Former minister breaks with Labour stance by calling for vote on Europe and foresees fiscally federalist ‘eurozone mark two’
The pro-Europe former Labour cabinet minister Lord Mandelson will call for Britain to commit to a future referendum as the best way of re-establishing a national consensus about future relations with Europe.
On the eve of elections in France and Greece, he will also warn that the EU inevitably needs a “eurozone mark two” project which “will rest to some degree on fiscal federalism amongst its members”.
Mandelson is one of a group of Labour politicians who believe the expected election of François Hollande is a chance for Labour to re-engage with Europe.
In a speech in Oxford on Friday, the former European commissioner will stress that a referendum on Britain’s continued membership should occur only after closer fiscal union – a “eurozone mark two” – has settled, although he admits this is a way off.
But Labour up until this point has not supported any referendum, and those running the party increasingly take the view that Britain will not join a single currency in the lifetime of its current leadership.
Mandelson will say: “I believe a fresh referendum will be necessary because the political parties cannot reconcile their own differences and come to a final conclusion on their own, and nor should they.
“While the Conservative party is the home of visceral hostility towards Europe, to an extent negative feelings about Europe are now more present in all the parties. This referendum should not be held as a panicky electoral response to the rise of Ukip, as I fear might be David Cameron’s inclination. It would not be relevant until the new shape of Europe and the success or otherwise of its eurozone mark two finally emerges.”
Cameron has already come under pressure to offer a referendum on UK membership in the Conservative manifesto, as a way of luring back voters lost to Ukip.
In a frank speech, Mandelson will argue that the euro, if it is more integrated, need not break up. But fiscal union, something that is far more than a free trade area, will require a clear mandate and clear debate, he will say.
He questions whether Europeans are willing politically to sign up to such federalism: “As we are already starting to see, German largesse will not feel anything like solidarity in Athens or Madrid. And in Germany and other surplus countries the solidarity may start to look excessive and politically unsustainable.”
He concedes the transfers in power being proposed to create a fiscal compact require unprecedented solidarity, the deployment of community resources across the eurozone’s periphery that dwarfs the postwar Marshall fund and finally “the largest measure of sovereignty that European leaders have so far contemplated collectivising”.
He warns that “will require German politicians to recognise that the badly designed eurozone has brought substantial benefits for Germany in the form of suppressed exchange rates and massive export surplus, but in return [they] must accept as a compromise the cost of correcting the eurozone deep imbalances.
“From politicians in Greece, Spain, Italy, Portugal and Ireland it will require the courage and discipline to present both painful austerity and structural economic reforms for what they are: not something that is externally imposed by Brussels or Berlin but as a sovereign choice dictated by national circumstance and necessity,” he adds.
He predicts that within a decade the EU will have been rebooted, with the UK on the outside.
At some point, he suggests, “Britain will have to confront the choice between taking part in greater integration including joining the euro, or an uncertain future”.
That uncertain future he claims will set challenges for the City of London and mean the UK will have to trade with an export market over which it has no influence.
Mandelson will also refer to new Policy Network polling conducted by Populus, showing that 67% still support staying in the EU, although 80% are against joining a single currency, and 56% favour a referendum now, and 44% regard it as a distraction at this stage.
He says closer fiscal union may require structural reforms inside the EU including a president for Europe, and national parliamentarians sitting inside the European parliament.
He suggests Britain will then be confronted by a eurozone that will see itself as the core, and an outer ring of states working towards eventual membership, with a third group probably led by Britain in an annex outside as a matter of politics or policy.