A celebration or a collapse?

BY RIGHTS nest January should see a party to rival the Millennium: street celebrations, fireworks, music, the Thames a river of fire and a thrilling display of all the pomp and ceremonial of the British state.

But when the 30th anniversary of our joining the [then] European Economic Community comes round early next year, how subdued this occasion will prove. According to that most reliably pro-EU of sources, the Financial Times, the official word has gone out that any fanfare will be low key - as if there would be a problem with over-enthusiasm.

Now this is an astonishing admission. Britain’s growing economic and political integration with the EU has been the single most important political and constitutional change to Britain’s standing in the world for 300 years. It was meant to have an immediate and lasting beneficial effect on our economy and our trading relations. It has certainly had profound effects on our government, parliamentary democracy and legal sovereignty.

The EU has directly touched and affected the lives of everyone in Britain. But far from this touch enjoying deep and unqualified support, the 30th anniversary is set to expose an uncomfortable truth: that few in Britain believe we have really gained much at all.

Nor can it be said that support for ever closer union has been a late developer and is now after 30 years catching up. On the contrary. As the case for that integration has rested on a set of claimed economic and business gains, the impact on British opinion of Germany’s relentless economic decline and the policy gridlock across the Euro-zone has been all the more damaging.

Support is as lukewarm as ever. As for that once monolithic business enthusiasm for all things integration, where is it? Only last week Martin Taylor, the chairman of WH Smith and a highly respected voice on the business scene, said for Britain even to think about joining the euro "would not merely be risky but stark staring mad".

That such an unequivocal condemnation appeared in the Financial Times may be shrugged off as merely piquant were it not for this striking fact. It coincides with a near total vacuum of hope and idea among those hitherto most supportive of the EU and all that it has come to stand for. Not in parliament, nor in the Foreign Office, nor the Treasury, nor in the Cabinet Office nor in those EU-funded think tanks and policy institutes that now litter British political life, is there an inkling of an idea as to how to make the EU popular in Britain. Still less is there any clue as to how to break the economic policy gridlock across the 12 countries of the euro zone.

Calls for structural labour market reform such as those reiterated by the European Commission last week are now so tired and threadbare that their credibility has gone. No one believes a word of it - not even those who speak it.

Almost as a diversion from the policy collapse within the EU has been the re-emergence of the Franco-German pantomime horse. Germany’s chancellor Schrder, having now forgiven Chirac for throwing his support behind the losing Edmund Stoiber in the autumn election, heads a coalition too thin and diverse to undertake the reform required. Chirac, meanwhile, has resumed a posture of vain and self-important insouciance while his economy is dragged down with that of Germany.

As striking as Martin Taylor’s blunt conclusions about the euro was the analysis that accompanied it. The reality of the European Union, he wrote, "is that it has shown itself not so much resistant to economic reform as utterly unreformable, even as evidence of peril mounts. The malign grip of French state employees continues to keep what should be the richest country in Europe operating well below its potential. The Commission is weak and blunder-prone. The bear market in equities threatens to defer by a generation a market solution to the pensions time-bomb. And the German economic crisis deepens by the day."

Over the top? The economic news coming out of the Euro-zone last week fully bears out Taylor’s grim summation. Germany and France incurred public censure over their budget deficits. Ahead of a full report on Germany’s budget health due out on Tuesday, Pedro Solbes, the EU Monetary Affairs Commissioner, launched discipline action against Germany on the basis of forecasts that her budget deficit this year will hit 3.8% of GDP. France risks breaking the 3% Growth and Stability Pact limit next year.

The Commission said that economic slowdown was the main cause of the deterioration in public finances and that recovery will take longer than previously thought. It has yet again cut its growth forecast for the Euro-zone this year, this time to 0.8%, while its 2003 forecast is cut from 2.9% to 1.8%.

And just in case you thought all this too grim, in waded Christa Randzio-Plath, the chair of the European Parliament’s Economic and Monetary Affairs Committee. She warned that the Commission was being overly optimistic even with these forecasts. "I consider", she thundered, "that the forecasts are still too optimistic, especially as regards the outlook for Germany, Italy and France."

Barely had her words echoed round Brussels than news came that Germany is now teetering on the brink of a second recession in just 12 months. Growth is likely to have slowed to just 0.2% this year. Unemployment rose 24,000 last month to 4.1 million and is projected by the government to rise further next year.

Faced with this appalling picture, Britain’s pro-EU establishment has just nothing to say. Its dwindling members have watched the economic decline of Germany and the deepening slowdown across the euro zone as if in a state of disbelief and denial that the economic model into which they wished to decant the British economy has spectacularly unravelled before their eyes. They are at a complete loss to advance any coherent analysis as to why this has happened, still less any policy for getting Europe out of this mess.

The demise of the EU as a beneficial economic construct, or one in which its people had hope of better times and an end to the relentless slide of Europe on the global stage, is now at an advanced and highly critical stage. The most withering fire is now coming from its former defenders. This was how the EU’s arch apologist Philip Stephens of the Financial Times summed up matters last Friday: "the uncomfortable truth", he wrote, "is that the European Union is not working. Its economy is feeble and its voice on the international stage is weak... Europe’s economic management falls by default too Wim Duisenberg, a lame duck European Central Bank president so wedded in yesterday’s orthodoxy that he would probably refuse to cut interest rates even if prices were falling."

This is an extraordinary confession of the political bankruptcy of Europe, and a measure of how complete is the intellectual collapse of the remaining pro-Euroists in Britain.

When this busted flush gets round, there is every possibility of a ferocious policy reassessment, not just of Britain’s status as a "pre in" but of how long we can pretending we really want a place at the rotten heart of Europe. The collapse of idea in Europe may yet be the event that will snap Britain awake from a 30-year delusion.