likely to try to meet the NATO target of spending 2 per cent of GDP on defence, although both would renew the Trident nuclear deterrent. Similarly, as minority governments, neither would risk participating in international military action in the face of strong domestic opposition.

The general election campaign has shown some of the uglier features of British politics. It has been marked by short-termism: the Conservatives have been willing to risk both Britain’s membership of the EU and the UK itself in order to court English votes. For its part, Labour has focused on populist responses to the UK’s poorly performing markets (such as price and rent controls) as much as on policies to make those markets work better. The campaign has focussed on side issues: how each party plans to cut the budget deficit has featured far more prominently than what they will do about weak productivity growth, or how to make Britain’s government more legitimate in the eyes of its people. And British politics is becoming insular: while the Middle East and Eastern Europe are torn by conflicts and a rising China squares up to the US, the next parliament will ignore those challenges in favour of arguments over ‘Scoxit’ and ‘Brexit’.

John Springford is a senior research fellow and Simon Tilford is deputy director at the Centre for European Reform.

Thursday, April 30, 2015

Two cheers for Ukraine

Despite recent progress, Ukraine remains militarily, politically and economically fragile. The EU needs to do more to help.

There are plenty of reasons for those in Kyiv to be optimistic. The government, more competent and less corrupt than any since independence in 1991, is undertaking serious reform. But Ukraine’s success is far from assured: the political class is fractious, Russia may be preparing for more fighting in the Donbass and the economy is shrinking. Without sustained Western attention, the country’s attempt to become a Western-orientated democracy may once again fail, as happened after the ‘orange revolution’ of 2004.

President Petro Poroshenko claims there is now a committed majority for pro-EU policies throughout Ukrainian politics. Some impressive foreigners have taken Ukrainian citizenship in order to become ministers, including the Ukrainian-American finance minister, Natalie Jaresko, and the economy minister Aivaras Abromavičius, originally from Lithuania. Many of those recently elected to the Verkhovna Rada (parliament) are young, bright and not beholden to oligarchs. Vigorous NGOs monitor the government’s actions and make a fuss when standards slip.

Reform-minded officials report that serious efforts are being made to tackle corruption. A new prosecutor-general, appointed in February, has made a start on going after corrupt officials (his deputy is a Georgian who overhauled the prosecutor’s office in Georgia) and almost 500 anti-corruption cases are underway. So that ordinary people can see the benefits of the crackdown, the government has made a priority of police reform. And after a four-month delay, it has appointed a head to the new Anti-Corruption Bureau.

There is much talk in Kyiv of ‘de-oligarchisation’. The government has started to take back control of state-owned enterprises (SOEs) which the oligarchs have – till now – de facto controlled through minority shareholdings. In March, Poroshenko fired Ihor Kolomoisky, from his job as governor of Dnipropetrovsk: Kolomoisky had deployed a private militia to defend his business interests in a state-owned oil company against the state. Prosecutors are investigating the affairs of Rinat Akhmetov, Ukraine’s richest man. The Rada has passed several laws that hurt the business interests of one or other oligarch. But business and politics are still unhealthily mixed: Poroshenko himself has not yet fulfilled his promise to sell his own corporate assets, including media interests.

Both Poroshenko and Prime Minister Arseniy Yatsenyuk have links to rival camps of oligarchs. Though tensions between them are serious, they are under Western pressure to maintain a united front. Yatsenyuk may want to be president but is currently less popular than Poroshenko, not least because he gets much of the blame for the country’s economic woes.

Both men have flirted with Ukrainian nationalists in an effort to court popularity. Poroshenko appointed Dmytro Yarosh, the leader of the far-right ‘Praviy Sektor’ group, as an adviser to the chief of the general staff. Meanwhile the Rada passed a law making it a criminal offence to criticise the role of the extreme nationalist organisations which operated in Ukraine from the 1920s to the 1950s, even though some carried out atrocities against Poles and Jews (at the time of writing, Poroshenko has yet to sign this law). The Rada should not waste its time on laws which do nothing to modernise Ukraine but help to sustain the Russian narrative that fascists run Kyiv.

Ever since the birth of the Maidan movement in November 2013 – when the then president, Viktor Yanukovych, rejected the EU’s Deep and Comprehensive Free Trade Agreement (DCFTA) – Ukraine’s politicians have had to look over their shoulders. When things are going badly on the battlefield or in the economy, there are mutterings about 'another Maidan'. But Ukraine needs a period of stability, rather than more unrest, in order to build its strength.

The ceasefire agreed in February, as part of the ‘Minsk 2’ agreement, is fraying, with soldiers being killed nearly every day. Russian troops remain in the Donbass, training and equipping separatist forces. On April 23rd, NATO’s secretary-general, Jens Stoltenberg, reported a substantial Russian build-up along the border with Ukraine and also inside the country. Ukrainian forces are finally getting some Western training, from the US, the UK and Canada, and some non-lethal military equipment. But Kyiv’s politicians also want defensive weapons: they believe that the Russian president, Vladimir Putin, plans more territorial conquest. If Russia does grab more land, Western governments should step up military assistance and consider giving Ukraine the means to defend itself. Ukraine’s politicians also want NATO membership (though they know it is not on offer for now); opinion polls show that just over half the people agree, up from a small percentage before the war began.

Poroshenko wants UN peacekeepers on the border between Russia and Ukraine to prevent further aggression, but Russia rejects that as contrary to the Minsk 2 agreement. Ukraine's problem is that this text (analysed in a recent CER insight) is ambiguous and impossible to implement. It says "a dialogue is to start on modalities of conducting local elections in accordance with Ukrainian legislation", including an interim law on "special status" – meaning greater decentralisation of power than in the rest of Ukraine – for the conflict areas; it does not specify with whom the dialogue should be conducted. It also calls for Ukraine to enact constitutional change, decentralisation and a permanent law on special status, all by the end of 2015, but is unclear on the sequencing of all these requirements.

The Ukrainians say that there must be free and fair elections in the conflict areas first, so that they have interlocutors with democratic legitimacy to deal with; the Russians say that the Ukrainians should negotiate the constitutional changes with the de facto authorities of the so-called Donetsk and Luhansk People's Republics and then hold elections later. Diplomats from Germany and some other EU countries think the Russian interpretation of the Minsk 2 agreement is correct, but US diplomats take Kyiv’s side.

Whatever the text was intended to mean, the reality on the ground is that elections cannot be held unless the Russians and their allies agree; and they will not agree until they have the autonomy they want. But if Ukraine accepts elections on Russian terms, and the current separatist leaders are confirmed in office, all hope of free and fair elections and the possibility of changing the region’s leadership in future elections will be lost; the Minsk agreement says that once elections have been held, the Kyiv government cannot sack the local authorities.

Somehow, the constitutional changes and the elections need to be synchronised. One possibility would be for the Ukrainian government to accept the separatist leaders as provisional interlocutors and negotiate a deal with them on special status for their territory. A referendum on the special status and local elections could be held simultaneously, according to Ukrainian law and subject to OSCE monitoring; and the separatist leaders would become legitimate if voters chose them and approved the new status.

But even if the timetable can be fixed, Ukraine and Russia disagree on the nature of decentralisation. Poroshenko emphasises that most Ukrainians do not want a federal constitution with broad regional autonomy. Russia wants the Donbass to have an effective veto over Ukraine's membership of the EU and NATO (as Republika Srpska has over Bosnia's big decisions). There is no obvious way of preserving the unitary state wanted by most Ukrainians while giving the rebel entities the blocking power desired by Russia. The West should avoid endorsing any arrangement likely to produce Bosnia-style paralysis.

The biggest reason for worrying about Ukraine, however, is neither the politics nor the military situation, but the economy. In the first quarter of this year, Ukraine’s GDP was 15 per cent lower than a year earlier, and it is still shrinking. Foreign currency reserves are only $10 billion, and that is after a recent $5 billion IMF disbursement. Putin's game may be to wait until Ukraine defaults, and economic woes push impoverished people onto the streets – and then offer assistance in return for the installation of a new, more Russia-friendly regime.

Senior officials in Kyiv claim that Ukraine will not undergo a disorderly default, even though at least $40 billion is needed over the next five years to balance the budget. They reckon it will come from the IMF ($17.5 billion) and the restructuring of debts ($15.3 billion), with the balance provided by friendly governments and the EU.

But the Ukrainian authorities know they need still more cash to stabilise the economy and then to generate growth. Speaking at the Lennart Meri conference in Tallinn, on April 26th, Anders Aslund of the Peterson Institute urged European central banks to make $10 billion in currency swap credits available to Ukraine, to strengthen its foreign currency reserves (and thus make a speculative attack on the hryvnia less likely). They could do so with policy conditions attached, thereby reducing the likelihood that the reserves would need to be used.

The government needs to create an environment that is attractive to foreign investors. Improving the rule of law is crucial. The government has plans for bringing more of the grey economy into the legitimate sector so that it pays tax. The measures demanded by the IMF, such as cutting pensions and phasing out energy subsidies (to reduce wastage of energy), are essential – but will be painful and unpopular.

The Rada took a crucial step on April 9th when it passed a law to break up the state gas company, Naftohaz, into transit, storage, supply and production businesses. This should bring Ukraine's gas market into line with the 'unbundling' prescribed by the EU's 'third energy package' (which Ukraine’s agreements with the EU oblige it to implement). Ukraine has managed to reduce its dependence on Russian gas, thanks to 'reverse flow' arrangements with EU neighbours.

Reformers in Kyiv want the EU to increase its role in Ukraine. If Russia will not allow UN peacekeepers, many Ukrainian politicians would like an EU police mission on the Russian border; and they would like more support for police reform. Poroshenko wants the EU to do more to fight Russian propaganda and to help broadcasters compete with Russia's output. One idea mooted is for the EU to help establish a Russian-language news agency that could operate throughout former Soviet countries.

Poroshenko also hopes that at the forthcoming Eastern Partnership summit in Riga, the EU will offer visa free travel to Ukrainians, as it has done for Moldovans. Though Ukraine has made some progress on meeting EU standards for border control, there are still technical obstacles to lifting visa requirements, so he is likely to be disappointed. The Union will have to reassure Ukrainians that the delay on visa waivers is not a political signal that Ukraine should be kept at arm's length.

The DCFTA between Ukraine and the EU is important for the country’s future, providing a roadmap for creating a more competitive economy. But although the EU has unilaterally opened its markets to Ukraine, in line with the agreement, Kyiv announced in September 2014 that it was postponing the implementation of its side of the DCFTA. This was mainly because of Russian pressure (though some Ukrainian oligarchs were happy to maintain protection from EU competition). Moscow claimed that the DCFTA would damage its economic interests, and called for trilateral discussions with the European Commission and Ukraine over how the agreement was applied. These technical talks started last autumn. The Commission reckons that none of Russia’s complaints stand up but Germany has chided Brussels for not doing more to reassure the Russians.

Poroshenko now says he hopes for implementation by the start of next year. The sooner the better: once Ukraine meets EU standards, its industries will be able to export more easily not only to the Union but also to anywhere else that recognises EU standards. That way, if Russia responds to DCFTA implementation by blocking Ukrainian exports, as it threatens, Kyiv will have other options. The EU should do all it can through technical assistance and twinning arrangements to ensure that Ukraine’s administration has the capacity to make the DCFTA work.

European unity over the sanctions regime against Russia has been, so far, impressive. But EU leaders have not yet shown a similar determination to support the government in Kyiv. At an EU-Ukraine summit and related donors’ conference, on April 27th and 28th, EU leaders failed to come up with any fresh money. The EU should unlock its vaults, while making further money conditional on the continuation of reform.The government in Kyiv is doing enough of the right things to deserve support.

Charles Grant is director of the CER, and was recently in Kyiv on an ECFR study trip. Ian Bond is director of foreign policy at the CER.

Thursday, April 23, 2015

Dead in the water: Fixing the EU’s failed approach to Mediterranean migrants

Europe can no longer ignore the humanitarian crisis in the Mediterranean. If it wants to avoid the death of more refugees, it should fix its asylum policy, increase its naval presence, and play a stronger role in Libya.

There is something deeply wrong with Europe’s approach to irregular migrants. After the Mediterranean boat tragedy, which left more than 700 migrants dead, the European Commission has unveiled a ten-point action plan on migration. It has several good points, but it can only be the beginning.

On migration and asylum policy, a north-south divide runs through the EU. Under the Schengen treaty (to which the UK and Ireland are not parties), all members are responsible for securing the external borders of the Union. The premise is simple: in an area of free movement without borders, the migration problems of one member-state are the problems of the Union as a whole. But the EU has not had a common migration policy for twenty years.

Europe’s asylum system, known as the 'Dublin system', has caused friction within the Union. Under it, the EU member-state where a migrant first arrives is primarily responsible for processing an asylum application. This places an unreasonable burden on countries bordering conflict zones, such as Italy, Greece or Malta. These countries, overloaded with applications, turn down the overwhelming majority of them. So asylum seekers travel to other countries, such as Germany or Sweden. Here they have better chances of a successful application; but locals resent them as an increasing burden on social services. The system has created two different zones in Europe with two different interests: Northern member-states want an asylum policy that keeps migrants in the South but treats them humanely, while Southern member-states want the North to share the burden by accepting more migrants. The Mediterranean refugee crisis shows that this system is unsustainable.

When popular uprisings in Libya and Syria turned into bloody conflicts, tens of thousands of people started risking their lives on leaky boats to cross the Mediterranean rather than face an uncertain fate at home. Problems were compounded as smuggling networks exploited Libya’s lawlessness to create a new, lucrative path by which they could bring African migrants to the EU. The rickety smuggling ships often got into problems on the high seas, whether by accident or by design.

In October 2013, three years after the Arab uprisings started, the Italian government of then-prime minister Enrico Letta decided to launch a search-and-rescue operation called ‘Mare Nostrum’. With a budget of 9 million euros per month, the Italian authorities patrolled both Italian and Libyan waters. Between October 2013 and October 2014 (when the operation was replaced by the EU-led ‘Triton’ mission), ‘Mare Nostrum’ helped save an estimated 150,000 lives and detained 351 smugglers. Still, the flow of migrants continued and scenes of overcrowded boats reaching Lampedusa became a symbol of Europe’s failed migration policies. According to the International Organisation for Migration, more than 170,000 migrants reached Italy by sea in 2014.

In October 2014, the Italian government appealed for EU support. The Italian demand to strengthen ‘Mare Nostrum’ was met with criticism from Northern member-states, including the UK, Germany and the Netherlands. They argued that Italy had created a ‘pull effect’ by establishing a search-and-rescue operation. In their view, the prospect of being rescued at sea needlessly encouraged more migrants to attempt the crossing. Germany, France, Sweden and the UK are the top destinations for asylum seekers, and their governments face increasing domestic pressure to cut back on the numbers. The compromise that emerged from this north-south disagreement was operation ‘Triton’. This is an EU-led operation, with a more restricted mandate, budget and area of operations than ‘Mare Nostrum’. It has no mandate to proactively search and rescue boats in danger; it has a monthly budget of 2.9 million euros with a limited fleet of two aircraft, one helicopter, and six patrol vessels, and it only patrols Italian waters.

During the first three months of operation ‘Triton’ (end of October to end of December 2014), Frontex, the EU’s border agency, observed an increase in migrants of 160 per cent, compared with the same period of 2013, when the Italian rescue operation was still in place. Meanwhile, deaths in the Mediterranean have soared: more than 1,750 migrants have perished since the beginning of 2015, in comparison with 56 reported deaths in the same period of 2014. Since ‘Triton’ was established, more migrants have attempted to reach European soil, and many more have died trying. This suggests that other factors besides the ‘pull effect’ are leading migrants to board the ships.

These factors are mostly linked to foreign, not migration, policy. Since October 2014, the conflict in Libya has worsened; the country has fallen apart and the Islamic State terrorist group has joined the fight. Refugees en route to Europe have to run a lethal gauntlet in Libya: they are harassed, mistreated and sometimes killed by the warring factions. Yet the country’s chaos and its proximity to Europe make it a smuggler’s dream. The Boko Haram terrorist group in Nigeria, repression in Eritrea, and continued violence in Somalia create a steady flow of refugees from further afield. The flood of refugees from Syria’s civil war continues unabated, and many of them now reach Europe through Libya. Not all irregular migrants are refugees. Some are merely economic migrants. But Europe’s inability to manage these crises has prompted an increase in the number of irregular migrants. The possibility of potential terrorists hiding among legitimate refugees is another reason for the EU to take a serious, end-to-end view of the migration issue.

The Commission’s ten-point action plan is a step in the right direction. The Commission is right to push for an increase in Triton’s resources. European leaders should agree to a substantial increase not only of the operation’s budget but also its logistical resources. The mounting death toll shows that the available fleet and manpower are not enough. More helicopters, ships and surveillance assets are needed. Since there is no meaningful Libyan coast guard or navy, European governments should agree to expand the mandate of the operation and to allow it to patrol Libyan waters, as ‘Mare Nostrum’ did.  Beyond increasing Triton’s capabilities, its mandate should be broadened to include assisting boats in trouble. This cannot be done within the existing mandate of Frontex, as the Commission suggests, since this is purely a border control agency. Reluctant governments should realise that over-emphasising the ‘pull effect’ is not only factually incorrect, but also morally indefensible.

The Commission has proposed capturing and destroying smuggling vessels, taking its cue from the EU’s counter-piracy mission Atalanta, which operates off the Horn of Africa and in the Gulf of Aden. But migrant flows will not stop if the EU starts sinking old fishing boats. Such action will only increase the price a migrant has to pay to a smuggler for his passage to Europe.

Smugglers and pirates are not the same and cannot be defeated in the same way. While a military show of force may deter pirates, the prospect of special forces abseiling onto, or firing warning shots at, boats filled with desperate civilians is not one we should welcome. Part of the success of operation Atalanta was a result of attacking pirate hideouts on shore in Somalia. Smuggling networks, by contrast, are dispersed; those in charge may be in an internet-café in Bamako, Benghazi or Bari. Shutting them down requires effective intelligence and law-enforcement operations, not military intimidation.

The EU has suggested destroying boats before they are used for smuggling. This sounds tough, but how can one differentiate between a smuggling vessel and a legitimate trawler or merchant ship? Not every Libyan fisherman doubles as a people smuggler. And many smuggling boats embark from Turkey, Egypt, Tunisia or elsewhere; the EU cannot sink them all. The EU should certainly pre-empt imminent acts of smuggling – for instance, when it is clear that people are being loaded onto a boat – but getting the information in real time to enable such an operation would present a tremendous intelligence challenge.

There is a market for people smuggling, and European leaders must appreciate the dynamics of supply and demand. Europe should focus on the demand-side problems onshore; those factors that lead people to risk their lives on rusty boats in the first place. This means Europe should address Libya’s lawlessness and Syria’s civil war. In the absence of a functioning central government in Libya, the EU should establish a civil-military mission on the ground and create a safe zone where migrants could be processed. It should be set up initially in an area controlled by Libya’s internationally-recognised government, currently in exile in the east of the country. The Mediterranean crisis should force Europe to take more responsibility for preventing Libya's collapse.

The Commission’s action plan offers some timid ideas for the unsolved question of better burden- sharing in the EU’s asylum system: the Commission promises to “consider options for an emergency relocation mechanism”. This measure shows that the EU is slowly considering how to tackle the flaws in the Dublin system. Its latest reform, termed ‘Dublin-III’, has clearly not gone far enough. Europe’s leaders should be bolder. They should rethink the rule of first entry and ensure the effective implementation of all existing EU directives on asylum seekers. This would contribute to harmonising national asylum standards and distributing refugees more evenly across the EU.

Finally, the Commission’s action plan promises to “establish a new return programme for rapid return of irregular migrants”. This sounds good, but such a programme will not work without a functioning Libyan government that can negotiate the conditions of the return of migrants.

As the conflicts in Europe’s backyard continue, or intensify, more and more people will risk their lives to flee their countries. Turning a blind eye to the EU’s obligation to help those in need would neither be moral, nor coherent with the EU’s foreign policy interests. The domestic politics of migration are difficult for many member states, including the UK. Migration is a unifying issue for Europe's right-wing populist parties. But the current system, which creates problems and tension in many countries, does nothing to reduce the level of anti-migrant sentiment. As the EU’s migration commissioner, Dimitris Avramopolous, puts it “if Europe does not present a united front to stop tragedies like this from happening, there will only be one winner: the populists.”

Camino Mortera-Martinez is a research fellow and Rem Korteweg is a senior research fellow at the Centre for European Reform.

Friday, April 17, 2015

Vorsprung durch Grexit?

The German political and bureaucratic class is preparing for Grexit, and thinks the risks are containable. Angela Merkel should resist this emerging consensus in Berlin, and make every effort to keep Greece in the euro.

The brinkmanship between Greece and the euro group is entering a decisive phase. Amidst escalating threats – default by Greece, financial cut-off by the eurozone – the most pressing issue is whether Germany would allow a Greek exit from the eurozone, either on purpose (‘Grexit’) or by accident (‘Greccident’). Most of the key decision-makers in Berlin say that unless Greece starts implementing real reforms, it should leave the euro. But Chancellor Angela Merkel needs to consider the geopolitical dimension, as well as pressure from the US and the ECB to keep Greece in – in addition to the unwillingness of the Greek people to leave. For Europe’s sake, she should go the extra mile to avoid Greece departing the eurozone. But the odds of Grexit happening are rising.

Until the Greek government comes up with a serious plan for structural reform, Germany will continue to block further money for Athens. Given that Greece is finding it increasingly difficult to repay debts, and pay salaries and pensions, a Greek default and possibly exit from the euro is looking more likely with every passing week. “We have never been closer to Grexit, and we are close,” said one senior official in Berlin. Officials say they cannot detect any desire from the Greek government to commit to reforming labour markets, fighting corruption, improving tax collection, strengthening fiscal discipline or attacking vested interests. “Faced with Grexit, Tsipras might do a U-turn, and perhaps change his coalition partner. But we have no idea what he’ll do,” said an official. The German government does not know whether Tsipras is playing chicken and waiting for Germany to blink, or simply unable to control the many factions in his government. Or even whether he really wants to keep Greece in the euro.

Germans who favour Grexit argue that it would be good for the Greek economy. Greece currently has an output gap of around 13 per cent of GDP, according to the OECD; the economy is running at well below its economic potential. Autonomous Greek monetary policy and a weaker currency could therefore speed up the recovery, and avoid the further harm to the economy that a long depression would inflict. But a prerequisite for such a successful outcome would be that the exit be properly managed, with the help of the ECB, and with bridge financing for the Greek government from European institutions, to limit short-term disruptions. What is more, the new Greek monetary policy authorities would need to build up trust quickly, to avoid continued instability and high inflation.

Proponents of Grexit tend to underplay the potential downsides. Leaving the euro is more difficult than giving up a currency peg: millions of contracts would need to be rewritten, and foreign debt (in euros or dollars) would balloon when measured in new drachma, forcing companies and especially banks into default. Inflationary pressure would be strong, hurting consumers. It is not a given that, post-Grexit, the Greek financial system would be stable and inflation manageable. The deeper institutional and structural problems of the Greek state and economy would remain unresolved, leading to slow growth after the economy had returned to its potential output.

Some German officials predict that Grexit could be a gradual, drawn out process. Greece would not be pushed out following a decision by the European Council or European Central Bank, they think. Instead, the government would run out of money and have to issue IOUs as a parallel currency, while imposing capital controls and intervening heavily in the banks to prop them up. This would not be a stable situation; the economy would not grow under such a scenario. As a result, the government would probably think it best in the long run to take the plunge and devalue by formally leaving the euro – then at least the economy would regain monetary autonomy, making it easier to boost demand.

German officials are sanguine about the consequences of Grexit. “It would not be problematic for our budget, financial sector or economic growth,” said one. “And one positive result could be that other countries would do their homework and become more disciplined” – an argument that the German council of economic experts has recently made, too. Tax payers are liable for around €240 billon of Greek debt, of which Germans could lose €70 billion. The officials think that would be manageable.

Most officials think the risk of contagion is minimal. “Spain, Portugal and Ireland would be alright because they have done their homework,” said one. Although Italy and France have not done much homework, he thought their fates – and whether they reformed – would be unrelated to what happened in Greece. In any case, Greece was a special case, he said – there was no longer much bank exposure to it.

He acknowledged that if the financial markets asked for a premium before lending to other eurozone countries as a result of Grexit, Germany would have to consider further eurozone integration, such as tighter fiscal discipline or the introduction of ‘economic reform contracts’. “In that case we would need to move fast, so hopefully we would be able to avoid changing the EU treaties.” He may be too nonchalant: if the markets were panicking about the euro’s viability it is highly unlikely that modest steps towards policy-integration or risk-sharing would reassure them.

Is there a difference between the approaches of Finance Minister Wolfgang Schäuble and Angela Merkel? Officials say that on the fundamentals, there is not, even though Merkel’s rhetoric is softer. They both want to keep Greece in the euro, but not under any circumstances, and not if the Greek government cannot get its act together. Some of their officials take a harder line. “As an economist, I am not sure if Greece should stay in the euro; it is structurally uncompetitive and could become a second Mezzogiorno,” said one. He noted that Latvia, Lithuania, Spain and Ireland had known they needed to change, and therefore taken painful decisions, but he thought that sometimes pressure to reform did not work. He worried that keeping Greece in at all costs would undermine European cohesion.

Inevitably, Merkel thinks more about the geopolitical context than Schäuble. She is under discreet pressure from the Obama administration, which worries about the risk of a Greek-Russian rapprochement. The IMF, the European Commission, France and Italy also want to find a way of keeping Greece in. A lot of European governments would be reluctant to make a visible write-down of their loans to Greece. The SPD – Merkel’s coalition partner in Berlin – says in private, though not in public, that Germany has overdone the austerity during the eurozone crisis, and it is against Grexit. Another reason for keeping Greece in the euro is that if it grew strongly outside the currency, anti-euro voices elsewhere would grow bolder.

The ECB, too, remains opposed to Grexit. For now it is taking a hard line on Greece, limiting the ability of Greek banks to fund the Greek government. Yet it was the (still untested) promise of Mario Draghi to do “whatever it takes to preserve the euro” that ensured the single currency’s survival in the summer of 2012. The ECB and others worry that in a future political crisis in another member-state, financial markets might start doubting the commitment of the core countries and the ECB to preserve the integrity of the euro. At that point, the eurozone would be thrown back into the self-fulfilling crisis mode that policy-makers have scrambled to leave behind during the past few years. The ECB would not risk the unravelling of that promise over Greece, unless put under considerable political pressure.

Within Greece, too, it should not be forgotten that a recent poll found 84 per cent of Greeks in favour of keeping the euro. Syriza does not have a mandate to negotiate an exit, and its high approval ratings could soon tumble if the country took steps to prepare for leaving the euro, such as capital controls and bank closures. It may well be that a Greek government which embarked on a path towards Grexit would fall before the event.

One key point for Merkel, apparently, is that Germany should not be blamed for Grexit. One visitor reports her line as being: “If Grexit happens, people will see the cause was that Greece failed to do its homework, not that we withheld solidarity.” In this blame game, Merkel is currently succeeding. It is astonishing how those who agree with Greece that the eurozone has overdone the austerity – like France and Italy, and to some degree the European Commission and the IMF – have been alienated by Syriza’s chaotic and confrontational style of governing, its extreme rhetoric and its inept diplomacy. As a result, Paris, Rome and Brussels are not speaking out on Greece’s behalf. And there are some eurozone governments, notably Finland, the Netherlands, Slovakia and Estonia, which are encouraging Germany to take a hard line. Even the Spanish and the Portuguese, having ‘done their homework’, are in this camp.

But this blame game could easily shift if Germany facilitated or actively pushed for a Greek exit. Not only the US, the IMF and the international press but also probably France and Italy would ultimately criticise Germany for its handling of the euro crisis – during which Greece has suffered from a depression of similar magnitude to that of Germany in the 1930s, the eurozone economy has failed to recover to its pre-crisis size, and the political extremes in Europe have gained much ground. The US has long understood that in its role of the transatlantic alliance’s hegemon, it must accept some costs for the greater good of the alliance’s stability. It expects as much from the EU’s hegemon, Germany, and in the event of a Grexit would hold Berlin largely responsible.

The threats from the Greeks to default on eurozone rescue loans, and from the Germans and their allies to push the Greeks out, are part of a game of brinkmanship: both sides need to be seen as fighting for their voters. A smooth and early agreement would raise suspicion among both sides’ electorates that their politicians could have achieved more from the negotiations. This does not mean, however, that neither Greece nor Germany will step over the brink.

There is no doubt that many powerful voices, within Europe and further afield, will try to prevent Grexit. But Berlin plays a decisive role in eurozone crisis management, and in Berlin key decision-makers believe that Greek membership of the euro is becoming unsustainable. Germany’s friends should help it to see the bigger picture.

Charles Grant is the director and Christian Odendahl is the chief economist at the Centre for European Reform.

Wednesday, April 15, 2015

Not in front of the MPs: Why can’t Parliament have a frank discussion about the EU?

Britain’s Parliament does a poor job of examining EU business. Some simple reforms would improve the way that it scrutinises European legislation.

The British prime minister, David Cameron, wants to make the EU more democratic. National parliamentarians, in his view, understand citizens’ concerns better than MEPs who deliberate in far-away Brussels and Strasbourg; national parliaments should therefore play a greater role in EU decision-making. However, Cameron’s argument would carry more weight if UK parliamentary scrutiny were improved.

The European scrutiny committee of the House of Commons recently questioned whether Cameron means what he says about involving Parliament more in EU law-making. This committee examines EU documents and the British position on them. So if it says the government is not serious about giving Parliament a bigger role in EU affairs, its views deserve attention.

The rule in Britain is that, with a few exceptions (set out in a parliamentary resolution), the government does not agree to any EU proposal until Parliament has expressed a view through the scrutiny process. Each year the European scrutiny committee sifts around 1000-1100 EU documents, including both European Commission legislative proposals and non-legislative texts (such as Commission consultation papers). The committee can either clear them from scrutiny or ask ministers for further explanations.

Whenever the scrutiny committee considers the documents “politically or legally important” it can request a debate on them on the floor of the house, or in one of the Commons’ three EU committees. Each of these committees is responsible for a range of topics; for example, ‘EU Committee A’ deals among other things with energy, climate and environment, food and rural affairs. The three committees do not have a permanent membership. The committee of selection nominates MPs to serve on these committees whenever debates are requested.

In the March 2015 follow-up report to its own 2013 inquiry into the system of scrutinising EU affairs in Parliament, the European scrutiny committee criticised the coalition government for failing to pursue a fruitful dialogue with MPs over European policy. The committee complained that its requests for debates with ministerial participation had fallen on deaf ears in Downing Street.

Six of the plenary debates the committee requested in the current Parliament – just dissolved, pending May’s general election – have not been held. One of the unfulfilled requests was for a debate on the freedom of movement of EU citizens – a central issue in British politics and the general election.

The government’s response to the committee’s criticism has been to argue that few MPs are interested in the EU. William Hague, the Leader of the House (the minister responsible for arranging the government’s business in Parliament), told the committee in February 2015 that the only parliamentarians to request EU debates were members of the scrutiny committee. In other evidence to the committee’s inquiry, the government pointed out that on one occasion, an EU committee meeting on EU law-enforcement co-operation lasted only 13 minutes, because it attracted so little interest among MPs. Only one of the 13 MPs who attended the meeting put a question to the minister present.

Hague has a point. However many debates are scheduled, Parliament can only hold the executive to account if MPs understand the issues. But most MPs have neither the time nor the inclination to learn how the EU works. The EU is seen as too technical and complicated, and many MPs doubt whether voters would reward them for understanding its mechanics. In the 2014-2015 parliamentary session, the scrutiny committee’s overall attendance rate was 48.7 per cent. Julie Elliott, a Labour MP who was shadow energy minister in the last parliament, Linda Riordan MP (Labour) and Stephen Gilbert MP (Liberal Democrat) did not turn up for a single meeting.

Even if all the members of the scrutiny committee had a 100 per cent attendance record, they would need help from other committees to do their job effectively. This is not always forthcoming. To support the scrutiny process, the committee can request an opinion from a departmental select committee, but the latter is not obliged to provide one. Some select committees, like the home affairs and justice committees help, but others are less inclined to do so.

The overall level of knowledge about the EU could improve if the House of Commons spread EU business more equally among MPs. The lower house of the Dutch parliament, for instance, has a decentralised system in which sectoral committees are responsible for scrutiny of documents in their areas of responsibility. But asking Commons’ committees, which already have a full agenda, to take on extra responsibilities for EU scrutiny would not necessarily improve the current situation: committees could well prioritise domestic issues over EU business. The House of Commons should rather take a step-by-step approach which would give MPs time to learn on the job. The European scrutiny committee sensibly suggested that each of the departmental select committees appoint a European rapporteur. The justice committee and the business, innovation and skills committee, which have already nominated such rapporteurs, could serve as an example to others. European rapporteurs could serve as contact points for the chair of the scrutiny committee. They would also ensure that whenever the European scrutiny committee requested an opinion from a select committee on an EU document, it would get an answer. In the next parliament, all departmental select committees should appoint at least one European rapporteur.

MPs should talk to their colleagues in the House of Lords more often. There is a wide gap between MPs and members of the House of Lords in terms of their interest and expertise in European affairs. Peers who sit on the EU select committee and its six sub-committees (jointly referred to as the House of Lords EU committee) often have a better understanding of the EU than their Commons counterparts. Some, like Lord Kerr of Kinlochard (the chair of the CER’s board), worked for the British government and participated in formulating its European policy; other peers worked in the European Commission or served as MEPs. Without the constituency responsibilities of MPs, peers have more time to conduct in-depth inquiries into the EU and British policy on it.

Today, MPs and peers rarely exchange views on the EU. Nor do they co-ordinate their positions on Commission proposals. Since 2006, national parliaments have been able to provide the Commission with direct feedback on its new proposals and consultation papers. After pro-Europeans lost referendums in the Netherlands and France on ratifying the EU constitutional treaty in 2005, the European Commission realised that it needed a dialogue with national parliaments on EU business; it hoped that this would narrow the gap between national and European politics. The House of Lords has grasped the opportunity but the House of Commons has been reluctant to engage in such a dialogue with the Commission. Since December 2009, after the Lisbon treaty entered into force, parliaments have also been able to object to the Commission’s legislative proposals when they think that member-states can better tackle the subject matter themselves (the so-called subsidiarity principle). The House of Commons makes use of this procedure more enthusiastically than the House of Lords: in the years 2012 and 2013 the House of Commons questioned eight of the Commission’s proposals on subsidiarity grounds; in the same period the House of Lords raised objections to only four of them. This lack of co-ordination between the houses weakens Westminster’s ability to get the Commission to take on board British concerns.

MPs and peers should establish a joint committee on the future of the UK’s relationship with the EU, to provide parliamentary oversight in the event of a future government trying to renegotiate the terms of the UK’s EU membership. There are precedents, in the joint committees on human rights and on national security strategy. Such a committee should not replace the existing European scrutiny committee in the Commons or the EU committee in the Lords but rather complement their work. Normal EU business would carry on, despite the government’s efforts to renegotiate the terms of British membership. A joint committee could help to ensure that parliamentarians in both houses were equally well-informed and could contribute fully to a discussion of the UK’s relationship with Europe.

British parliamentarians should make better use of the experience of their colleagues in the European Parliament. The UK national parliament office in Brussels organises joint meetings for MPs, peers and British MEPs twice a year. This is not often enough to support effective co-operation on European affairs. In the German Bundestag and the Polish Sejm (the lower chamber of the Polish parliament), MEPs can participate in meetings of the EU affairs committees. But in the House of Commons only MPs can take part and speak in the scrutiny committee or on the floor of the house; MEPs can only contribute if the scrutiny committee invites them to give evidence as part of an inquiry. It would therefore be difficult to copy German or Polish practice in the UK. Individual MPs, however, should make more use of their party channels to make contact with British MEPs. MEPs could help them to understand the legislative process in Brussels, and in particular in the policy areas that the British care the most about.

Parliamentarians can do a lot to help themselves, but there also are things the British government should do to facilitate Parliament’s knowledge of and interest in EU affairs. The scrutiny committee sensibly proposed that the incoming prime minister allocate sufficient time for debates in the Commons on EU matters, within a month of a request from the committee. MPs also complained that the government refused to circulate to Parliament classified or sensitive EU documents which were relevant to the scrutiny process. The new government could organise informal briefings for MPs from the scrutiny committee and peers from the EU committee on sensitive topics. The government has held such briefings on EU proposals for international sanctions, but only for peers. Briefings should take place on so-called Privy Council terms, whereby parliamentarians promise not to reveal what they learn during the meetings.

The new government should also reinstate regular Commons debates on European Council meetings, before they take place. These were abandoned in 2010 after the Conservative-led government took office. David Cameron has usually reported back to the Commons after EU summits. If the British government wishes to renegotiate the terms of UK membership, it will be up to the European Council to decide whether to consider its proposals for reform, or not. MPs should be able to discuss this process and provide their own input before each summit.

Rather than blaming each other for Parliament’s ineffective contribution to EU policy, MPs and ministers should accept that improving parliamentary scrutiny of EU affairs requires a joint effort. MPs need to be better prepared for discussions on the UK’s approach to the EU. Any British proposal for national parliaments to have a stronger voice in the EU will be more credible if the prime minister of the day is prepared to discuss EU business more openly in Westminster.

Agata Gostyńska is a research fellow at the Centre for European reform. This insight is part of on-going research supported by a grant from the Open Society Foundations.