Wednesday

25th May 2016

Merkel and Cameron seek common ground on Europe

  • 'Europe is being out-competed and out-invested,' Cameron says (Photo: World Economic Forum)

German Chancellor Angela Merkel and British PM David Cameron on Thursday (24 January) sought common ground on the future of the European Union, one day after he announced a referendum on Britain's EU membership four years from now.

Europe's competitiveness gap on the global market was a common concern of both Merkel and Cameron, in separate speeches held in the Swiss resort of Davos where leaders and businessmen meet yearly for the World Economic Forum.

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"Europe is being out-competed and out-invested - and it's time we make it an engine for growth, not a source of cost for business and complaint for our citizens," Cameron said.

His plan to renegotiate Britain's membership terms in order to "repatriate" some powers from Brussels was not about "turning our backs on Europe - quite the opposite," he said.

"It's about how we make the case for a more competitive, open and flexible Europe –and secure the UK’s place within it," Cameron said.

As euro countries are "moving inexorably towards a banking union and forms of a fiscal union, that has huge implications for countries like the UK who are not in the euro and never will be," he added.

Consent in the UK for the changes that already have been taken is "wafer-thin," Cameron added, which is why a new deal with the EU and a referendum on it is needed.

Merkel, speaking a few hours later, struck a conciliatory tone.

"The euro was introduced with the expectation that one day all EU countries will adopt it. David Cameron repeated today that he cannot envisage Britain to become a member of the euro, we also have the Danish opt-out and in Sweden I believe there were two referendums against it," she said.

Merkel insisted that the formula of "enhanced cooperation" - meaning a group of EU countries pressing ahead with projects they can agree on, such as the fiscal compact signed among 25 members or the border-free Schengen zone where five EU members are not part of it - are the way forward.

"We are not a closed shop, we stay open to all who want to join. And we still hope that many countries will still want to join the euro," she said.

Similarly to Cameron, she stressed that boosting EU's competitiveness on the global market is essential for Europe to keep its prosperity in the future.

But the solution she proposes is quite the opposite of his view of a more "flexible", deregulated single market.

For Merkel, the way to boost competitiveness are binding contracts between each member state and the European Commission on issues such as reducing wage costs, making labour markets more flexible or investing in research and education.

"National parliaments will have to legitimise these contracts, which will be binding for each country signing them," she said.

'Smell the coffee'

One area they did agree on is the need for the EU to sign free trade agreements with the US, Japan and Canada and for industrialised countries to reach a deal on tax evasion and shadow banking.

Cameron went further.

He devoted a large section of his speech to saying G8 countries should fight not just tax evasion (which is illegal) but also tax avoidance, or, as he put it "setting up ever-more complex tax arrangements ... to squeeze their tax bill right down."

"They [tax-avoiders] need to wake up and smell the coffee because the public who buy from them have had enough," he said, alluding to Starbucks, a US-based coffee chain which last year caused a furore in the UK last year by paying almost no tax while earning billions.

"Some forms of avoidance have become so aggressive ... it's time to call for more responsibility and for governments to act accordingly," he noted.

London, the UK's Channel islands and its Caribbean protectorates are among the world's most deregulated financial centres.

But the British PM talked tough on the need for change.

"We're going to push for more transparency on who owns companies, on who's buying up land and for what purpose, on how governments spend their money, on how gas, oil and mining companies operate, on who is hiding stolen assets and how we recover and return them," he said.

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