Praise for The Trouble with Europe I recommend our diplomats and ministers read this book: it will provide them with an intellectual backbone This will be the essential vade mecum if and when a referendum campaign takes place The part of Bootle’s book in which he analyses the pros and cons of British exit from the EU will be the most influential On the big calls [Bootle] has a spectacularly good record He warned about the bubble in US real estate which led to the credit crunch Earlier, he forecast the collapse of the dotcom boom Most creditably of all, back in 1992 he identified that the pound would be forced out of the ERM – and that this would be a good thing for the British economy His latest book is all of a piece with that prescient judgment of more than 20 years ago —Dominic Lawson, The Sunday Times Bootle is right on every count —Larry Elliott, The Guardian Bootle writes with energetic prose and makes some good points His discussion of European monetary union is cogent The enterprise was unnecessary and it was embarked on too early and with insufficient preparation It was an integration too far and too soon Bootle is an accomplished economist whose The Trouble with Markets provided a penetrating analysis of the origins of the financial crisis In The Trouble with Europe, he asks what has gone wrong with the EU, suggests why reforms are unlikely to happen and maps out a fresh start for UK–EU relations —Financial Times 969NN_tx.indd 18/03/2016 08:50 An outstanding, grown-up account of the failures of the European Union Bootle is certainly no little Englander, but his argument is calm, conversational, rigorous and – quite remarkably for an economist – entirely free of bafflegab Engaging and absorbing, here is an eye-opening book that will inspire you to think through the issues clearly – without starting a saloon-bar brawl —The Daily Telegraph Roger Bootle perceptively analyses what is wrong with the European Union as presently constituted, both politically and economically; what reforms are needed to make it wise for the UK to remain a member; and how we can most sensibly conduct ourselves outside the EU, should those reforms not be undertaken It is essential background reading for any future in/out referendum —Rt Hon Nigel Lawson, former Chancellor of the Exchequer As I have come to expect from Roger Bootle, he gets to the heart of the matter with crystal-clear analysis and punchy comment It’s the best book yet on the European Union’s dysfunctionality —Jeff Randall, Sky News business presenter Brilliant, albeit radical solutions One of the most thoughtful accounts that I have yet read about the European question —Independent on Sunday Here it is – a book for every faint-heart who thinks this country could never prosper outside the European Union A timely and balanced analysis —Boris Johnson, Mayor of London 969NN_tx.indd 18/03/2016 08:50 This is a credible plan for life outside Europe and deserves to be widely read The Week – Business Books of the Year Roger Bootle’s well-informed and rigorously-argued book brutally exposes the problems besetting Europe and Britain’s position within – and conceivably outside – the European Union It should be required reading for all those preparing to vote —David Marsh, Co-chairman of OMFIF, and author of Europe’s Deadlock A timely and balanced analysis of the contradictions inherent in what has become the European Union, driven not by ideology but by rational economic analysis It provides a chronological context, pursues some historic comparisons and concludes with a variety of options both for the EU generally and the UK specifically Bootle recognises that the political will of the elites is never sufficient to overcome economic reality and the voice of the people —Gisela Stuart, Labour MP for Birmingham Edgbaston – Bartley Green, Harborne and Quinton Roger Bootle manages to weave the economic, political and diplomatic aspects of the European Union’s current problems into a compulsively readable analysis which should be of engrossing interest to europhiles and eurosceptics alike —William Keegan, Senior Economics Editor, The Observer, and author of The Prudence of Mr Gordon Brown 969NN_tx.indd 18/03/2016 08:50 [Roger Bootle] has a distinguished (and, for an economist, unusual) record of being right on the main issues – famously predicting in 1990 that the financial climate in Europe and North American would face ‘the death of inflation’ —Andrew Hilton, Director, Centre for the Study of Financial Innovation This is an important book Anyone who wishes to debate this issue seriously will have to read it Bootle has done the world a service —John Llewellyn, Llewellyn Consulting and former Chef de Cabinet to the Secretary-General, Organisation for Economic Co-operation and Development 969NN_tx.indd 18/03/2016 08:50 The Trouble with Europe Why the EU Isn’t Working What Could Take Its Place How the Referendum Could Change Europe Third Edition Roger Bootle 969NN_tx.indd 18/03/2016 08:50 This third edition first published by Nicholas Brealey Publishing in 2016 An imprint of John Murray Press An Hachette UK company © Roger Bootle 2014, 2015, 2016 The right of Roger Bootle to be identified as the author of this work has been asserted in accordance with the Copyright, Designs and Patents Act 1988 All rights reserved No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording and/or o therwise without the prior written permission of the publishers This book may not be lent, resold, hired out or otherwise disposed of by way of trade in any form, binding or cover other than that in which it is published, without the prior consent of the publishers A CIP catalogue record for this title is available from the British Library ISBN 978-1-85788-655-9 eISBN 978-1-85788-967-3 Printed in the UK by Clays Ltd, St Ives plc John Murray Press policy is to use papers that are natural, renewable and recyclable products and made from wood grown in sustainable forests The logging and manufacturing processes are expected to conform to the environmental regulations of the country of origin John Murray Press Carmelite House 50 Victoria Embankment London EC4Y 0DZ Tel: 020 3122 6000 Nicholas Brealey Publishing Hachette Book Group Market Place Center, 53 State St Boston, MA 02109, USA Tel: (617) 523 3801 www.nicholasbrealey.com 969NN_tx.indd 18/03/2016 08:50 Contents Acknowledgements viii Preface to the Third Edition x Introduction: The Trouble with Europe PART I: PAST HISTORY AND PRESENT PURPOSE 5 How the EU Came into Being and Why The Trouble with the EU as a Political Institution 38 PART II: THE ECONOMICS OF THE EU 77 Has the EU Been an Economic Success? 78 The Trouble with the Euro 113 Policies to Prevent an Economic Disaster 145 Europe’s Economic Future 170 PART III: REFORM, DISSOLUTION OR DEPARTURE 195 Could the EU Willingly Embrace Reform? 196 What Could Force Radical Change? 217 The Costs and Benefits of Leaving the EU 243 10 Possible Arrangements to Take the EU’s Place 289 11 The Referendum – and Other Existential Challenges 320 Postscript: History Moves On 336 Glossary 337 Selected Bibliography 340 Notes 345 Index 348 969NN_tx.indd 18/03/2016 08:50 Acknowledgements I nevitably, I owe many people debts of gratitude The book was inspired by David Green of the think tank Civitas, which generously provided a research grant For both David’s inspiration and encouragement and Civitas’ grant, I am extremely grateful It was David who galvanized me into writing the book Meanwhile, Civitas’ grant enabled me to employ research assistants Melanie DeBono, Sam Dickens and Konrad Malinowski, who greatly increased my productivity and allowed me to finish the book that much more quickly I am also grateful to the think tank Open Europe for permission to use an adapted version of one of its charts as Table 9.1.1 I also owe a debt to The Daily Telegraph, for which I write a weekly column, published on Mondays, for permission to draw on some of the material that first appeared in those columns and for continuing to give me a platform from which to air my developing views on Europe and other subjects In many ways this book is the culmination of the ‘conversations’ I have been having with Telegraph readers over a number of years My good friend Leonard Lipman provided muchneeded encouragement and solace when my general confidence and belief in the book flagged Without him, I don’t think the book would have been completed Thanks are also due to Joaly Smith, Faith Elliott, Hayley Charlick and Suhayla Egan for organizing the various versions of the typescript and to Ben Blanchard, Alexander Burgess, Rebecca Heywood, Nina Loncar, Alice Major and Helena Patterson for help with the maps and charts included in the book Special thanks are due to my PA, Sam 969NN_tx.indd 18/03/2016 08:50 Acknowledgements ix Howard-Carr, not only for help with the typescript but also for organizing me and helping to keep Capital Economics going while I was writing the book Her support for me has been invaluable As with my last three books, I received helpful comments, guidance and criticism from the editorial team at Nicholas Brealey Several other people helped me by reading early drafts and making critical, but helpful, suggestions I should especially mention David Barchard, Tony Courakis, David Green, Jonathan Lindsell, John Llewellyn, George de Nemeskeri-Kiss, Robert Rowthorn, Christopher Smallwood and Richard Thoburn Several colleagues at Capital Economics also read and commented on early drafts: Paul Dales, Mark Harris, Julian Jessop, Jonathan Loynes, Ben May and Mark Pragnell Sam Tombs was also very helpful in digging out data I am grateful to them all, not only for their help with the book but also for their hard work at Capital Economics – especially while I was preoccupied with The Trouble with Europe Last but not least, I must thank my family, who have had to put up with another period of my absorption in writing a book As always, none of the above is responsible for any errors of omission or commission These remain the responsibility of the author alone Roger Bootle London, March 2016 969NN_tx.indd 18/03/2016 08:50 Glossary 339 NATO North Atlantic Treaty Organization This commits member countries, which include most of western Europe and the US, to mutual defence OECD Organisation for Economic Co-operation and Development OMTs Outright Monetary Transactions, the policy of the ECB standing ready to purchase the bonds of troubled members of the eurozone, potentially without limit The policy was announced in July 2012, but by the end of 2013 it had not yet been implemented Open Europe A British-based think tank Optimum Currency Area The extent of a group of countries or regions that, according to certain theoretical criteria, can best operate with a single currency rather than each country or area having its own currency Productivity The amount of output produced in a given time per unit of inputs Productivity is often measured in relation to the input of labour, when it means the level of output produced per capita Review of Competences A major research initiative announced by the British government in July 2012, consisting of a range of reports on a wide variety of subjects The full range of reports is planned to be available by autumn 2014 Schengen The agreement signed in 1995 that allows travel without passport control in various European countries Single Market A system that combines both free trade between members and the common imposition of agreed standards and regulations across all member countries The European Single Market was established in 1992 Stability and Growth Pact An agreement put in place in 1997 in order to restrain the government budget deficits of members of the eurozone Subsidiarity The principle that within the EU decisions should be taken as close to the citizen as possible Target Balances The claims on or obligations of one central bank or other central banks within the eurozone under the clearing system known as Target The German Bundesbank has substantial claims on other central banks Tariffs A tax on imports levied by the importing country Treaty of Rome Signed in 1957, this established the European Economic Community (EEC), which evolved into the European Union TTIP Transatlantic Trade and Investment Partnership This is still under negotiation between the EU and the US, but if successful it would establish a north Atlantic free trade area WTD Working Time Directive, which, among other things, lays down maximum daily and weekly working time restrictions WTO World Trade Organization, established in 1995 as the successor organization to GATT 969NN_tx.indd 339 18/03/2016 08:50 Selected Bibliography Acemoglu, D., & Robinson, J (2012) Why Nations Fail: The Origins of Power, Prosperity and Poverty, London: Profile Alesina, A., & Spolaore, E (1997) On the number and size of nations, Quarterly Journal of Economics, 112(4): 1027–56 Alesina, A., & Spolaore, E (2003) The Size of Nations, Cambridge, MA: MIT Press Alesina, A., Angeloni, I., & Schuknecht, L (2001) What Does the European Union Do? NBER Working Paper 8647, Cambridge, MA: National Bureau of Economic Research Bannerman, D.C (2013) Time to Jump: A Positive Vision of an Independent Britain Outside the EU in an EEA Lite Agreement, Epsom: Bretwalda Books Barro, R.J (1991) Small is beautiful, Asian Wall Street Journal, October 11 Becker, G.S (2005) Response on small is beautiful, BeckerPosner blog, 22 April, http://www.becker-posner-blog com/2005/04/response-on-small-is-beautiful-becker.html, viewed on 11 September 2013 Becker, G.S (2005) Why small has become beautiful, BeckerPosner blog, 17 April, http://www.becker-posner-blog com/2005/04/why-small-has-become-beautiful-becker.html, viewed on 11 September 2013 Becker, G.S., & Mulligan, C.B (2003) Deadweight costs and the size of the government, Journal of Law and Economics, 46(2): 293–340 Booker, C (2001) Britain and Europe: The Culture of Deceit, London: The Bruges Group Booker, C., & North, R (2003) The Great Deception: The Secret History of the European Union, London: Continuum Booth, S., & Howarth, C (2012) Trading Places: Is EU Membership Still the Best Option for UK Trade? London: Open Europe Buchan, D (2012) Outsiders on the Inside: Swiss and Norwegian Lessons for the UK, London: Centre for European Reform Burrage, M (2014) Where’s the Insider Advantage? London: Civitas 969NN_tx.indd 340 18/03/2016 08:50 Selected Bibliography 341 Cameron, D (2013) EU speech at Bloomberg, https://www.gov uk/government/speeches/eu-speech-at-bloomberg, visited 31 January 2014 CBI (2013) Our Global Future: The Business Vision for a Reformed EU, London: Confederation of British Industry Charter, D (2012) Au Revoir, Europe: What if Britain left the EU? London: Biteback Publishing Chevènement, J.P (2013) 1914–2014: L’Europe sortie de l’histoire? Paris: Fayard Congdon, T (2004) Will the EU’s Constitution Rescue Its Currency? London: The Bruges Group Congdon, T (2009) The City of London under Threat: The EU and Its Attack on Britain’s Most Successful Industry, London: The Bruges Group Congdon, T (2012) How Much Does the European Union Cost Britain? Newton Abbot: UKIP Connolly, B (2012) The Rotten Heart of Europe, London: Faber and Faber Dixon, H (2014) The In/Out Question, London: Scampstonian Dustmann, C., & Frattini, T (2014) The fiscal effects of immmigration to the UK, Economic Journal, 124(580): F593–F643 Eichengreen, B., & Boltho, A (2008) The Economic Impact of European Integration, London: Centre for Economic Policy Research Erickson, J (2004) Size Matters, review of The Size of Nations by A Alesina & E Spolaore, SAIS Review of International Affairs, 24(2) Fresh Start Project (2013) Manifesto for Change: A New Vision for the UK in Europe, London: Fresh Start Project, http:// www.eufreshstart.org/downloads/manifestoforchange.pdf, visited 31 January 2014 Gamble, A (2003) Between Europe and America: The Future of British Politics, Basingstoke: Palgrave Macmillan George, S (2008) An Awkward Partner: Britain in the European Community, 3rd edn, Oxford: Oxford University Press Giannakouris, K (2008) Ageing Characterises the Demographic Perspectives of the European Societies, Luxembourg: Eurostat European Communities Giddens, A (2014) Turbulent and Mighty Continent: What Future for Europe? Cambridge: Polity Press Grant, C (2008) Why Is Britain Eurosceptic? London: Centre for European Reform 969NN_tx.indd 341 18/03/2016 08:50 342 The Trouble with Europe Grant, C (2013) How to Build a Modern European Union, London: Centre for European Reform Green, D (2013) What Have We Done? London: Civitas Green, D (2014) The Demise of the Free State, London: Civitas Hannan, D (2012) Switzerland is a more attractive model than Norway, but Britain could better than either, Daily Telegraph, 15 December Harari, D., & Thompson, G (2013) The Economic Impact of EU Membership on the UK, London: House of Commons Library Heisbourg, F (2013) La fin du rêve européen, Paris: Stock Hewish, T., & Styles, J (2012) Common-trade, Common-growth, Common-wealth, Cheltenham: The Hampden Trust Hindley, B., & Howe, M (2001) Better Off Out? The Benefits or Costs of EU Membership, London: Institute of Economic Affairs HM Government (2013) Review of the Balance of Competences between the United Kingdom and the European Union: The Single Market, July HM Treasury (2005) The Economic Effects of EU Membership for the UK, https://www.gov.uk/government/uploads/ system/uploads/attachment_data/file/220965/foi_ eumembership_presentation.pdf, visited 31 January 2014 Howell, D (2014) Old Links and New Ties: Power and Persuasion in an Age of Networks, London: I.B Taurus Johnson, J (2012) Britain Must Defend the Single Market, London: Centre for European Reform King, A., & Crewe, I (2013) The Blunders of Our Governments, London: Oneworld Publications Kremer, M., & Parkes, R (2010) The British Question: What Explains the EU’s New Angloscepticism? Berlin: Stiftung Wissenschaft und Politik, Berlin Lea, R (n.d.) Britain’s Contributions to the EU: How to Save £5bn, Minimum, London: The TaxPayers Alliance Liddle, R (2014) The Europe Dilemma: Britain and the Drama of EU Integraton (Policy Network), London: I.B Tauris Lindsell, J (2014) Softening the Blow: Who Gains from the EU and How They Can Survive Brexit, London: Civitas Llewellyn, J., & Westaway, P (2011) Europe will work – But it needs to strengthen its governance, fix its banks, and reform its structural policies, Nomura Global Economics, March 969NN_tx.indd 342 18/03/2016 08:50 Selected Bibliography 343 Mansfield, I (2014) A Blueprint for Britain: Openness not Isolation, London: IEA Marsh, D (2011) The Euro: The Battle for the New Global Currency, New Haven, CT: Yale University Press Marsh, D (2013) Europe’s Deadlock: How the Euro Crisis Could Be Solved – and Why It Won’t Happen, New Haven, CT: Yale University Press Milne, I (2004) A Cost too Far? An Analysis of the Net Economic Costs and Benefits for the UK of EU Membership, London: Civitas Milne, I (2007) Lost Illusions: British Foreign Policy, London: The Bruges Group Milne, I (2011) Time to Say No: Alternatives to EU Membership, London: Civitas Milne, I (2013) The British car market and industry, Civitas Review, 10(1) Minford, P (1992) The Cost of Europe, Manchester: Manchester University Press Minford, P (1999) So what NAFTA then? Daily Telegraph, 19 July, www.euro-know.org/europages/telegraph/dt990719 html, viewed on 12 November 2013 Minford, P (2006) Measuring the economic costs and benefits of the EU, Open Economics Review, 17 Minford, P., Mahambre, V., & Nowell, E (2005) Should Britain Leave the EU? An Economic Analysis of a Troubled Relationship, Cheltenham: Edward Elgar Publishing North, D (1991) Institutions, Journal of Economic Perspectives, 5(1): 97–112 North, D.C., Wallis, J.J., & Weingast, B.R (2013) Violence and Social Orders: A Conceptual Framework for Interpreting Recorded Human History, New York: Cambridge University Press Oliver, T (2013) Europe without Britain: Assessing the Impact of the European Union of a British Withdrawal, Berlin: Stiftung Wissenschaft und Politik Olson, M (1974) The Logic of Collective Action: Public Goods and the Theory of Groups, Cambridge, MA: Harvard University Press Olson, M (1984) The Rise and Decline of Nations: Economic Growth, Stagflation and Social Rigidities, New Haven, CT: Yale University Press 969NN_tx.indd 343 18/03/2016 08:50 344 The Trouble with Europe Pain, N., & Young, G (2004) The Macroeconomic Impact of UK Withdrawal from the EU, London: National Institute of Economic and Social Research Peet, J., & La Guardia, A (2014) Unhappy Union: How the Euro Crisis – and Europe – Can Be Fixed, London: Profile Persson, M (2013) Hey Berlin, this is what an EU without Britain would look like, Daily Telegraph, June Portes, J (2013) Commentary: The economic implications for the UK of leaving the European Union, National Institute Economic Review, 226 Posner, R.A (2005) The size of countries, Becker-Posner blog, 17 April, http://www.becker-posner-blog.com/2005/04/ the-size-of-countriesposners-comment.html, viewed on 11 September 2013 Siedentop, L (2001) Democracy in Europe, New York: Columbia University Press Smallwood, C (2010) Why the Euro-zone Needs to Break Up, London: Capital Economics Smith, A (2011) The Theory of Moral Sentiments, Seattle, WA: Gutenberg Publishers (Reprint of 1759 London edition.) Van Middelaar, J (2013) The Passage to Europe: How a Continent Became a Union, New Haven, CT: Yale University Press Vaubel, R (1995) The Centralisation of Western Europe: The Common Market, Political Integration and Democracy, London: Institute of Economic Affairs Vaubel, R (2009) The European Institutions as an Interest Group: Dynamics of Ever-Closer Union, London: Institute of Economic Affairs 969NN_tx.indd 344 18/03/2016 08:50 Notes Stephen Booth and Christopher Howarth (2012) Trading Places: Is EU Membership Still the Best Option for UK Trade? London: Open Europe Sources: Worldology; Hitler Historical Museum; History Place; Jean-Jacques Arzalier (2000) The campaign of May–June 1940, the losses? in C Levisse-Touzé (ed.) La Campagne de 1940, Paris: Editions Tallandier; and John Ellis (1993) World War 2: A Statistical Survey, New York: Facts on File Charles Moore (2013) Margaret Thatcher: The Authorised Biography, Vol One: Not for Turning, London: Allen Lane Douglass North (1991) Institutions, Journal of Economic Perspectives, 5(1): 97–112 Charles Grant (2013) How to Build a Modern European Union, London: Centre for European Reform I am grateful to Christopher Smallwood for emphasizing this For a brief guide to the evolution of the English constitution and the gradual rise of parliament, see David Green (2013) What Have We Done? London: Civitas See Anthony King and Ivor Crewe (2013) The Blunders of Our Governments, London: Oneworld Publications World Trade Organisation, EU Trade Policy Review 10 R Allen, M Gaiorek and A Smith (1996) Trade Creation and Trade Diversion Summary, Single Market Review Series, Subseries IV: Impact on Trade and Investment, Luxembourg: European Commission; S Booth and C Howarth (2012) Trading Places: Is EU Membership Still the Best Option for UK Trade? London: Open Europe; A.M El Agraa (2011) The European Union Economics and Policies, 9th edn, Cambridge: Cambridge University Press; European Commission (2011) External and Intra-EU Trade: A Statistical Yearbook, Luxembourg: EuroStat; Y Kandogan (2005) Trade creation and diversion effects of Europe’s regional liberalization agreements, Working Paper No 746, Ann Arbor, MI: William Davidson Institute 11 Open Europe Briefing Note, Another 50 Examples of EU Waste, 10 November 2010 969NN_tx.indd 345 18/03/2016 08:50 346 The Trouble with Europe 12 According to a report in The Guardian on 18 September 2013 13 See R.J Barro (1991) Small is beautiful, Asian Wall Street Journal, October 11; A Alesina and E Spolaore (2003) The Size of Nations, Cambridge, MA: MIT Press; J Erickson (2004) Size matters, review of The Size of Nations by A Alesina & E Spolaore, SAIS Review of International Affairs, 24(2); G.S Becker (2005) Response on small is beautiful, Becker-Posner blog, 22 April and Why small has become beautiful, Becker-Posner blog, 17 April; A Alesina, I Angeloni and L Schuknecht (2001) What Does the European Union Do? NBER Working Paper 8647, Cambridge, MA: National Bureau of Economic Research 14 David Gilmour (2012) The Pursuit of Italy: A History of a Land, Its Regions and Their Peoples, London: Penguin 15 Ibid 16 The Financial Times, October 2013 17 The Daily Telegraph, October 2013 18 Reported in The Financial Times, 22 June 2013 19 Fresh Start Project (2013) Manifesto for Change: A New Vision for the UK in Europe, London: Fresh Start Project, http://www.eufreshstart.org/downloads/manifestoforchange.pdf 20 The Daily Telegraph, October 2013 21 Office for Budget Responsibility and HM Treasury, December 2014 22 See Global Britain Briefing Note No 64, The RotterdamAntwerp Effect and the Netherlands Distortion, published at www.globalbritain.org 23 I have taken these figures, and the ones that follow later in this section, from Michael Burrage (2014) Where’s the Insider Advantage, London: Civitas 24 Burrage, op cit 25 For a succinct and informative short study of the position of both the UK car market and the UK car industry, see Ian Milne (2013) The British car market and industry, Civitas Review, 10(1) 26 Burrage, op cit 27 The GFCI is a widely quoted ranking of financial centres produced by Z/Yen It draws on two separate sources of data: responses to an online survey; and instrumental factors (external indices produced by organizations such 969NN_tx.indd 346 18/03/2016 08:50 Notes 28 29 30 31 32 33 34 969NN_tx.indd 347 347 as the World Bank, OECD, BIS and numerous private companies) Research conducted semi-annually by Oxford Economics Capital Economics (2014) NExit – Assessing the Economic Impact of the Netherlands Leaving the European Union, London: Capital Economics See Ian Milne (2011) Time to Say No, London: Civitas Sources: Canadian Ministry of Finance, Financial Times and Benjamin Cohen (2006) North American monetary union: A United States perspective, Current Economics and Politics of Europe, 17(1) CBI (2013) Our Global Future, London: CBI Burrage, op cit See Tim Hewish and James Styles (2012) Common-trade, Common-growth, Common-wealth, Cheltenham: The Hampden Trust 18/03/2016 08:50 Index administrative failures of EU 59–60 Agency Workers Directive 93 Algeria 244, 304 Alternative für Deutschland (AFD) 65, 161, 177 Andreasen, Marta 98 Argentina 105, 175, 325 ASEAN 291, 292–3, 294, 301, 306, 324 Asian Tigers 230, 308 Attali, Jacques 231 austerity 22, 67, 70, 125, 130, 138, 145, 171, 173, 182–3, 231, 320–22 Bannerman, David Campbell 254–5 Barroso, José Manuel 97, 202, 213 Basel Agreement, 1972 115 Basel Agreement 272 Belgium 11, 12, 16, 21, 26, 70, 80, 106, 109, 119, 148, 235, 296–7 benefit tourism 205–6 Benn, Tony 67–8 Berlusconi, Silvio 66–7 Bildt, Carl 240 BMW 186, 250 Brazil 84, 105, 191, 265, 310–11, 325 969NN_tx.indd 348 break-up of euro 133, 169, 287, 216, 217, 233, 241, 287 benefits of 182–5 effects of 170, 172–3, 186 political consequences of 229–32 possibility of 175–8, 322 budget contributions 247, 253, 255 Bulgaria 14, 34, 43, 44, 49, 88, 226, 264 Cameron, David 29, 202–4, 206, 213, 218, 226, 275, 282, 285, 302, 320–6 EU ‘deal’ 325–7 Capital Economics 172, 287, 334 car industry 244, 250–51, 264–6, 269–71, 287, 300, 333 Chevenement, JeanPierre 232 China 29, 73, 84, 90, 107, 134, 135, 156, 186–7, 189, 190, 191–3, 209, 251, 254, 256, 259–60, 265, 275, 277, 304, 305, 310, 313, 315, Choudhry, Moorad 274 Christendom 23–5, 51 Churchill, Winston 6, 9–10, 32–3 City of London 93, 206, 244, 270–76 Clarke, Kenneth 302, 307 Columbia 256 Common Agricultural Policy (CAP) 95, 202, 210, 244, 246–7, 324 Commonwealth 9, 33, 221, 289, 308–11 Communism 19, 28, 30, 34–5, 200, 215, 305, 314–16 competition 38, 43, 80, 85, 89, 91, 94, 104, 106–11, 226, 229, 284 competitiveness gap 122–3 Confederation of British Industry (CBI) 284, 303, 328–9 corruption 149–50, 198, 319 Costa Rica 304 Council of Ministers 54, 55, 268 Crimea 45, 73, 210, 214 Cyprus 14, 16, 175, 298 Dalgleish, Angus 329 De Gasperi, Alcide 66 de Gaulle, Charles 27, 34 defects of EU 38–9, 111 18/03/2016 08:50 Index deflation 113, 126, 130, 135, 137–8, 140–43, 144, 156, 158, 166, 193, 324 democratic deficit 29, 57–9, 229 demography 170, 188–9 Denmark 14, 16, 35, 47, 70, 88, 106, 135, 209, 227, 232, 239, 294 devaluation 129, 175, 324 devaluation, internal 126, 142, 325 Draghi, Mario 124, 160–61, 322 Dubai 274 Duisenberg, Wim 127 East, fear of 29–30 economic failure of EU, reasons 84–8 economic growth prospects for 170–73 slowdown in 82–4 economic performance of EU xii, 1–4, 75, 80–104, 111–12, 170, 172, 194, 202, 209, 229 economic performance of eurozone 127–35, 145, 172–3, 182–5 emerging markets 1, 73, 84, 90, 190, 192, 193–4, 265, 316 euro benefits of 127–8, 230 benefits of break-up 182–5 969NN_tx.indd 349 deflationary bias of 130, 193 difficulties with 145–6, 172, 196 effect of break-up 133, 169, 170, 172–8, 182–5, 186, 229–32 entry criteria 119–20 formation of 2, 115, 117–19, 166, 183, 185, 187, 317 launch 4, 121–2 political consequences of break-up 229–32 political lessons of 168–9 possibility of break-up 173–8 Europe demographic outlook 170, 188–9 full integration of 199–200, 214, 240–41, 314–16 reuniting 22–6 European Central Bank (ECB) xii, 57, 122, 124–5, 127, 154–8, 160–61, 163–5, 186–7, 275, 320–22, 324 European Coal and Steel Community 10, 309, 324 European Commission 14, 16, 17, 24, 54, 55, 58–9, 60, 63, 66–7, 94, 98, 128, 201, 205, 213, 320, 325 European Communities Act, 1972 244 349 European Convention on Human Rights 57, 281–2, 324 European Court of Auditors 98 European Court of Human Rights 57, 281–2, 324 European Court of Justice 56, 208, 239, 275, 281, 324, 326 European Economic Community (EEC) 10–12, 21, 32, 34, 47–9, 67, 81, 208, 225, 290, 295, 324, 326 European Free Trade Association (EFTA) 294, 324 European Monetary Union (EMU) 12, 114, 127, 325 European Parliament 11, 14, 24, 54, 55–6, 59, 68–9, 97, 201, 212, 238 European Union (EU) administrative failures of 59–60 barriers to reform 210–14 benefits of exit 239, 249–51, 260–64, 273–5, 279, 282–4, 328–9 budget contributions 247, 253, 255 business favours 328–9 competition policy 94–5 costs of exit 245–9 18/03/2016 08:50 350 defects as a political institution 38–9, 111 democratic deficit in 29, 57–9, 229, 333 economic future of 170–75, 190–94 economic performance of xii, 1–4, 75, 80–104, 111–12, 170, 172, 194, 202, 209, 229, 333 effect of Brexit 331–2 effect on trade 89–91 excessive regulation in 1, 38, 188, 201 expenditure 95–9 fiscal union 110, 120, 146, 148, 151–2 free movement of capital 91, 114, 292 future of 334–5 gains from specialization 99–100 geographical expansion of 14–15 guiding beliefs of 19–32 harmonization 1, 38, 80, 100, 104, 110–12, 187, 230, 235 historical development of 6–15, 34–7 identity crisis of 38, 41–2, 50, 52, 333 institutions of 54–7 969NN_tx.indd 350 The Trouble with Europe interventionism 60–61, 92, 94, 99, 108, 285, 294 labour market regulation 88, 92–3, 108, 171 limits of 52–3, 69 membership criteria 42–7 passporting rights 272–3 political union 1, 12, 13, 38, 63, 104, 116–17, 120, 127, 146, 165, 167, 199, 216, 227–9, 241, 293, 299, 317 possibility of exit 244–5 possibility of reform 207–14 potential replacements for 289–311 presidencies of 54 problems with 322–3 prospects for economic growth 170–73 prospects for GDP 190–93 reasons for economic failure 84–9 reform of 1, 4, 71, 171, 192, 194, 196–214, 216 requirements for reform 202–6 slowdown in economic growth 82–4 social security spending 88 successes of xii, 1, 4, 35, 37, 53, 78, 80–82 tax reform 171 trade relationships with 182, 247–9 unemployment levels 73, 83, 87–8, 93, 127, 130, 131, 136 unpopularity of 1, 69–71, 212 euroscepticism xi, 2–3, 60, 62, 65, 67–9, 70–71, 161, 168, 177, 196, 201–2, 208, 211–12, 228, 255, 257, 277, 281, 285, 317, 332 eurozone competitiveness gap in 122–3, 126–7 economic performance of 127–35, 145, 172–3, 182–5 Exchange Rate Mechanism (ERM) 115, 174, 325 exit from EU benefits of 239, 249–51, 260–64, 273–5, 279, 282–4, 327–8 costs of 245–9 possibility of 244–5 expenditure, in EU 95–9 Ferrari 250 financial services industry 270–76 effect of leaving EU 273–6 Finland 14, 16, 20, 34–5, 62, 70, 106, 18/03/2016 08:50 Index 176, 185, 209, 232, 294, 296, 298 fiscal transfers 145, 148–150, 187, 293 fiscal union 110, 120, 146, 148, 151–2 Ford 267 Fox, Vicente 291 France 8–11, 13, 16, 18, 21, 24, 26, 31, 34, 37, 54, 55, 62, 64, 65, 80, 82, 85, 87, 88, 98, 109, 110, 118, 12o, 127, 134, 135–8, 148, 162, 167, 170, 171, 178–81, 182, 185, 197, 200, 202, 209, 211, 212, 213, 222, 230–32, 236, 265, 294, 296–7, 299, 302, 311, 312 free movement of capital 91, 114, 292 free trade agreements xii, 254, 255, 285, 303, 306, 310 GDP, prospects for European 190–93 Germany 11, 13, 16, 18, 19, 21, 22, 29, 37, 54, 55, 62, 64, 65, 67, 72–4, 80, 82, 85–7, 101, 118–19, 120, 122–3, 124, 126, 130, 133, 134, 135–6, 142, 146, 148, 151–4, 156, 160–61, 165–7, 170, 173, 176–7, 178, 180–81, 183–7, 189, 197, 199, 200, 209, 222, 231–2, 235, 237, 265, 294, 296, 311 969NN_tx.indd 351 Gilmour, David 147 Gold Standard 115–16, 130, 173, 181, 232, 325 Golden Dawn 200 governance, importance of 39–41 Greece 14, 16, 20, 36, 62, 65, 70, 87, 119, 121–4, 127, 132, 134, 137–8, 142, 146–7, 162, 175–6, 178, 186, 189, 199, 200, 232, 286, 296–7 Greenland 244 harmonization 1, 38, 80, 100, 104, 11012, 187, 230, 235 Heisbourg, Franỗois 231 Holy Roman Empire 24–5 Hong Kong 135, 221, 274, 275, 304 Howell, David 308–9 Human Rights Act 281–2 India 29, 73, 84, 135, 189–93, 198, 203, 221, 256, 260–61, 265, 310–11, 313 inevitability, of European integration 30–32 integration 1, 6, 11, 13, 16, 19–34, 38, 41, 52–3, 57, 61, 64–7, 69, 72, 78, 80, 85–6, 99, 102, 110, 112, 113, 116, 117, 128, 161, 192, 197, 199–200, 203, 208, 351 211, 214, 228, 230, 232, 240–41, 291, 293, 314–18 internal devaluation 126, 142, 325 Ireland 14, 20, 35–6, 47, 121–3, 132, 137, 209, 297–8 Israel 42, 256, 304 Italy 16, 21–2, 47, 55, 62, 65, 66–7, 80, 82, 84, 110, 119, 125, 127, 134, 138, 146–50, 152, 162, 171, 175, 178, 181, 189, 199, 209, 232, 234, 235–7, 296, 311, 321–2 Japan 73, 113, 139, 140–44, 155–6, 160, 162, 179, 191, 203, 256, 260, 265–8, 279, 301, 304 Jian, Gao 275 Johnson, Boris 275 Jordan 304 Juncker, Jean-Claude 17, 54 Kissinger, Henry 54 Kohl, Helmut 119 La Malfa, Ugo 22 labour market regulation 88, 92–3, 108, 171 Latvia 34, 88, 210 Letta, Enrico 29 Lisbon Agenda 61–2, 171, 325 Lisbon Treaty, 2007 13, 31, 167, 212, 244, 282 18/03/2016 08:50 352 Maastricht Treaty, 1992 12–13, 65, 70, 119–20 Macmillan, Harold 33 Martino, Antonio 208 Mercedes 186, 250 MERCOSUR 301, 306, 325 Merkel, Angela 83, 124, 172, 209, 231 Mexico 265, 291 Minford, Patrick 2834 Mitterrand, Franỗois 119 monetary union 43, 115–17, 119–21, 129, 145, 146, 148, 162, 168, 180, 208, 217, 232 Monnet, Jean 10, 32, 72 Morocco 256 Netherlands 11, 13, 16, 21, 26, 31, 47, 62, 69, 80, 82, 87, 106, 110, 123, 176, 199, 207–9, 211, 213, 222, 232, 238–9, 249, 287–8, 297, 312 Nissan 266 North American Free Trade Association (NAFTA) 291–2, 301, 306–7, 310, 325 North Atlantic Treaty Organization (NATO) 20, 35, 50, 74, 210, 214, 297–9, 326 North, Douglass 40 969NN_tx.indd 352 The Trouble with Europe Norway 35, 81, 84–5, 105–6, 131, 134, 188, 232, 246, 251, 254, 261, 294, 298, 299 Noyer, Christian 274 Orphanides, Athanasios 273 Outright Monetary Transactions 124, 326 Owen, David 331 Peru 256 political union 1, 12, 13, 27, 63, 104, 116–17, 120, 127, 146, 162, 165, 167, 199, 216, 227–9, 241, 291, 293–6, 299, 314, 316–17 Portugal 13, 14, 16, 20–21, 36, 70, 88, 110, 123, 132, 134, 137, 142, 162, 178, 189, 199, 232, 294, 296, 312, 321 Powell, Enoch 67, 199 presidencies of EU 54 Prodi, Romano 24, 66 quantitative easing (QE) 86, 145, 154–66, 183–4 Reding, Viviane 14, 205 reform of EU 1, 4, 71, 171, 192, 194, 196–214, 216 requirements for 202–6 barriers to 210–14 regulation in EU 1, 38, 188, 201 replacements for EU 289–311 Roman Empire 22–3, 50 Romania 14, 34, 43–4, 49, 88, 226, 264 Roosevelt, Franklin D 33 Rules of Origin 251 Russia 7, 24, 30, 34, 35, 44–7, 73–4, 84, 105, 135, 191, 200, 209–10, 214–15, 220–21, 261, 265, 297–8, 301, 310, 315 Sarkozy, Nicolas 52, 172 Schäuble, Wolfgang 21, 153, 176 Schengen Agreement, 1995 12, 326 Schröder, Gerhard 211 Schuman Declaration 10 Schuman, Robert 10–11, 32, 72 Scotland 102–3, 145, 233–4, 235, 329–30 Second World War 6–9 Singapore 85, 105, 106, 135, 274, 279, 292, 304, 310 Single European Act, 1986 12 Single Market xii, 53, 203–5, 207, 210, 212, 228, 244, 251, 255, 257–64, 268–9, 283, 285, 292, 294–5, 326 18/03/2016 08:50 Index size, importance of 99–103 Social Chapter, of Maastricht Treaty 13 social security spending 88 South Africa 221, 256 South Korea 256 Soviet Union 1, 19–20, 26, 29, 41, 43, 45–6, 72–3, 79, 105, 108, 118, 179, 192, 214–15, 301, 314–16, 334 Spain 11o, 121–3, 125, 127, 132, 134, 137, 142, 162, 175, 178, 181, 189, 199, 232, 234, 265, 296, 311, 312, 330 specialization, gains from 89, 99–100, 101 Stability and Growth Pact 120, 152, 326 subsidiarity 103–4, 235, 326 Sweden 14, 16, 35, 70, 81, 82, 106, 131, 181, 199, 209, 222, 227, 232, 239, 294, 298 Switzerland 71–2, 81, 84, 85, 106, 131, 134, 181, 188, 232, 246, 251, 254, 261, 294–5, 299, 304, 310 Syriza 320 tariffs 89–90, 101, 247, 266–7, 270, 290, 292, 305, 326 tax reform 171 969NN_tx.indd 353 353 Thatcher, Margaret 14, 26, 59, 81–2, 118 top table syndrome 18, 316 trade relationships 247–9 trade, EU effect on 89–91 trading blocs 301–4 Trans-Pacific Partnership 301 Transatlantic Trade and Investment Partnership (TTIP) 300, 326 Treaty of Amsterdam, 1997 13 Treaty of Brussels, 1965 12 Treaty of Lisbon, 2007 13 Treaty of Nice, 2001 13 Treaty of Rome, 1957 12,14, 23, 32, 68, 82, 218, 227 Turkey 23, 43, 50–52, 255, 298, 299, 333–4 300, 303, 306–11, 313, 316, 317 referendum 320–35 security 330–31 UK Independence Party (UKIP) xi, 62, 218, 320 Ukraine 24, 44–5, 52–3, 73–4, 210, 304 unemployment 70, 73, 83, 87, 93, 108, 117, 126–7, 130, 131, 136–8, 146, 149–50, 173–4, 180–81, 183, 190, 225, 320 United States of Europe 1, 9, 13–14, 27, 32, 197–8, 206 USA 26–9, 32–4, 40–41, 74, 82, 86, 101, 105, 116, 118, 192, 197–8, 256–7, 259, 265, 267, 280–81, 290–91, 302, 305, 307, 310, 313, 314 UK xi, xiii, 4, 13, 14, 16, 18, 20, 32–4, 35, 47, 54, 55, 57, 59, 62, 63, 65, 67, 68, 70, 71, 80–83, 86–8, 91, 93, 97, 103, 116, 118, 145, 148, 154–6, 158, 162–4, 168, 173–4, 179, 181–2, 185, 189, 197, 201–9, 212–15, 217–19, 221, 222–4, 225–9, 233–4, 235, 237–42, 244–88, 290, 294, 297, 299, voters, alienation of 62–4 war, avoidance of 20–2 Westerwelle, Guido 240 Wolf, Martin 187 Working Time Directive 93, 262, 326 World Trade Organization 256–7, 289, 304–5, 326 18/03/2016 08:50 ... Acknowledgements viii Preface to the Third Edition x Introduction: The Trouble with Europe PART I: PAST HISTORY AND PRESENT PURPOSE 5 How the EU Came into Being and Why The Trouble with the EU as a Political... 08:50 The Trouble with Europe Why the EU Isn’t Working What Could Take Its Place How the Referendum Could Change Europe Third Edition Roger Bootle 969NN_tx.indd 18/03/2016 08:50 This third edition. .. 08:50 14 The Trouble with Europe Reding, Vice-President of the European Commission, said: ‘We need to build a United States of Europe with the Commission as government and two chambers – the European