European Union

Demonstrators hold up placards urging a "no" vote in Sunday's bailout referendum

[UPDATE] Late on Monday, Donald Tusk, the European Council president, wrote to Alexis Tsirpas, the Greek prime minister, to inform him that his request for reconsidering an extension of his country’s bailout had been denied. We’ve obtained a copy of that letter, too, and posted it here.

In it, he notes the eurogroup of finance ministers already decided the issue, adding:

After consultations with leaders, in the absence of new elements, I see no willingness to go against the position expressed by finance ministers at their 27 June meeting.

This is likely the last chance Tsipras had to avoid having Greece’s EU bailout expire on Tuesday night. With that gone, on Wednesday his country goes without an EU safety net for the first time in five years.

There may be less than 48 hours remaining in Greece’s EU bailout, and Saturday’s decision by eurozone finance ministers not to extend the programme through next Sunday’s Greek referendum on creditors’ “final” offer was largely seen as the final nail in the rescue’s coffin.

But could it still be extended at the 11th hour?

That’s clearly the hope of Alexis Tsipras, the Greek prime minister, who has written to all eurozone heads of government asking them to reconsider the decision. We’ve obtained a copy of the letter sent to Xavier Bettel, the prime minister of Luxembourg, who takes over the EU’s rotating presidency this week. A copy of the letter is posted here.

Tsipras at Saturday's parliamentary debate in Athens on legislation to call a referendum

The decision by Alexis Tsipras to hold a referendum on the creditors’ final bailout offer may have changed the political dynamics of the standoff between Athens and its international lenders, but what’s at stake financially really hasn’t changed.

On Friday, there was a bit of buzz that creditors had tabled a new €15.3bn offer to Greece to extend the current bailout through the end of November. But in reality, there was nothing new to it at all. It is essentially all the money left in the bailout, which was presented to Athens in a more fully articulated two-page memo.

Brussels Blog got its hand on the memo, and we’ve posted it here (apologies for its slightly rumpled appearance…I put it in the wrong pocket of my briefcase).

The main question that needs to be addressed with this document is: why are creditors offering €15.3bn rather than the €7.2bn tranche that they’ve been discussing for nearly a year?

Finance minister Yanis Varoufakis, left, with Greece's negotiating team at the eurogroup

Athens’ final counterproposal to its trio of bailout monitors would re-impose many of the large-scale corporate taxes and pension contributions that creditors demanded be stripped out amid concern it would plunge Greece into a deeper recession.

According to a copy, distributed to eurozone finance ministers Thursday and obtained by the Financial Times, Athens has stuck with its demand for a one-time 12 per cent tax on all corporate profits above €500,000, a measure the government estimates will raise nearly €1.4bn by the end of next year.

In addition, it would raise employer contributions to Greece’s main pension fund by 3.9 per cent and would more slowly implement measures to raise the country’s retirement age to 67 and “replace” rather than phase out a special “solidarity grant” to poorer pensioners.

We have posted a copy of the Greek counterproposal here.

Greece’s bailout creditors – the International Monetary Fund, European Central Bank and European Commission – eliminated the one-time profits tax and the increase in employer contributions to the pension system in their offer to Athens yesterday, arguing that such heavy levies on companies would severely hit economic growth. It also pushed for more aggressive timeline for raising the retirement age and cutting the special top-up for poorer pensioners.

Still, the Greek plans contain some key concessions from the original proposal submitted by Alexis Tsipras, the Greek prime minister, to creditors in an offer made on Monday. Although legislation raising the retirement age would not be implemented until the end of October – creditors want it to kick in immediately – it accepts the 67-year retirement age should be hit by 2022. Originally, Athens was proposing 2025.

From the beginning, the European Union has been polarising in Britain. The past four decades of membership have been marked by sustained debate on the extent and shape of British participation in the European project. Some have always rejected the notion that Britain can and should integrate with the rest of Europe. Others have supported Britain’s involvement in parts of the EU, particularly in the economic sphere. Few have wholeheartedly embraced European integration to the levels historically seen in the ‘core’ of Europe.

European Council 7-8.2.2013, European Council, CC BY-NC-ND 2.0

In this respect, British reluctance to sign up to different aspects of the EU has been a function of internal prevarication on setting a foreign policy that reflects Britain’s place in the world. The question of ‘Europe’ has divided parties from within and without. Consequently, the UK’s ongoing renegotiation and eventual referendum on EU membership need to be filtered through the lens of national context. Both are the result of electoral politics in Britain rather than momentous change in the EU’s design.

The Prime Minister’s renegotiation will naturally derive its objectives from domestic political considerations. The outcome of the renegotiation, however, will depend greatly on the willingness of Britain’s European partners to work with the suggestions placed before them. This external dimension – the politics at European level – is fundamental to any deal which may be agreed.

By definition, a negotiation necessitates negotiating partners. In this case, the UK government’s main interlocutors are the governments of the other EU Member States (with a role for the EU institutions as well). These governments do not all share the same interests nor have they presented a united front against Britain in its desire to change how the EU works – far from it. A number of EU countries support some of the options for reform emanating from London. At the same time, three main points on which they broadly agree might make the renegotiation more challenging than hoped.

First, they have other pressing issues on the European agenda. The sovereign debt difficulties facing Greece, garnering great attention is recent weeks, is only one of a number of serious questions preoccupying European leaders. These pressing issues may take priority over discussing the details of the UK government’s demands to amend EU rules. Considering the tight timetable the Prime Minister has set himself, the postponing of solving the ‘British question’ to a later date could make securing a deal even more complicated.

Second, Europe’s leaders are generally happy with the EU’s architectural framework and not predisposed to making dramatic alterations. Desire to weaken the integrity of the internal market by altering the rules of the free movement of persons, for example, is minimal. Nor are other EU countries keen to see the multiplication of opt-outs or special rules just for Britain. While the will exists to work with the UK government to address its concerns, any EU changes agreed are likely to be relatively modest.

Third, the countries which share the single currency may well amend the governance of the Eurozone without changing the EU treaties. It seems unlikely, therefore, that Britain can simply tack on its demands to treaty reform certain to happen. The EU treaties could eventually be updated to incorporate the Fiscal Compact and related measures, but this prospect seems years down the line. In any case, securing treaty change in time for a referendum by 2017 would be a Herculean feat.

The obstacles to securing a substantive renegotiation within the set timetable are numerous. However, the actual renegotiation is but one part of the equation in (re)shaping Britain’s relationship with the EU. How the deal is presented at home and the arguments made in the campaign are likely to be much more influential to the referendum result. The external dimension may well determine the substance of the renegotiation, but the national context, as ever, will determine the outcome of the referendum.

This article was originally published on European Futures.

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Shortened link: britainseurope.uk/20150626

How to cite this article:

Salamone, A (2015) ‘The External Dimension to Britain’s EU Membership’, Britain’s Europe (Ideas on Europe), 26 Jun 2015, britainseurope.uk/20150626

The post The External Dimension to Britain’s EU Renegotiation appeared first on Ideas on Europe.