The ins and the outs

IT HAS been a busy week for Britain’s Treasury. On April 18th its study of the costs and benefits of European Union membership concluded that Brexit could reduce GDP after 15 years by as much as 6.2%. George Osborne, the chancellor, called Brexiteers who claimed there would be no costs in leaving “economically illiterate”. Yet his bigger concern over Britain and the EU is not economic: it is whether the euro zone might unfairly discriminate against non-euro countries like Britain.

Mr Osborne put this issue at the heart of the government’s effort to renegotiate its EU membership. Since November 2014 the 19-member euro zone has in itself constituted a “qualified majority” that can, in theory, take decisions without consulting the nine non-euro countries. Before then, in January 2014, Mr Osborne warned that, if non-euro countries felt their interests were not protected, they would “have to choose between joining the euro, which the UK will not do, or leaving the EU”.

At a Brussels summit in February, Mr Osborne’s boss, David Cameron, won several concessions. One was recognition that the EU has more than one currency. Next was an undertaking that the euro zone would not damage the wider 28-strong single market—although in return non-euro countries promised not to obstruct deeper euro-zone integration. He also secured the right to appeal to a full EU summit against euro-zone decisions that Britain disliked. And he won acceptance that, within broadly agreed boundaries, the British could apply their own detailed rule book when regulating financial services.

Mr Cameron hailed this deal as giving Britain the “best of both worlds”. It is in the single market but not the euro (and so liable for euro-zone bail-outs), just as it is in the EU but not the Schengen passport-free zone (with its refugee crisis). Many in Brussels reckon Britain frets too much about the euro zone ganging up on non-euro countries. The top official working for the euro group of finance ministers says that, far from forming a rapacious caucus eager to do down non-members, his political masters find it hard to agree on anything. One observer, Iain Begg of the London School of Economics, also argues that the British fear is more theoretical than real.

Yet the Treasury points to cases where British interests have been overlooked. The European Parliament imposed an EU-wide ban on excessive bankers’ bonuses. Several euro-zone countries are trying (so far unsuccessfully) to impose a financial-transactions tax. The European Central Bank sought to stop the clearing and settlement of euro transactions in London, though the British successfully challenged this in court. Last summer euro-zone ministers used an EU-wide rescue fund to help Greece despite promising not to (later they agreed to cover any losses by Britain and other non-euro countries).

So British concerns over euro-zone caucusing may not be wholly hypothetical. Many on the continent resent the dominance of London as Europe’s financial centre and would like to grab some of its business. They are also clear that they cannot allow Britain a veto over financial regulation, as they showed when they sidestepped an attempt in December 2011 by Mr Cameron to block a fiscal treaty unless he was given just such a veto. And they do not want to extend the “double majority” mechanism of the London-based European Banking Authority, whose decisions require the approval of majorities of both euro and non-euro countries.

Will Mr Cameron’s deal safeguard British interests? Only time can tell, but there are reasons for moderate optimism. One is that the EU will have many non-euro countries for years to come. The Poles, Swedes, Danes, Hungarians and Czechs seem in no hurry to adopt the single currency. A second is that, for all the talk in Brussels of another leap forward in euro-zone integration with a euro-zone finance minister, a common budget and mutually backed Eurobonds, there is as yet no agreement on any of it. The Germans remain hostile to anything that could be seen to turn the monetary union into a “transfer union”.

And third there are the February concessions, which will be written into the EU treaties. They should make it harder for the euro zone to dictate terms to non-euro countries, even if Britain feels increasingly uneasy as more join the euro. The paradox is that, although this may be the most important part of the renegotiation, it is the hardest to explain to voters—and so barely features in the referendum campaign.