EU in­fight­ing shows that Scot­land should be care­ful what it wishes for

Calls for in­de­pen­dence may be back on the agenda but re­al­ity is yet to sink in for Ni­cola Stur­geon

The Daily Telegraph - Business - - Business Comment - roger boo­tle Roger Boo­tle is chair­man of Cap­i­tal Eco­nom­ics roger.boo­tle@cap­i­tale­co­nomics.com

Last week saw one ma­jor deal con­cluded, while another ap­peared to be slip­ping away. Mean­while, one po­lit­i­cal union seemed to be strength­en­ing as another seemed to be weak­en­ing. But things weren’t quite as they seemed. The deal that went ahead was be­tween mem­bers of the Euro­pean Union on a new coro­n­avirus re­lief fund. The sums in­volved looked huge – namely €750bn (£683bn).

This looks like the be­gin­ning of fis­cal union, with full po­lit­i­cal union fol­low­ing not far be­hind.

But it is just the first skir­mish. In prac­tice, the sums are not that large. The fund amounts to about 5pc of to­tal EU GDP and is to be dis­trib­uted over at least three years. And it comes with strings at­tached.

More im­por­tant than the mea­sures was the mood mu­sic. Now that the UK is out of the union, the re­main­ing mem­bers are sup­posed to be free to move mer­rily on to closer union in ac­cor­dance with every­one’s wishes, un­con­strained by the foot-drag­ging and ob­struc­tion­ism of Per­fid­i­ous Al­bion.

In fact, the sum­mit was one of the most frac­tious in the EU’s his­tory, with pres­i­dent Macron of France threat­en­ing to pull out. As it was, he ac­cused the Dutch prime min­is­ter of tak­ing up the role pre­vi­ously oc­cu­pied by David Cameron. Nor was this just a protest. It was also a warn­ing. “Look where Cameron’s be­hav­iour got him” was Macron’s mes­sage.

Macron had bet­ter be care­ful. All along, Euroscep­ti­cism has been much stronger across the EU than its lead­ers let on. It was con­ve­nient to pre­tend that this was largely a pe­cu­liar Bri­tish con­di­tion. Mean­while, it was use­ful for the lead­ers of coun­tries with strong anti-in­te­gra­tionist and Euroscep­tic ten­den­cies to hide be­hind the UK’s skirts and to keep quiet. With the UK gone, they have to fight their own bat­tles and this has forced their anti-in­te­gra­tionism into the open. And the bat­tles are go­ing to be bloody.

If the in­te­gra­tionists’ ap­par­ent vic­tory of prin­ci­ple is to mean any­thing in prac­tice then there will have to be a lot more money spent on sup­port­ing the weaker mem­bers of the union.

The req­ui­site sums are enor­mous. Italy’s GDP this year will be down 10pc – 3pc lower than when it joined the euro 21 years ago. The coro­n­avirus has hit the coun­try hard but this is not the fun­da­men­tal cause of Italy’s plight.

In due course, the Nether­lands and other fru­gal coun­tries will be asked to fi­nance the bail­ing out of a chron­i­cally weak econ­omy un­suited to be­ing in the euro. This is the fault of the EU’s in­te­gra­tionists.

Does any­one now se­ri­ously be­lieve that if the euro wasn’t al­ready here, the EU would need to in­vent it?

Mean­while, it seems that ne­go­ti­a­tions be­tween the UK and the EU over a trade deal when Bri­tain’s tran­si­tion pe­riod fin­ishes at the end of this year have not been go­ing well.

The UK Gov­ern­ment is ap­par­ently pre­par­ing se­ri­ously for a “no-deal” exit, un­der which we would trade with the EU on World Trade Or­gan­i­sa­tion terms. We def­i­nitely should be pre­par­ing for such a sce­nario, but I would not give up hope for a deal.

With the EU, the req­ui­site con­ces­sions and re­sult­ing deals typ­i­cally oc­cur at the last mo­ment.

But the most im­por­tant thing is that although a no-deal exit wouldn’t be ideal, it would be far from dis­as­trous.

It would mean that we would trade with the EU on the same terms as most of our non-EU trad­ing part­ners, in­clud­ing the United States. Any­one who thinks that this would deal a dev­as­tat­ing blow to the UK econ­omy has clearly been liv­ing on the Planet Zog for the last five months.

What­ever tem­po­rary dif­fi­cul­ties there are from a no-deal exit would be a round­ing er­ror com­pared to the dev­as­ta­tion wrought by the lock­down.

The ex­tent of the wran­gling and ill feel­ing at the EU sum­mit, cou­pled with the re­al­i­sa­tion that €750bn is a mere fleabite com­pared to what will be needed to sta­bilise the euro, should em­pha­sise that we are well out of this union of im­pos­si­bil­i­ties.

If we had re­mained, heaven knows what sums we would be obliged to cough up in fu­ture years.

This touches upon the fate of another union, namely the United King­dom. Scot­tish opin­ion polls now show sup­port for in­de­pen­dence steadily above 50pc.

The fact that Scot­land voted to stay in the EU and was out­voted by Eng­land cer­tainly isn’t help­ing.

More­over – at least as far as the pre­sen­ta­tion is con­cerned – Ni­cola Stur­geon, Scot­land’s first min­is­ter, is widely per­ceived as hav­ing had a much bet­ter coro­n­avirus cri­sis than Boris John­son. The “i-word” – in­evitabil­ity – is be­ing fre­quently heard. When it comes to eco­nom­ics and politics, I am not much fond of the i-word. And I don’t think that another ref­er­en­dum in the next few years is re­motely in­evitable – nor its re­sult if there is one.

Our exit from the EU makes the eco­nomic cost for Scot­land of leav­ing the UK much greater. What is the point of try­ing to re­join the EU – for that is what would be en­tailed – if that meant leav­ing the UK’s sin­gle mar­ket, which is much more sig­nif­i­cant for Scot­land than the bloc?

This mes­sage has still not sunk in. It is one thing for Scot­land to leave if the UK is still part of the EU.

That would con­tinue free move­ment of peo­ple, goods, ser­vices and cap­i­tal across the bor­der. But that pos­si­bil­ity is now gone for good.

Of course, there is more to life than eco­nom­ics, and when it comes to po­lit­i­cal unions, feel­ings of at­tach­ment, se­cu­rity and sol­i­dar­ity count for a lot.

Be­tween the four mem­bers of the UK, those feel­ings have been sorely tested. But just watch what is go­ing to hap­pen in the EU over com­ing months and years. The lessons will not be lost on the Scots.

Boris John­son, the Prime Min­is­ter, speaks next to a Ty­phoon fighter jet at RAF Lossiemout­h dur­ing a visit to Scot­land last week

Newspapers in English

Newspapers from UK

© PressReader. All rights reserved.