Good news. The UK is, as of this week, less likely to leave the EU than was the case last week. Whether you consider that to be a good thing or not is another matter, but it should at least be considered an unalloyed good that British diplomacy (and Swedish too presumably), worked effectively to head-off further EU encroachment into the sovereignty of the nation-state. As usual, openeurope has a handle on the problem.

To quote from the paper:

De jure incentives to take common position: This incentive is reinforced by the way the Commission’s ECB/EBA Regulations are currently drafted. For example: • The ECB Regulation envisions the ECB acting as a coordinator of eurozone national supervisors, with the view for them to take a common position. The ECB has already dropped hints that it intends to actively discourage dissenting opinions amongst eurozone national supervisors. • Through a eurozone caucus, some member states will indirectly boost their influence as their voting weight amongst eurozone countries is proportionally much greater than in the EU-27 (EU-28 with Croatia). This is particularly true of the larger eurozone member states. • The safeguards proposed by the European Commission (see Section 5 below) leave the eurozone with the upper hand. Given that the 17 eurozone countries already constitute a simple majority, these countries would only need to seek the support of three ‘outs’ – whereas non-euro countries would need at least four countries. De facto incentives to take a common euro position: To avoid banks free-riding on taxpayers in creditor countries, the ECB, Germany and others could well insist on putting into place perfectly harmonised eurozone regulations before moving to financial backstops. This could include single-target capital requirements, rules on leverage or bonuses – and could even spill over to market access issues. In turn, this would heavily shape decisions at the EBA, as the eurozone is unlikely to accept an uneven playing field within EU financial services as a whole.De facto incentives to take a common euro position: To avoid banks free-riding on taxpayers in creditor countries, the ECB, Germany and others could well insist on putting into place perfectly harmonised eurozone regulations before moving to financial backstops. This could include single-target capital requirements, rules on leverage or bonuses – and could even spill over to market access issues. In turn, this would heavily shape decisions at the EBA, as the eurozone is unlikely to accept an uneven playing field within EU financial services as a whole. Taken together, the EBA structure will therefore significantly shift the balance of power in favour of the eurozone, at the expense of the UK and other ‘outs’.

In short, we face a serious (future) problem whereby a integrated economic union of eurozone states begin to caucus decisions against the policy consensus of the EBU, the consequence of which would be that Britain ceased to be a sovereign nation. Once we cease to be a sovereign nation we instead become a sanjak, such as Greece was under the ottomans and is again today under the troika.

This would have reduced the EU’s value in British eyes, bringing a serious disconnect between the perception of the price we pay (in constitutional terms) vs the value we derive (in economic terms).

This deep concern was communicated during the negotiation, and the proposed compromise proposed by openeurope was accepted. Congrats, we are now less likely to exit the EU entirely, because the eurozone has demonstrated a willingness to make room for non-euro nations. Once again, openeurope has the details:

Agreement requires majority amongst both “ins” and “outs”: As proposed by Open Europe, a “double majority” principle now applies. When the EBA makes decisions using QMV, (for example on technical standards), in addition to a qualified majority, there must be a simple majority of countries participating in the banking union (‘ins’) and a majority of countries that don’t (‘outs’) in favour of the measure before it can pass. This means that the “ins” (the 17 Eurozone countries plus other countries that decide to join the banking union) can never use an inbuilt majority to impose their will on the “outs”. Safeguards against discrimination: Significantly, the regulation turning the ECB into a single supervisor specifically prohibits the ECB from discriminating against a single country or a group of countries, on the basis of their membership of the Single Currency. This will strengthen the legal principle that the banking union cannot undercut the single market. Safeguards against Eurozone-bias in disputes: When the EBA reaches decisions on breaches of EU law or disputes between national supervisors, a decision has to be adopted by an independent panel of national supervisors who are not directly involved in the issue and confirmed by a simple majority of ‘ins’ and a simple majority of ‘outs’ (very close to what was proposed by Open Europe).



This is not the end of the road, there remain plenty of battles yet to fight and the outcome still might be a Britain outside the EU, but it is perhaps the end of the beginning.

Update – 29/03/2014 – Germany supports the principle of protection for euro-outs. Britain moves one step further away from Brexit. But where were the lib-dems on this…?

Update – 25/04/2014 – Now for the next two economic battles.