THERE are two kinds of Eurosceptics. There is the pro-market, classical liberal variety: believers in the Four Freedoms – the free movement of goods, services, capital and people – across the countries of the European Union, but who oppose everything else, including political integration, the undemocratic nature of the European construct, the EU’s myriad subsidies, the euro, tax harmonisation, the EU’s growing defence and other roles, and regulatory harmonisation.

The second category of Eurosceptic shares with the first a dislike of the European institutions and the euro – but it also opposes many or all of the free-market parts, wants to allow member states to discriminate in favour of national industries or to bail out national champions, and opposes the free movement of people.

Needless to say, many people straddle both categories, especially in countries like the UK where polls show that the vast majority of the electorate is in at least some sense Eurosceptic. Thatcherite Eurosceptics, who dislike the EU for being too social-democratic, were firmly in the first category – but many have now partly moved into the second over the free movement of people, which they have started to oppose. Left-wing Eurosceptics – of which there are more than people realise – have always been in the second category: they oppose the EU for being too capitalist and often dislike free trade and free capital flows.

I remain firmly in the first camp: I want people to be able to trade and interact as freely as possible – but the creation of centralised, corporatist, increasingly powerful system of EU governance has been a deeply retrograde step. London’s prosperity is due to its embrace of capitalism and commerce and the fact that it welcomes the best and brightest talent – some of the EU’s policies have helped this, of course, but plenty of others hinder growth, jobs and competitiveness.

The second kind of Eurosceptic scored a major victory yesterday when Switzerland voted to reimpose quotas on EU immigration. The margin was wafer thin, led by German and Italian speakers, and the quotas unspecified – but the importance of this vote cannot be underestimated. Shockwaves will reverberate for years, and it may even be remembered as the day the whole European project went into reverse.

While the country isn’t part of the EU, it signed bilateral agreements with Brussels in 1999, and opened its borders to EU workers in 2002. There is little doubt that any such vote in the UK would see a much greater proportion of the public vote for quotas. The same would be true in many other countries. Direct democracy is not the friend of European integration.

UK Eurosceptics of all stripes will be watching carefully: they want to renegotiate a new relationship with the EU, and that is exactly what Swiss voters have just ordered. Many in Brussels will threaten retaliation – but that would be tantamount to self-harm, as both sides gain from free trade. The Swiss will be hit by labour shortages, which could cut growth, push up wages, inflation and interest rates, further boosting the Swiss Franc and hitting exports; the demand for housing will fall, however, which is what voters cared about.

This is the second blow to the EU in days. Germany’s constitutional court declared war on the European Central Bank’s bond-buying programme last week. The court thinks the ECB’s outright monetary transactions (OMT) programme goes beyond its mandate – as defined by the EU treaties – and that it infringes the powers of member states and violates the prohibition on monetary financing of the budget. The judges demanded safeguards, and referred the matter to the European courts. Under German law, however, its own courts remain supreme so the move should really be seen as a veiled threat to the EU authorities to amend the OMT or else. National sovereignty is back; the impact will be immense.

allister.heath@cityam.com

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