Merkel’s bluff shows she knows EU exit wouldn’t be a disaster

Jonathan Lindsell, 4 November 2014

The German Chancellor said that she’d be happier to see Britain leave the EU than renegotiate the fundamental freedom of movement. If Der Spiegel’s information is correct, Angela Merkel has pre-emptively vetoed renegotiation of immigration within the EU. She called such a change a ‘point of no return’. Without German support, David Cameron would achieve little: with German opposition, even less.

But Merkel makes her threat only because she knows that the basics of free trade, cross-Channel commerce without quotas or extra regulatory requirements, will continue if Britain calls her bluff and continues to push for immigration curbs to the detriment of EU membership.

If the Conservative party win the next election, their success will be judged very largely on their EU record. Altering the terms of free movement is ‘at the very heart of my renegotiation strategy for Europe,’ we already know from Cameron, while Chancellor George Osborne insists that a ‘calm and rational’ approach to migrants’ benefits rights could solve the ‘great unhappiness’ many Britons have over migration.

Germany is vulnerable. With slashed growth projections and fear of a Eurozone triple-dip, this is no time for Berlin to strike empty poses. By threatening that she’s happy to put principles above Britain’s EU inclusion, Merkel reveals her deeper understanding: the EU’s no longer that important for either country’s prosperity. She would not risk 6.2% of Germany’s export market without steely confidence that British demand would continue unabated. As Michael Burrage’s Civitas research shows, it’s perfectly possible to prosper outside the single market. Through an Association Agreement, through EFTA or through bilateral arrangements, trade could continue much as before.

However, the Sunday Times (£) reports that before exploring outright exit, Cameron’s reform attempts will stretch existing EU laws ‘to their limits’ in a last-ditch bid to be ‘German-compliant’. His previous suggestion, to limit low-skilled EEA migrants via a National Insurance number quota, failed the „Deutschen-kompatibel“ test. Presumably this is also a requirement from the Liberal Democrats – Norman Baker’s recent resignation highlighted Home Office tension over the immigration debate.

It’s notable how little Jean-Claude Juncker features in these discussions. Cameron’s latest idea shows no commission input – he wants to expel any EU migrant who cannot support themselves after three months in Britain. Think tank Open Europe proposes an EU-wide extension along similar principles, with a directive stating EU migrants shouldn’t qualify for foreign benefits until 3 years’ integration, and employers shouldn’t use immigration to undercut a native workforce.

Would either reform be enough? Ukip supporters argue that actual border caps – a Canadian or Australian system – are the only satisfactory solution. However YouGov polling indicates that 55% of voters would support continued EU membership if Cameron ‘…said that Britain’s interests were now protected.’ In the election build-up, Conservatives and Germans will be asking themselves ‘How much renegotiation is enough?’ If Merkel’s stance shows anything, the question isn’t as vital as pro-Europeans imply. Britain and Germany could do fine after an EU exit.