The Sarkozy/Merkel pact for competitiveness aims to harmonise national economic and social policy for the eurozone countries: corporate taxes, pension systems, wage bargaining, educational qualifications, public debt limits and the management regimes for troubled banks. Although essentially a plan for a federal Europe, British PM David Cameron remains “relaxed about this enormous step in the EU’s journey”, writes the Times columnist. “The hope in Whitehall is that this centralisation programme will be quietly abandoned, or even reversed, once the crisis is over; but the likelihood is the opposite.”

Worse, however, is that this proposed harmonisation of tax, labour and pension policies will do little to help Europe out of its economic crisis. “On the contrary, Ireland would suffer outflows of capital and employment if forced to harmonise its tax rates up to German and French levels. Centralising wage bargaining across Europe, far from allowing poor countries to become more competitive by taking advantage of their cheap labour, would create a mechanism to protect high German and French wages and social charges.”

Britain is apparently untroubled by such developments because Germany insists that the EU harmonisation should be monitored by national leaders at summits, rather than by EU commissioners in Brussels. However, “The Commission provides the only mechanism for implementing intergovernmental decisions and everything in EU history suggests that it will soon gain complete control. Moreover, the other members of the eurozone are all determined not to be governed by Germany, or even by a Franco-German directorate. They will ensure that the main responsibilities for “economic government” move rapidly to the Commission, once Germany signs up to irrevocable guarantees for the euro’s financial stability and thereby loses its veto power.”

As this momentum towards a Federal Europe becomes ineluctable, non-euro countries like Britain “will then have to face up to the reality of a multi-speed Europe, with a fully integrated federal core, and a much looser coalition of trading partners on the outside. This vision of a looser Europe has much to commend it, but is one that successive British governments have struggled for decades to avoid. It is now a fact of life.” Read full article at The Times (paywall) or in Presseurop's nine other languages...