It’s not a fiscal union and Cameron didn’t veto it

A fiscal union would have transfers from various parts of the union to various other parts over the business cycle.  A guarantee to stand behind somebody’s debt while simultaneously insisting that you’ll never actually need to cough up a cent because you’ve made them pinky swear is not a fiscal union.

A veto stops a thing from happening (think of the UN Security Council).  The fiscal compact is going to go ahead, just without Britain.  Therefore, Britain did not veto it; they declined to take part.

That is all.


Okay, that isn’t quite all.  Just to be clear, I think that Cameron did the wrong thing.  I believe that, at a minimum, he should have committed to bringing the proposal to the UK parliament.  It may well have been voted down at that point, but nevertheless it should have happened.  Parliament is sovereign in the UK.  This was a serious proposal with potentially significant consequences from either agreeing to it or walking away from it; the people of Britain deserved to have their elected representatives decide.

I am undecided on whether signing up to the pact would be in the best interests of the UK.

4 Responses to “It’s not a fiscal union and Cameron didn’t veto it”

  • Yes and no. I see what you are saying, but it’s really not the point. What Cameron vetoed may not have been a fiscal union, but he did veto the EU evolving into something more than it currently is. Instead his veto shaped the future European project into something else – something else without Britain in it.

    I am not attaching any judgement to that, but it was a veto. Maybe not a veto against the fiscal union, because maybe that was never really on offer, but a veto against further integration and a veto against the European project the way many Europeans see it.

  • Hi Miriam,

    I don’t see it as a veto by my reading of the definition of the word.

    The European Project is now and always has been a series of overlapping layers (I count at least eight). The new pact will simply add to that list. The success or failure of the pact was never going to rely on Britain’s involvement, so Cameron’s actions cannot be said to prevent or prohibit the pact in any meaningful sense. He certainly didn’t overrule the decision of the other heads of government.

    For the curious, here are the eight current layers that I can think of (suggestions for any more are welcome):

    The Council of Europe (which houses the European Court of Human Rights)
    The North Atlantic Treaty Organisation (NATO)
    The European Free Trade Association (EFTA)
    The European Economic Area (EEA)
    The Schengen Area
    The European Union (EU)
    The EU Custom Zone
    The Euro zone

    Here is a Venn diagram of most of them. None of those groups has the same membership as any other group.

    Also: See my update to the main post.

  • I’ll buy that it wasn’t a veto (precisely) but the EU already transfers vast amounts of money around the union in the form of grants, the common agricultural policy, and so on. Adding constraints on the spending of the states – well it may not be good fiscal policy, but it sure isn’t fiscal independence.

  • Adam,

    I agree with you completely! However, it’s worth noting that those existing transfers are designed to either combat long-term structural issues (e.g. southern Italy) or to prevent the adoption of efficiencies of scale (i.e. the CAP). Nevertheless, that they exist at all should, in principle, make it easier to set up a business cycle-related transfers. As a general rule, I am skeptical of transfers to fight long-term issues and strongly supportive of transfers to fight cyclical slumps.

    But all of that is quite a separate discussion from the idea of imposing tighter constraints on (aggregate) fiscal spending. I think I probably support the idea of those constraints because they would reduce the probability or at least the severity of the Great Sovereign Debt Crisis Of 2025. However, I do not necessarily agree that they would help in dealing with the Really Quite Awful Sovereign Debt Crisis Of 2010/2011.

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