It seems rather likely that the present turbulence in the Eurozone will require permanent institutional changes to the EU. If the Euro is not separated into two currencies (one for the stable core and one for the dodgy periphery) there will have to be treaty changes to allow more centralised control on the borrowing and taxation of Eurozone states. This would require changes to the European treaties which would require the consent of the United Kingdom. The coalition with the Liberal Democrats complicates matters, but it is not impossible that the United Kingdom could drive a very hard bargain on this one. The level of integration likely to be proposed is such that none of the mainstream parties in Britain would feel comfortable espousing it. This means that the situation where Britain is out of the Euro but retains the option of going in may soon pass. It may soon be the case that it is the settled policy of the United Kingdom’s political caste that the price in terms of sovereignty demanded by Euro-membership is too high. This would mean that a two-tier (no longer a two-speed) Europe will have to be institutionalised. It is therefore entirely reasonable for Britain to remove herself from certain areas of EU activity that have been unhelpful, but which hitherto have been accepted as the price to be paid to stay on board the train. If Britain has reached its destination as far as European integration is concerned then that price need no longer be paid. The Common Agricultural Policy, the Common Fisheries Policy, the jurisdiction of the EU in Social Affairs and in matters related to Justice and Home affairs could all potentially be ditched.
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But this creates a problem. It would push Britain far more towards the status of an EEA country how could she then continue to contribute to the core institutions by electing MEPs, nominating Commissioners and sitting on the Council of Ministers? Perhaps in Europe the solution which has been avoided in Westminster could be adopted whereby British MEPs (and those of any other country which chose to be permanently outside the Eurozone) would simply have no vote on these matters. This is already somewhat the procedure in regard to the Euro and the Council of Ministers (Council of the European Union). But it is hard to see how Britain could withdraw from all the areas that it would suit us to abandon and still nominate a Commissioner and if we didn’t nominate a Commissioner we might as well actually leave the EU and just be part of the EEA. That would certainly be too dramatic a move for the Liberal Democrats and a number of others. On the other hand it would have the immense advantage of repatriating the majority of legislative powers to the British Parliament and slowing or even reversing the cancer of gold-plated statutory instruments.
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Strangely this sort of structure was talked about extremely early in the history of the European Communities when the European Coal and Steel Community looked set to be complimented by a European Defence Community and a European Political Community. There was then some discussion of whether these bodies could share institutions with the Council of Europe so that the non-federally minded countries like Britain would still share a forum for discussion and common action (if desired) with the ECSC Six. The more enthusiastic federalists pushed instead for an all-or-nothing deal and the Council of Europe was permanently sidelined. One problem with reviving this proposal, or (in name or fact) becoming part of the EEA is the historical baggage. It would essentially be an admission that we really shouldn’t have joined the EEC in the first place. There are enough politicians left in Parliament for whom that would be a very bitter pill to swallow to make it difficult. Additionally the European bureaucracy itself while happy to rid itself of the dead weight of Euro-sceptic Britain would be very nervous of the example of a major player leaving the European Union. If Britain prospered outside the EU (or outside its central structures) the temptation might grow among the disfranchised core-EU populations, with their ‘No’ votes bypassed or ignored, to join Britain on the outside. The Commission will not be oblivious to this danger it may intend to do everything it can to sabotage the prospects of a semi-detached Britain and for the reasons already mentioned it will have allies inside the government.
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On the other hand, if Cameron wants an overall majority, he could use any renegotiation precisely as an opportunity to pick a fight with the Lib Dems. He could secure ideal terms of reduced membership and then, when the Liberals refuse to accept it, go to the country promising a referendum on the re-negotiated terms if he is returned with an overall majority. It would be a huge risk but it would have historic consequences for Britain, Europe and the Tory Party. It might, if he pulled it off, have very positive consequences for all three.

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