Lord Mandelson: austerity means EU faces decade of unpopularity

Former EU commissioner says he expects eurozone to recover, but fears falling living standards will affect European unity

Continued austerity and falling living standards mean the European Union is facing a decade of further unpopularity and strains on its unity, requiring urgent reforms to survive, according to Lord Mandelson, the former EU commissioner.

He is one of a group of Britain’s prominent pro-European grandees deeply aware that the Conservative leadership is as much reflecting as leading a shift away from Europe in British popular opinion, partly due to the euro’s travails and partly due to a long-term ambiguity about the need for Europe.

This group, interviewed by the Guardian before David Cameron’s landmark speech on Europe next month, may be united in their opposition to Cameron’s negotiating tactics, and its diplomatic dangers, but they insist they are not complacent about the EU as an institution.

Mandelson’s assessment is the most stark: “I think that the eurozone is on life support and that cures for its ills can be found eventually. I’m more worried about the politics of austerity Europe, the huge adjustment that Europe is going to have to make in the coming decade and beyond in terms of its financing and its living standards and the impact this is going to have on European unity and solidarity.

“Now this goes to the heart of the EU’s political legitimacy because whether you are from an austerity member state or a bailout country, you are likely to be dissatisfied for a long time to come with the economic state of Europe and the price you are paying for Europe’s indebtedness and its relative failure to generate the wealth it needs to pay for its high standard of living. That’s going to have a negative political impact on how people regard the EU and its institutions and that’s what we’ve got to understand and address. These raise real issues and challenges of political management and accountability of Europe’s affairs. And we’ve got to pay as much attention to what needs to be done politically to repair Europe as we do economically and in the running of the eurozone. These are very deep questions for the EU’s future and they’re not going to be solved by a touch more austerity here or a further bailout there.”

Lord Brittan, one of Mandelson’s predecessor’s as EU trade commissioner, also acknowledges “there has been a major shift in public opinion here about Europe”. He says: “The Eurosceptics have had the public space to themselves to a greater extent than one would have wished. The pro-Europeans have been too content to win the actual decisions.

He says the situation may have come about under John Major. When he was prime minister “there was a group of people who were a minority, but his Commons majority was not sufficiently great for it to be in his interests to rub their noses in it too much. He had to win. The result of that was that the public space was filled in the way it was.”

Lord Heseltine, possibly the most prominent pro-European voice in the Conservative party, attaches the strength of Euroscepticism to Britain’s different wartime experience. In mainland Europe, he says, “men and women who had come out of the prisoner of war camps and the resistance movements felt deeply war must never happen again. Britain’s position at that time was a very different one. First, we hadn’t lost, we had won. Secondly, we had stood alone. Thirdly, we were the partners, as we perceived, of the United States of America. And fourthly we were the head of the greatest empire and commonwealth the world had ever seen. This was not a position from which you threw in your lot with people from a totally different psychological experience.”

But he believes the poison really entered the British political system when Margaret Thatcher signed the Single European Act in 1986, creating a single market across Europe. He said this occurred at a time when “the economy at the end of the 80s went sour. It was a time when everybody was looking for alibis, escape clauses, someone to blame, and it coincided with the introduction to this place of hundreds of regulations in order to comply with the directives of Brussels. Well, this is a formula for political tension. And so a coalition of national press, plus the aggrieved industrial commercial world, turned the Brussels machine into a hate character and I think that was the huge turning point when the resentments became bitter and entrenched. Where I think there is a degree of political responsibility is that instead of explaining that this was the inevitable conclusion of creating a single market of hundreds of millions of people, it was all too easy for the politicians to say: ‘Oh, it’s all those foreigners, it’s all those Europeans, it’s all those bureaucrats.’ That reinforced the aggro in the system.”

Lord Kerr, the former head of the Foreign Office, admits something deep has gone wrong in the UK relationship with Europe. “These Tories are not causing public opinion to move. They are reflecting a move in public opinion which people like me who are Euro-fanatical have to admit is real. There are the standard excuses we parade, like ‘nobody speaks up for Europe, why do ministers always use Europe as an alibi, why is it always a zero-sum game where we win or we are ambushed by evil foreigners with stitch ups?”

But he says these are inadequate explanations. He argues: “I think we don’t have a narrative about the EU in Britain. We had a single market narrative which we then followed by an enlargement narrative. Although probably the guy in the Dog and Duck wasn’t awfully interested in the enlargement narrative, the political classes were on the whole. So it went quite well.

“For many Tories this turned into a call to widen rather than deepen Europe. People like me argued that’s an analytical error, that the most enthusiastic deepeners will be the new member states, and we were three-quarters right. Now the enlargement justification has vanished because in the Dog and Duck, or at least in the Tory constituency office, the enlargement that has happened has meant ‘all these horrible Latvians, Lithuanian and Polish people coming and taking our jobs’. So it is all mixed up with the immigration story.

“The idea of free movement of Turks and Balkans, people think: ‘Come on, we have had enough of that already.”

Matters have worsened with the failures of the euro. “If you go from 1999, when they kick the euro off, to late 2008, it is like the guy in the cartoon who has gone over the cliff and is still walking and hasn’t looked down and hasn’t yet fallen. I think we are all in that period. People had not noticed the design flaw.”

Mandelson, of the four, has the most developed programme of reform, but the quartet all have views.

Mandelson contends: “The commission should be shrunk and some of its working methods merged with the European council to form a full governing board of all member states and a smaller executive committee of the EU rather as the European Central Bank organises itself.

“The European commission needs to see its job as protecting the integrity and the rules of the single market and therefore the interests of those outside the eurozone as much as those inside it. The commission needs to provide the essential bridge, the institutional bridge, between the ins and outs of the eurozone, you know, locking together the two overlapping spheres of the eurozone and a single market.

“We have to re-engage national parliamentarians in Brussels alongside the European parliament, not least because a lot of the policy areas which are so relevant to Europe’s future economic success and competitiveness are domestic policy areas like education and industrial policy. And last of all I think we have to find a way of electing or getting some popular mandate for the personality who leads the EU’s governance.

Brittan throws what he describes modestly as his little pebble into the debate about Europe’s economic governance. He argues: “The real question about the fiscal pact – the successor to the stability pact – is enforceability. What happens if you don’t observe it? A financial penalty is incredible in the most literal sense of the word because it only makes things worse. My view is that the penalty should be a total, or partial, temporary loss of voting rights. That would make people really think because the people who exercise the voting rights are not the people who suffer the financial penalties. The people who exercise the voting rights are the ministers. If you are a member of a country and you go into a council meeting and you are told: ‘Sorry, null point, no vote because you are in breach of your treaty obligations in the fiscal pact,” that would have a really powerful effect. It could be a temporary or partial loss of voting rights.”

Heseltine admits to fault on both sides, including a deep British failure to recognise the influence it can still have in Brussels. He thinks that influence can be extended and sets out his own four-point plan.

Greater physical presence of more Brits in the commission; more frequent visits of ministers to fight our corner at early stages of the negotiating processes; a root-and-branch appraisal of the regulations to see that they are actually compliant with the directives and not gold plated; and a very tough line on the fact that Europe has not been able to sign its accounts.

Above all he feels Britain failed to anticipate that a later generation of German politicians would share their predecessors’ determination to make the EU venture stay the course.

He recalls: “I had a very interesting conversation with Chancellor Kohl, and this would have been in the 80s, in which he said: ‘You have to understand that I am the last generation of Germans who feel the need to make a success of this venture. There will come another generation who will take the view that we have created the most powerful economy in Europe. We have a relationship which is very much in Germans’ interest. We don’t need any longer to feel an obligation to go further and deeper.’ Now Chancellor Merkel demonstrates quite clearly that Chancellor Kohl’s view about how quickly German opinion could change was actually wrong because she has continued exactly in the tradition that all German leaders have followed since the war. Europe is going to survive, and we have to come to terms with that.

Kerr fears British influence may decline as changes to voting systems mean the eurozone can operate as a winning block. “So the Right Hon George Osborne MP will appear and read out a brilliant Treasury script on what should be done on the matters up for discussion at the EU finance ministers’ meeting. People will look out the window and be very polite and say: ‘That is jolly interesting, George thank you very much and now shall we vote.’ That is what is going to happen.”

“Then the European commission and the council will start looking like an ogre here, and what the Daily Mail says – which is not true now – about hostility to the Brits inside the institutions will start being true.”

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