Article on the EU Published in The Times 26 November 2003

Until yesterday, the issue was whether to support a referendum on the new EU constitution. I am by no means a euro sceptic but was feeling myself drawn to the argument that, if half the people of Europe were to have a referendum, then why not Britain? On top of this, I do believe that the European elite are dividing from the people, in their enthusiasm for ever greater integration which drives inexorably towards a super state. I was coming round to the case for a referendum because the elite need a shake and because we need a much more thorough debate on what the European Union is for, in a rapidly changing and integrating world.

And then suddenly briefings – clearly authorised at the highest level – suggest that there may not be agreement on a new EU constitution and the UK support cannot be taken for granted. It seems that Gordon Brown has got his way with Blair again. It may well be that the new position is tactical and part of a careful pre-election repositioning, but it also reflects the fact that the European project is in increasing trouble.

What is going on? The small countries are increasingly fearful that the big powers – particularly France and Germany – are determined to dominate and are worried that the new constitutional arrangements will marginalise them. Both France and Germany have breached the discipline on public borrowing and spending that is meant to underpin the euro and The Netherlands, Austria and Finland are fearful that all euro economies will pay the price in higher inflation and interest rates. On top of this, the euro economies are doing badly – slow to climb out of recession and poor growth, largely as a result of the deflationary bias of the European Central Bank and the Stability and Growth Pact.

The referendum on the euro in Sweden showed that even with all the major parties in support, the people could not be persuaded. Germans are talking nostalgically about the Mark and even France is doubting whether it could win a referendum on Giscard's new constitution. There are serious problems of fraud in the Commission again and Gordon Brown has started to argue that there is too much regulation coming out of Brussels and that a firm line should be drawn that prevents any moves to integrate tax systems or social security.

All of this comes at a time when the European Union has had one of its finest hours, acting as a beacon of democracy and tolerance to the Balkan and helping them to overcome their history of ethnic hatred in order to be able to join in with modern Europe. And Turkey – at these times of real danger of a growing divide between the Moslem and Western world – is willing to reform in order to join and with it bring a resolution of the long standing division in Cyprus. And yet the people of Europe are going off the European project.

My own conclusion is that we need much more than new constitutional arrangements in Europe. The debate in Britain has been posed far too much as a battle between little Englanders and the rest, but the reality is that pro-Europeans are driving a project that is leading inexorably towards a super state and the rest of us don't really want to go there but do not have a coherent view of where Europe should fit in the larger scheme of things.

If we mean what we say – and almost all claim to be in favour of subsidiarity and multilateralism – then we need a thorough discussion of what we want the EU to be. If we do want a successful trade round and international agreements on investment and competition, then the significance of the single market – obviously the strongest feature of the EU – will begin to erode. Environmental agreements are made globally and multilaterally. The performance of the EU at the trade talks in Cancun makes me hanker for a re-nationalisation of trade negotiating authority. If we can get back to the imperative of increasing the capacity of the international system to promote development for the half of humanity that still lives in poverty, we should cut the EU out of the effort because its record is shamefully ineffective and there is no need for both national and European machinery.

As the global economy integrates, we need better ways of dealing with crises such as the Russian, Asian and Argentinean collapses, but that requires a more effective IMF. If we are to agree on new international humanitarian law to assist in the overthrow of cruel dictators, it is through the UN we must agree. And there is no one in France or Britain willing to give up their seat in a reformed Security Council to the EU, or allow the EU to represent us in the IMF or the World Bank.

We have reached a crucial point when we need a new rationale for the EU. There is increasing agreement that we need more de-centralisation and stronger local government in our own over-centralised island and this should be complemented by a commitment to review all EU powers – strip out all the unnecessary regulation and test every EU power against the principle of subsidiarity. The future I see is an EU slimmed down to run the single market which gradually gives up much of its rule making to global rules; a Commission that is revamped with new - efficient and fraud-free financial management systems. The euro will stand or fall on the quality of the economic management that underpins it and is urgently in need of improvement. The aspiration to a common foreign and security policy is increasingly unrealistic after the disagreements on Iraq. And unless we are aiming for a super state, co-operation on foreign policy should be confined to informal consultation.

Multilateralism means nations agreeing basic rules to manage globalisation. De-centralisation and subsidiarity mean much more discretion and authority allocated to our cities and surrounding regions. If this is the broad direction in which we want history to go – the space for the EU is likely to wither.

Clare Short MP