Why eurozone matters to UK

At the forthcoming European Council of EU leaders, two important issues will be addressed: the stability of the eurozone and the EU growth agenda.

In the light of the current economic crisis, urgent action needs to be taken to tackle market uncertainty by recapitalising banks and establishing credible plans for getting on top of debt. These issues are just as important to the UK as they are to all eurozone countries. As British Prime Minister David Cameron said after his meeting with German Chancellor Angela Merkel last week:

“When it comes to the eurozone crisis, I’m very clear that urgent action is needed to deal with market uncertainty. That is about building firewalls and recapitalising banks but it’s also essential that we need credible plans for getting on top of deficits and debt and we also need those structural reform plans, completing the single market, to make sure we can get good growth throughout the European Union, including in the single currency area.”

Indeed, this crisis in the eurozone has shown the absolute need to ensure that the foundations of Europe’s economies are strong. Because of the speed and scale of globalisation, the balance of wealth and political power is being shifted towards emerging economies and this naturally poses a challenge to the position of the EU in the world order. This shift reinforces the urgent need for all EU countries to reform to stay competitive, generate growth and maintain employment and standards of living.

The UK wants an EU that is able to use its collective weight for our common interests, such as trade and security. We want an outward-looking EU that is more dynamic and competitive on the global stage. Indeed, it is in Britain’s interest for the EU to be effective, credible and prosperous. Being part of the EU is vital to how we create jobs, expand trade and advance our interests around the world.

We support a multi-faceted EU where member states with a range of different interests and needs can work together in informal groupings, such as the like-minded groups, or in more formal groups, for example, the Schengen countries. Multiple forms of EU membership already exist and it is in all our interest that the EU has the flexibility of a network and not the rigidity of a bloc. The EU is not, and should not become, a matter of everything or nothing.

A satisfactory outcome to the eurozone crisis will mean an evolution towards a tightly integrated eurozone within the EU’s current structures. Although we will not be a part of eurozone integration, we will not stand in the way of further political integration among the eurozone countries that any successful solution will require. But it is critical for the UK and Europe as a whole that eurozone integration does not work against non-eurozone EU member states.

The UK is supportive of the principle of a eurozone banking union. Mutualisation of fiscal risk and common supervision makes sense for members of a single currency. But we’re also clear that this is not required for the single market. So while we support a banking union for the eurozone, the UK will not be part of it.

The single market requires robust regulation of the financial sector through an EU rule book. The UK supports that. Our approach is not, and never has been, about opting out and evading the rules. The truth is, we have some of the toughest rules in Europe. The size of the UK’s financial sector means its stability is critical, not just to UK but to EU prosperity too.

Eurozone integration raises the question about how the single market and single currency fit together. It’s important that the integrity of the single market is not adversely affected. We don’t expect the European Council to agree a detailed blueprint for a full blown banking union. This, as well as protecting the single market, will need careful thought.

Both the UK and Malta agree that growth is vital to get the European economy going again and that the single market is the best engine we have for doing that. The EU should continue to make ambitious progress on the back of the March European Council conclusions. We should make sure Europe remains open for trade – launching free trade negotiations with Japan and making progress on a possible deal with the US and on negotiations with Canada, India and Singapore.

The British government is clear that it is strongly in our interests for our biggest export market to succeed. The risks of a disorderly outcome are huge as the fate of many non-eurozone countries’ economies is inextricably intertwined with the economies of the eurozone. We’re in this together.

The author is British High Commissioner to Malta.