BREXIT: THE POSSIBLE DISPLACEMENT OF THE FINANCIAL POLE

Università degli Studi di Modena e Reggio Emilia D

C ORSO DI L AUREA M AGISTRALE IN

LANGUAGES FOR COMMUNICATION IN

INTERNATIONAL ENTERPRISES AND ORGANIZATIONS (LACOM)

BREXIT: THE POSSIBLE DISPLACEMENT OF THE FINANCIAL POLE

Prova finale di:

Marilena Balzano Relatore:

Barbara Luppi

Correlatore Antonie Hornung

2017/2018

Abstract

The purpose of my thesis is an analysis of changes in the financial sector as a result of the Referendum held on 23 June 2016 concerning the permanence in, or withdrawal from the European Union of the United Kingdom. In particular, the main aim of this paper is considering possible future evolutions that could affect not only the English and European economies, but the financial system as a whole.

The initial part puts the current situation into a historical perspective. In particular, it is argued that UK-EU relationship has always been complex and that the daunting prospect of a possible exit of the UK (Brexit) has always existed.

Brexit today involves the whole global scene whether, directly or indirectly. Future uncertainties and concerns about a possible agreement on a smooth transition have encouraged citizens, international organizations, companies and banks to redefine their priorities, organize their social, economic and financial network differently, and consider investments from a different standpoint. Due to the difficult situation, an attempt was made to clarify the immediate consequences of the Brexit Referendum and the possible outcomes of a post-Brexit scenario. In order to have a clear picture of the situation, I interviewed financial experts and members of leading English and Italian institutions; their contribution was essential for the development of the “experimental”

part of my paper. In particular, through a careful analysis of the evidence collected, I have speculated about potential changes that might affect the City of London and other important financial districts, affect the current situation and cause a possible shift in the European financial hub from London to other European centres.

Finally, I found it appropriate to also focus on linguistic aspects and, more specifically, the influence that languages used in business relations could have on economic decisions, and, in particular, how learning, studying and disseminating a specific language could drive and help predict future scenarios, i.e., in the case under review, the possible developments of the “Brexit” issue.

Zusammenfassung

Das Ziel meiner Abschlussarbeit ist die Analyse von den Veränderungen des Finanzsektors, die sich aus dem Referendum des 23. Juni 2016 über den Verbleib oder den Rücktritt des Vereinigten Königreichs aus der Europäischen Union ergeben haben.

Das Hauptziel dieser Arbeit ist, vor allem, die Untersuchung von möglichen zukünftigen Entwicklungen, die sich nicht nur auf die englische und europäische Wirtschaft, sondern auch auf die gesamte Finanzwelt auswirken könnten.

Ausgehend von einem historischen Exkurs habe ich erklärt, wie die Beziehung zwischen dem Vereinigten Königreich und der Europäischen Union von Anfang an immer komplex gewesen ist und wie das "Spektrum" einer möglichen Abspaltung immer die Grundlage für ihrer Beziehung gewesen ist. Brexit ist ein Phänomen, das direkt oder indirekt das gesamte globale Panorama miteinbezieht und betrifft: Die zukünftige Ungewissheit und die Sorge über mögliche Vereinbarungen haben Bürger, internationale Organisationen, Unternehmen sowie Banken dazu veranlasst, ihre eigenen Prioritäten nochmals zu definieren, ihr soziale, wirtschaftliche und finanzielle Netzwerke anders zu organisieren, ihre Investitionen aus einer anderen Perspektive zu betrachten. Aufgrund der schwierigen Situation, versuchte ich, die unmittelbaren Folgen des Referendums und das mögliche Ergebnis des Szenarios nach dem Brexit zu klären.

Um eine echte Wahrnehmung und eine gültige Meinung zu den tatsächlichen Ereignissen zu haben, habe ich Experten des Finanzsektors und Mitglieder wichtiger englischer und italienischer Institutionen befragt. Ihr Beitrag war wesentlich für die Entwicklung des „experimentellen Teils“ meiner Arbeit: Durch eine sorgfältige Analyse des gesammelten Materials habe ich mögliche Veränderungen als Hypothese angenommen, die sich auf die „City of London“ und auf andere wichtige Finanzzentren auswirken könnten. Ich habe auch analysiert, wie diese Faktoren die gegenwärtige Situation verändern könnten und wie sie die Umstellung des Europäischen Finanzzentrums von London zu anderen europäischen Zentren veranlassen könnten.

Letztendlich hielt ich es interessant dafür, eine sprachliche Betrachtung mit dieser Studie zu kombinieren. Ich habe mich auf den Einfluss konzentriert, den die Sprachen auf wirtschaftliche Entscheidungen haben können. Der Erwerb, das Lernen und die Ausbreitung können bestimmter Sprachen zukünftige Szenarien lenken und vorhersagen, wie in diesem Fall mögliche Entwicklungen der Brexit-Frage.

Resumen

El objetivo de mi tesis es llevar a cabo un análisis sobre los cambios en el sector financiero a raíz del referéndum celebrado el 23 de junio de 2016 sobre la salida o la permanencia del Reino Unido en la Unión Europea.

El foco principal de este trabajo es analizar posibles evoluciones del sector que podrían afectar a la economía inglesa, la europea y al mundo financiero, además de modificar su orden.

Desde un punto de vista histórico, mi trabajo explica porqué la relación entre el Reino Unido y la Unión Europa ha siempre sido compleja y difícil y el porqué ha existido siempre ese miedo a una posible división.

El Brexit ha involucrado y sigue involucrando de forma directa o indirecta el entorno mundial. De hecho las incertidumbres futuras y el miedo a posibles acuerdos han llevado a los ciudadanos, a las organizaciones internacionales, a las empresas y a los bancos a delinear nuevas prioridades, a organizar de forma distinta sus redes sociales, económicas y financieras además de considerar su inversión bajo un prisma diferente.

A raíz de dicha situación, traté de aclarar cuáles fueron las consecuencias inmediatas del referéndum e imaginé un posible escenario post-Brexit.

Para contar con opiniones válidas y reales sobre los acontecimientos que están ocurriendo, entrevisté a algunos expertos del sector financiero y a miembros de importantes instituciones inglesas e italianas. La aportación de dichos expertos fue fundamental para desarrollar la parte experimental de mi trabajo: a través de un análisis pormenorizado del material recolectado, hice conjeturas sobre los potenciales cambios que podrían afectar a la "Ciudad de Londres" y a otros distritos financieros importantes.

Cambios que podrían modificar la situación actual y provocar un desplazamiento del polo financiero desde Londres hasta otras ciudades europeas.

En última instancia, también desarrollé un estudio lingüístico enfocado en la influencia que podrían tener los idiomas a la hora de tomar decisiones económicas.

La investigación examina, en particular, cómo el aprendizaje, el estudio y la difusión de ciertos idiomas podrían guiar y predecir escenarios futuros, como en este caso los posibles desarrollos de la cuestión "Brexit".

Riassunto

Oggetto della mia tesi è l’analisi dei mutamenti nel settore finanziario che si sono verificati a seguito del Referendum relativo alla permanenza o al ritiro della Gran Bretagna dall’Unione Europea, svoltosi in data 23 giugno 2016. In particolare, l’obiettivo di questo lavoro è quello di considerare possibili evoluzioni future che potrebbero coinvolgere non solo l’economia inglese ed europea, ma l’intero mondo finanziario, modificandone l’assetto.

Partendo da un excursus storico, ho illustrato come il rapporto tra Unione Europea e Gran Bretagna abbia avuto sin dal principio un carattere molto complesso e come lo

“spettro” di una possibile scissione sia sempre stato alla base della loro relazione.

La Brexit è un fenomeno che ha investito ed investe, direttamente o indirettamente, tutto il panorama globale: l’incertezza futura e la preoccupazione riguardo possibili accordi hanno spinto cittadini, organizzazioni internazionali, aziende, banche, a definire nuovamente le proprie priorità, ad organizzare diversamente la propria rete sociale, economica e finanziaria, a considerare in una nuova ottica i propri investimenti.

Considerata la difficile situazione, ho cercato di fare chiarezza riguardo agli effetti immediati del Referendum e ai possibili esiti che potrebbe avere uno scenario post- Brexit. Per avere una percezione reale ed una parere fondato circa gli avvenimenti che si stanno verificando, ho intervistato esperti del settore finanziario e rappresentanti di importanti istituzioni inglesi ed italiane; il loro contributo è stato fondamentale per lo sviluppo della parte sperimentale del mio lavoro: attraverso un’attenta analisi del materiale raccolto, ho avanzato delle ipotesi circa eventuali cambiamenti che potrebbero coinvolgere la “City of London” ed altri importanti distretti finanziari, mutando lo stato attuale delle cose e provocando un possibile spostamento del polo finanziario da Londra verso altri centri europei.

In ultima battuta, ho ritenuto interessante associare, a questo tipo di studio, una riflessione di natura linguistica, focalizzando la mia attenzione sulle influenze che le lingue possono avere sulle decisioni economiche. L’indagine esamina, in particolare, come l’apprendimento, lo studio e la diffusione di determinate lingue possano orientare e predire importanti scenari futuri, come in questo caso possibili sviluppi della questione “Brexit”.

Index

Introduction ... 1

Chapter 1: The historical relationship between Europe and the United Kingdom ... 7

1.1 The creation of EU and the accession of the UK ... 7

1.1.1 From the end of the World War II to 1973 ... 7

1.1.2 The Referendum of 1975 ... 12

1.2. The economic and financial policy of the UK ... 15

1.2.1. The Premiership of Margaret Thatcher ... 15

1.2.2. The European Monetary Union ... 19

1.3. The UK before Brexit: the beginning of the crisis ... 21

1.3.1. The era of the new Labour Party ... 21

1.3.2. The Premiership of David Cameron ... 27

Chapter 2: The phenomenon of Brexit ... 33

2.1. Referendum ... 33

2.1.1. The crucial years before Brexit and the reasons behind the Referendum 33 2.1.2. The results of the Referendum and the Article 50 of the EU Treaty ... 39

2.2. The immediate reactions after the Referendum ... 42

2.2.1. The social and political dimensions of Brexit ... 42

2.2.2. Future possible scenarios and the economic relationship between UK and Europe………..46

2.3. Interviews ... 49

2.3.1. Biographical information about the surveyed sample ... 50

2.3.2. The purpose of the interviews: reasons and methods ... 51

2.3.3. Analysis and discussion of the interviews as a background to understand the Brexit dynamics ... 53

Chapter 3: The displacement of the financial hub ... 58

3.1. Consequences of Brexit Referendum... 58

3.1.1. The day after the Referendum ... 58

3.1.2. The relocation of EMA and EBA ... 64

3.2. The economic relevance of a deal before the withdrawal... 70

3.2.1. The status of the negotiation and the threat to the financial system ... 70

3.2.2. “Hard” and “Soft” Brexit: what does it mean? ... 74

3.3. Potential implications of Brexit in the financial sector ... 78

3.3.1. Concerns in the financial sector in a post-Brexit scenario ... 78

3.3.2. The possible displacement of the financial pole: main destinations ... 84

Chapter 4: The business languages ... 93

4.1. What is a “business language” ... 93

4.1.1. Definition of a business language ... 93

4.1.2. English as Foreign Language (ELF) ... 96

4.2. The current scenario: a pivot business language and European languages ... 99

4.2.1. Strengths and weaknesses of a common business language... 99

4.2.2. The European scenario: Multilingualism ... 103

4.3. The linguistic relevance of the displacement of the financial hub... 108

4.3.1. Languages spoken in Europe ... 108

4.3.2. The current institutional language scenario ... 115

4.3.3. How languages can influence the displacement of the financial hub ... 119

4.3.3.1. Final comments about the future language scenario ... 130

Conclusions ... 131

Bibliography ... 137

Online Sources ... 142

Appendix ... 152

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Introduction

The purpose of this dissertation is to analyse the phenomenon of Brexit and its consequences on the global scene. In particular, I will examine its potential impact on the financial system and consider the implications of a possible displacement of the financial hub to other European cities.

At the outset, I will illustrate the methods and structure of my thesis.

I have chosen to divide it into four chapters, each focusing on different but interconnected Brexit issues. Chapter 1 describes the relationship between the European Union and the United Kingdom from a historical perspective, in order to gain a better understanding of the sequel of events and reasons behind the current social, political and economic crisis. Chapter 2 covers the crucial years before the Referendum as well as its implications and immediate consequences. A final paragraph reports the results of my interviews. The core part of this dissertation is Chapter 3, which discusses the relevance of Brexit in the economic scenario, related threats for the financial sector and conditions for a possible transfer of the financial hub from the City of London to other European cities. Chapter 4 illustrates the importance of a common business language, and the impact that languages other than English may have in a post-Brexit scenario, e.g. how they could influence decision-making in the financial system.

As basic references for the drafting of this thesis, I used specialized books and articles as well as official documents published by the British government and the European institutions, for the sake of objectivity and in order to draw objective conclusions without any external influence.

After giving a methodological background, I proceeded with a more in-depth analysis of the reasons for a possible transfer of the financial hub and the main implications of Brexit.

The relationship between the United Kingdom and the European Union has always been peculiar.

In the past, the UK played a liaison role between Europe, the US and the British Commonwealth in foreign, commercial and political affairs. However, its strength as a single economic player was not sufficient to overcome the internationalisation

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movements and alliances between states occurred after World War II; indeed, these new alliances threatened the strategic position of the UK.

It can be argued that the accession of the UK to the European Economic Community was not exclusively motivated by the creation of a stronger link and cooperation with other Member States. Most probably, the UK’s underlying intention was to use this new

‘coalition’ of States as a way to enhance its power on the global market.

The Referendum called in 1975 by the English government to ratify its accession to the European Economic Community was only the first of a series of attempts made in the following legislatures by the UK government to redefine the terms, conditions and role of the United Kingdom as a Member State of what would later become the European Union in 1993. The UK government worked very hard to reach, time after time, new agreements and achieve more sovereignty for the benefit of its population, but all those efforts failed. These ongoing negotiations and (unsuccessful) attempts mirrored a long- standing discontent.

Independence and supremacy have always been key drivers of the UK policy. All Conservative or Labour governments have always asserted these rights in the global scenario, not only in political affairs but also as safeguards of the social dimension. The concept of “European citizenship” has always been rejected as something ‘continental’

(read: ‘foreign’) and, of course, played an important role in the Brexit results. With that in mind, it can be said that the Referendum was another attempt to confirm the supremacy of the “Britishness”.

The proposal for the Referendum to be held on 23 June 2016, which ultimately resulted in Brexit, was the inevitable consequence of a protracted dispute. It was a chance for the government to give power previously centralized in the EU and its institutions back to the British people and cover up discrepancies and divisions between pro-EU and Eurosceptics by a “democratic decision”. British people voted in favour of the UK

“Leave”, which was decided by a handful of votes.

The result of the Referendum had a great social and economic impact in the UK and worldwide. Reactions were clear; the day after the Referendum was named “Black Friday”, due to the financial system collapse. The world stock markets lost capitals and share prices fell, the oil price also dropped, banks implemented “contingency plans”, and the value of the pound sterling depreciated dramatically. The City of London, the

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first European Stock Exchange and one the major stock exchanges worldwide, faced one of the most dramatic times in its history. As a result, new conditions of uncertainty emerged that had never been experienced before.

Although this situation has now partially changed, the UK’s economic architecture has been completely redesigned. The significant depreciation of the pound has raised the price of imports and reduced that of exports. In the domestic market, this implies that goods and services bought abroad are now more expensive; the inflation rate has also increased, productivity has stopped (or even dropped) and real wages have shrunk.

Combined together, these processes have resulted in a slowdown of the UK’s GDP growth.

With all these internal troubles and the reorganization of the economic balance that the UK now has to address, the uncertainties about an agreement with the EU on Brexit have influenced the global scenario, above all the financial system. The depreciation of the pound makes the exchange rate against the euro attractive, but the uncertain perspective of a future deal with the EU has alarmed foreign investors, who have decided to suspend their activities with this country for the time being.

The EU’s immediate reply to the result of the Referendum was its decision to relocate the two European Agencies based in London, the EMA and the EBA, to Amsterdam and Paris respectively. The technical and bureaucratic troubles for the UK that this relocation implies may have serious consequences. Indeed, moving these two European institutions away from London seriously damages the English economy making it less attractive in many important respects. These institutions are key reference points for the scientific and financial communities alike, let alone for investors. Their displacement may ultimately move capitals and people away from London. This phenomenon is likely to have a domino effect. We are witnessing a general redefinition of the criteria and priorities of the economic system. Following the example of the European Union, many other companies and financial institutions have planned or are considering transferring their headquarters or activities elsewhere in Europe. The reasons behind these decisions hinge on the future agreement that the UK will reach with the European Union. Negotiations are still going on and it is difficult to predict what the future scenario will be, but some considerations are worth making on the displacement of this financial hub. Predictions about “soft” or “hard” Brexit, “deal” or “no-deal”, are

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absolutely important in the definition of the post-Brexit scenario, but there is a key aspect that could undermine the role played by the City of London as the main European financial centre. The British government declared its intention to refuse “EU passporting rights” after the transition period of the negotiations, even in case of a positive agreement with the EU. In short, European passporting rights allow banks of a EU Member State to provide financial services to another EU Member State, which obviates the need to open a subsidiary in such state and each financial institution can act freely under the home country legislation. Losing these privileges and rights represents a huge obstacle for financial investors operating in London and wishing to have a preferential access to the Single Market. A solution that the UK has proposed to overcome this stumbling block is the application of the “Equivalence clause”, namely a specific regulation applied for third countries. This clause provides for: the reduction or the elimination of overlaps in regulatory compliance; the provision in the EU of services, products and activities originating from a third country; and the application of a less burdensome prudential regime in relation to exposures of EU financial institutions. It is based on reciprocal support that varies on a case-by-case basis but, even if the equivalence clause is drafted in a manner similar to passporting rights, the only way to ensure UK’s access to the European financial system is achieving and signing a good agreement with the EU. With the acceptance of the equivalence clause, however, the UK would be considered a third country. This means redefining the whole financial architecture and, in any case, access to the Single Market will be limited.

Investing in the London Stock Exchange could make trading complex within the EU and meet with several unprecedented obstacles.

This prospect seems even more likely after the documents approved and published by the British government on 14 November 2018 (“Draft Agreement on the Withdrawal”).

Even if a proposal is made to reach a positive deal in customs union and free movement of people, the financial order and the role of the City in the post-Brexit scenario are rarely mentioned in these documents. The only benchmark used relates to an

“equivalent assessment” of the entire set of financial activities. At the end of the transition period, all companies have to decide whether to move their headquarters out of, or remain in London and abide by English law.

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Considering all the assumptions made and the application of the “equivalence clause”, financial relationships in the City could be seriously threatened.

Several European cities are gaining advantage from this uncertain situation. The major preferential destinations for foreign financial activities moving away from London are Amsterdam, Paris and Frankfurt. All these cities are experiencing a surprising economic renaissance. Following the relocation of many important companies and international organizations (including the EMA and the EBA), they are now able to attract a pool of expertise, create job opportunities and enhance the welfare of their respective countries.

This generalised relocation of financial activities has several implications. In particular, in order to become the new European financial hub, each candidate city should have a certain degree of credibility on the financial market. Based on a number of measured parameters, such as national GDP, position achieved on the international financial scene and dissemination of the national language, the city most qualified to replace London is currently Frankfurt. Although Paris and Amsterdam are both very interesting as financial centres (based on the criteria used by the EU to choose those cities as hosts of the two European Agencies), the German financial capital embodies the ideal model of a European financial centre.

In financial terms, linguistic relevance plays a fundamental role. If we think about the origin and development of the concept of “lingua franca” and the importance of a common language for business relations, this is more than obvious. In particular, in a post-Brexit scenario, English will clearly remain a pan-European language. At the end of the transition period and after the withdrawal of the UK, however, English could lose its actual status as one of the EU official languages, since the two other English- speaking countries, Malta and Ireland, have respectively declared Maltese and Irish their national languages. Unless the EU rejects a future proposal from these countries to confirm their native languages as “national”, the official documents of the European Institutions could not be published in and translated into English in the future. In this case, the entire European language and communication systems could change.

In the final paragraphs, a full illustration is given of the dissemination of languages spoken and utilized in the most important international organizations. In this case, the two pivot languages used, besides English, are German and French. Determining which of the two is most appropriate is quite impossible, but if we consider the potential of

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each language, understanding the future linguistic scenario could be easier. Indeed, French has an ancient history and has always been used extensively as a lingua franca.

German is the most spoken language in Europe and its dissemination seems on the rise.

After the Brexit Referendum, data show that the education, R&D, quality of life and the financial system have improved a lot in Germany. All of these aspects make this country very attractive for highly-skilled and specialised labour from all over the world and contribute to the internationalization of its language. We should not forget about the importance of the education system in the economic growth and welfare of a country.

Considering the link between financial and linguistic aspects, it is obvious that languages play a crucial role in the financial sector.

Based on the assumptions made about the current European financial situation and with due account taken of the key elements of the Brexit negotiation, the displacement of the financial hub seems inevitable.

The interviews conducted in my survey on Brexit helped me focus on several critical aspects related to such displacement. Respondents found the position and prestige of London indisputable. Moreover, the promise and proposal from the British government to become a “tax-haven” for all foreign investors, especially those from third countries, make the UK an ideal place for capital investments from all over the world and London a secure financial market. However, based on the latest developments, including the likely shift of the European financial hub and the relocation of core activities within the EU Single Market, we could assume that London would soon be replaced by another EU Stock Exchange as European financial centre. If this happens, the migration of financial activities seems inevitable.

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Chapter 1

The historical relationship between Europe and the United Kingdom

1.1 The creation of EU and the accession of the UK

In order to understand the reasons of Brexit and how it has impacted the actual social and economic sectors, we should analyse the historical events that have affected the UK political history and the EU in the last seventy years. The relationship between the UK and the EU has always been very peculiar, also before the admission of the country in the Community. The ambition of the UK was becoming a key player and an important intermediary among the international powers.

1.1.1 From the end of the World War II to 1973

The phenomenon of “Brexit” is the consequence of a Referendum held in 2016, concerning the permanence in, or withdrawal from the European Union of the United Kingdom. The relationship between the UK and the EU has always been very difficult and has been characterized by specific features since the early stages of the UK admission to the EU. From the beginning, the Britsh public opinion has been divided between supporters and opponents of European alliance.

After the World War II the global scenario was dramatic. The economic, political and social situation changed, due to the catastrophic consequences of the war experienced by the countries across all the sectors of human activities. All the production process in prevalence organized to produce weapons and war equipment. Poverty was worldwide diffused and the conversion process from a war economy to the economic normal activities was slow and complicated to achieve. The United Kingdom was no longer an empire. New agreements were stipulated and the history of the European Union, as well as the relationship among countries, began.

Winston Churchill, army officer, writer, reporter, professor, British Prime Minister in the years 1940-45 and 1951-55, was one of the greatest believers in the creation of the

“United States of Europe”. Basically, the development of an alliance among states based

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on freedom, equity, safety and peace, in order to prevent dictatorship and totalitarian governments such as in the World War II. In his famous “Speech to the academic youth” held at the University of Zurich in 1946, he said:

“There is a remedy which ... would in a few years make all Europe ... free and ... happy.

It is to re-create the European family, or as much of it as we can, and to provide it with a structure under which it can dwell in peace, in safety and in freedom. We must build a kind of United States of Europe. In this way only will hundreds of millions of toilers be able to regain the simple joys and hopes which make life worth living”.¹

The fundamental political push was given by George C. Marshall, the Secretary of the US: on 5 June 1947, at Harvard University, he gave a public speech about the essential cooperation issue among the European states. The plan was called “European Recovery Program”. The main aims were the reconstruction of the economic and political assets after the World War II and the creation of a supranational institution that could guarantee the implementation of the plan. The proposal was accepted by the West European States and the consequence was the creation of the “Organization for European Economic Cooperation” (OEEC).²

“For the past ten years conditions have been highly abnormal. […] Long-standing commercial ties, private institutions, banks, insurance companies and shipping companies disappeared, through loss of capital, absorption through nationalization or by simple destruction. In many countries, confidence in the local currency has been severely shaken. The breakdown of the business structure of Europe during the war was complete. Recovery has been seriously retarded by the fact that two years after the close of hostilities a peace settlement with Germany and Austria has not been agreed upon.

But even given a more prompt solution of these difficult problems, the rehabilitation of the economic structure of Europe quite evidently will require a much longer time and greater effort than had been foreseen.”³

1 From a document of European Commission, “Winston Churchill: calling for United States of Europe”

2 It became in the future the “Organisation for Economic Co-operation and Development” (OECD);

3 From Goerge C. Marshall Foundation, “The Marshall Plan Speech”.

https://www.marshallfoundation.org/marshall/the-marshall-plan/marshall-plan-speech/;

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In 1948, in The Hague, Churchill, as honorary president, called the “Congress of Europe” in which he met 800 delegates from all the European countries. This led to the creation of the Council of Europe on 5 May 1949.

In the same year was born the North Atlantic Treaty Organization (NATO), an alliance created to serve three major intents: deterring Soviet expansionism, forbidding the revival of nationalist militarism in Europe through a strong North American presence on the continent, and encouraging European political integration.⁴

The idea of European integration approach grew and with it the role of Britain. Thanks to Churchill’s theory of the “three circles⁵”, the UK was considered as the “joining link”

between Europe, America and Commonwealth. It had a global responsibility in the foreign, commercial and financial affairs.

Even though the words of Winston Churchill, the relationship between the European Union and the United Kingdom continued to be really difficult. The years after the World War II were characterized by a strong opposition to the entry into the European Community.

In 1951 was founded the European Coal and Steel Community in the Treaty of Paris (ECSC). It was the first supranational organization created to regulate the production and industrial process after the devastation of the war, ended in the 1945.

The Treaty was signed by Belgium, France, West Germany, Italy, the Netherlands and Luxembourg. The main purpose was to prevent another possible global conflict and to create a common market of coal and steel in order to control the flow of goods among the states.

The ECSC led to the creation of the European Economic Community (EEC) and the European Atomic Energy Community (EAEC or Euratom), founded in the Treaty of Rome (known as TFUE, Treaty establishing the European Economic Community) in 1957 and signed by the same six States. The objective was to create common customs and to reduce the common duties, in order to establish a single market for goods, labour, services and capital among the Member States.

In this scenario the history and the strategic position of the UK was threatened. After a strong opposition following the World War II to the ingress into the EEC, the UK

4 As reported in the official website of NATO; https://www.nato.int/;

5 Ellison, J. (2000). “Threatening Europe: Britain and the creation of the European Community, 1955-58”.

London: Macmillan.

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government understood the potential benefits of the European Agreement. During the period 1950 – 1960, the economic power and the political influence of the UK was reduced. The strategic position of the UK was not sufficient to overcome the new West European alliance.

Due to the new coalition and after the catastrophic failure in the Suez crisis in 1957⁶, the Prime Minister Harold Macmillan, Conservative Prime Minister (elected in the same year, 1957) understood the necessity to create strong boundaries among states to compete with the EEC. Macmillan wondered about the creation of an independent European alliance, in order to enhance the credibility of the UK and to strengthen its power on the market.

In May 1960, “The European Free Trade Association” (EFTA) was founded by Austria, Denmark, Norway, Portugal, Sweden, Switzerland and the United Kingdom. The purpose was to promote closer economic cooperation and free trade in Europe⁷. The idea was to found a “Common Market” to reduce the tariffs and fees of industrial goods.

Initially it did not provide for a central supranational organization and the introduction of common external tariffs.

The constitution of the EFTA was the first integration approach of the UK government.

At the same time, the UK kept the attitude to oppose to the European alliance by making continuous attempts to demonstrate and establish the power of UK as a dominant economic voice in the EU scenario.

After entering in EFTA, the UK considered the great possibility to enter in the West European Alliance. The main reason was to reach the same tariffs and agreements of the EEC in the economic textiles and agricultural sector. The country needed to promote its strategic position and influence on international affairs. For this reason, the UK considered to enter into the EEC.

1961 was the year of the first negotiation. The British government submitted its application (together with Denmark and Ireland, followed by Norway in the 1962) to join the EEC. Macmillan committed fully to the collaboration and the participation of the country. However, its membership was to be considered as effective only under

6 May, A. (Ed.) (2001). Britain, the Commonwealth and Europe: the Commonwealth and Britain's applications to join the European communities. New York: Palgrave

7 “EFTA through the years, Main events in the history of EFTA from 1960 until today”.

http://www.efta.int/;

11

certain conditions, such as the preservation of the national sovereignty and an intergovernmental position. The UK conditions were fundamental to improve the credibility of the country in the European scenario and to prevent the application of the EU free-trade ideology.

The negotiations lasted two years, as far as in 1963 the French President, Charles de Gaulle, vetoed the application of the UK⁸.

A second British application, proposed by the new Labour PM Prime Minister Harold Wilson, was rejected by the same de Gaulle in 1967.

The French government was steadfastly opposed to the entering of the UK. In particular, the global perspective of the UK and the possibility to open up the commercial European borders to the United States, threatened the French economic force. France would have wanted to maintain its strategic position in the new alliance and to protect its “Renaissance” after the World War II, achieved after the government of de Gaulle⁹.

In 1968 de Gaulle resigned and Pompidou became the new French Prime Minister.

After seven years of attempts and negotiations, the new French government and the UK Prime Minister Edward Heath agreed the condition of the admission. In 1971 the United Kingdom submitted the third successful application to enter in the EEC.

During the meeting, Pompidou and Heath clarified and signed the admission’s conditions of the UK in the EU. One of the main issues was the role of the pound. The British Prime Minister accepted to limit in a future step the power of the pound sterling in Commonwealth countries.

After two years, the negotiations ended successfully. In 1973, the United Kingdom became officially part of the EEC (with Ireland and Denmark)¹⁰.

8 “A History of the UK’s EU Membership”; http://ukandeu.ac.uk/explainers/factsheet-on-timeline/;

9 “After Charles de Gaulle's inauguration as president in January 1959, France seemed to have the upper hand for the first time since the beginning of the second world war. During the 1960s French gross national product grew at an average of 5.8% a year: it was the beginning of a French «renaissance» and of the period known as the «thirty glorious years», «trente glorieuses».”; article: “Back when Britain was banging on Europe’s door”, Kathryn Handley; 13 October 2012; The Guardian;

https://www.theguardian.com/commentisfree/2012/oct/13/britain-europe-david-cameron-eu;

10 UK and Denmark left EFTA to join the EEC.

12 1.1.2 The Referendum of 1975

Even though the meeting in Paris and the admission of the United Kingdom in the European Economic Community, the relationship between the UK and the European alliance was threatened again.

Harold Wilson won the general election in 1974. In his election manifesto, he proposed a renegotiation of the UK agreements with the EU and promised to hold a national referendum. Wilson won the general election and became the new British Prime Minister. True to his word, he asked certain concessions to the UK¹¹.

The Referendum would have been consultative, as established in the manifesto election commitment. In this way, British citizens would have had the possibility to express their opinion about the renegotiation, thereby choosing whether to stay or leave the EEC.

On 1 April 1974, the Foreign Secretary James Callaghan informed the EU Council of Ministers about the proposals of the Prime Minister. The main aims that the UK would have wanted to achieve were: major changes in the Common Agricultural Policy, allowing the foreign producers outside the EU to have access to the food market in UK;

new and fairer methods of financing the Community Budget, to balance the financial contribution and the division of resources among the Member States (mainly in the agricultural sector); the rejection of international agreement to maintain a fixed parity of the exchange rate among the European currencies; retention by the English Parliament of powers over British economy, to manage properly regional, industrial and fiscal policies; new agreement on capital movements, to protect the balance of payments and full employment policies in UK; the protection of the interests of the Commonwealth and developing countries, allowing them to have access to the British market with special trade and aid policies; the refuse of the harmonization of Value Added Tax, i.e. rejecting any proposal that did not comply with British fiscal system.

Those requests were supported by the UK government and by popular consensus.

During his speech at the European Council of Ministers, Callaghan underlined the reasons why they strongly believed in the renegotiation and redefinition of the EEC membership terms. The UK refused permanently fixed parities and Economic and

11 “The 1974-75 UK Renegotiation of EEC Membership and Referendum”; Briefing Paper, Number 7253, 13 July 2015; House of Commons, Library;

13

Monetary Union as well as the “unrealistic” concept of European Union¹². It also contested the cost of the Common Agricultural Policy, burdensome for the UK as one of the major importer of food in EEC, and promoted trade with the Commonwealth and developing countries in industrial and agricultural sectors; aid and regional assistance.

The real intention of the British Government was to maintain the strategic economic and political position of the country in the world, especially by preserving the possibility to be the “joining link” among Europe, the US and Commonwealth and keeping its global responsibility in the foreign commercial and financial relations¹³.

The negotiation was difficult. The Paris Summit in 1974 and at the European Council in Dublin in 1975 redefined several agreements between the UK and the European Mmber States. The new terms were established in the Cabinet on 18 March 1975. The Commons approved the renegotiation on 9 April 1975¹⁴.

After the election campaign of Wilson and the fundamental speech of Callaghan at the European Council of Ministers, the public opinion changed. Due to the agreements achieved in 1973 by Heath, in favour of the new proposals of the Labour Party, the public perception of the European Union changed. In 1975 the Britons considered being part of the EEC as an advantage.

The issue of a Referendum on EEC membership turned out to be controversial in the UK Parliament. On one side, the supporters of the EEC and the Conservative Party, represented by the neo-elected leader Margaret Thatcher, were strongly opposed. On the other side, the Referendum procedure was promoted by those who wanted to leave the EEC, majorly composed by mainly the Labour party politicians.

12 As James Callaghan defined the Project of European Union during his speech at the European Council of Ministers on 1 April 1974: «quite unrealistic and not desired by our peoples, certainly not by the British people». “The 1974-75 UK Renegotiation of EEC Membership and Referendum”; Briefing Paper, Number 7253, 13 July 2015; House of Commons, Library;

13 According to the Churchill’s theory of the “three circles”, already mentioned.

14 The EEC Member States were prepared to the UK concession, but the French Foreign Minister defined the requests of UK «wholly contrary to the very spirit of the community» and the German Government worried about the possibility to lose the main point that was the creation of a community. As reported in

“The 1974-75 UK Renegotiation of EEC Membership and Referendum”; Briefing Paper, Number 7253, 13 July 2015; House of Commons, Library;

14

The Parliament produced the “White Paper”¹⁵ on 26 February 1975 that was called:

“The Referendum of the United Kingdom Membership of the European Community”

The question was:

“Do you think the United Kingdom should stay in the European Community?”

Public funding was provided for both “Yes” Campaign¹⁶ and “No” Campaign¹⁷, in order to guarantee an equal and fair discussion. On 26 March 1975 the UK government proposed the Referendum Bill. It was debated on 10 April 1975. The crucial issues concerned the franchise, the authority of the Government during the Referendum and the general norm for its conduct.

The question reported was the same adopted in the White Paper, with an addiction:

“Do you think the United Kingdom should stay in the European Community (the Common Market)?”

The Bill was approved on 8 May 1975.

The Referendum was held on 5 June 1973 and its results were declared on 6 June 1975.

The turnout was 64.03%.

The following chart explains in details the percentage:¹⁸

15 A document produced by a government authority or International institution to inform the citizens about difficult arguments and issues, in order to explain the problem or an eventual decision and to propose a solution;

16 Manifesto «Why you should vote “Yes”» was integrally reported in LSE Digital Library;

https://digital.library.lse.ac.uk/objects/lse:fuv593baz?page=1;

17Manifesto «Why you should vote “No”» was integrally reported in LSE Digital Library;

https://digital.library.lse.ac.uk/objects/lse:cez792qaf?page=1;

18 As reported in The 1974-75 UK Renegotiation of EEC Membership and Referendum”; Briefing Paper, Number 7253, 13 July 2015; House of Commons, Library;

15

Yes 17,378,581 (67.2%)

No 8,470,073 (32.8%)

Valid votes 25,848,654

Invalid votes 54,540

Total votes 25,903,194

Figure 1. Source: House of Common

1.2. The economic and financial policy of the UK

The admission of the UK in the EU was an emblematic event for the European history.

It changed the existing rules and created a new balance among the EEC Member States.

During the time, the discrepancy within the EU grew, as well as the public discontent of the UK citizens. The possibility of secession has always threatened the membership of the UK in the EU.

1.2.1. The Premiership of Margaret Thatcher

The agreements reached in 1973 seemed to be the beginning of a new cooperation among states. However, the British government did not accept completely the European rules and the terms of the countries’ integration.

In the 1980s, the UK government worked hard to establish and to improve its strength on the international economic arena.

16

The turning point, that casted several doubts on the apparent peaceful European scenario, was the election of Margaret Thatcher as Prime Minister in 1979, member of the Conservative Party.

After the inflation growth and the consequent imposition of pay caps on public employees¹⁹, imposed by the government of Callaghan²⁰, was time for new election.

The troubles with the trade unions represented a good opportunity to Thatcher.

In 1979 Thatcher proposed in Parliament a motion for no-confidence vote against Callaghan. Due to this event, a new era for the British government began. In May 1979 the Conservative Party obtained the majority of seats in Parliament and Thatcher became the First female Prime Minister in the history of UK²¹.

The political and economic changes started in a very short time. The main aim of the new government was to reduce the inflation. Thatcher applied the theories of Friedrich von Hayek²² and Milton Friedman²³, about privatization²⁴ and monetarism²⁵, in order to reach her goals. This political period become known in history as “Thatcherism”.

She started increasing the interest rates in order to slow down inflation and reduce money supply. She also introduced an indirect taxation and raised VAT²⁶.

Regards the foreign policy, the core of disappointment in the relationship between UK and the other West European Countries regarded the funds received from the treasury of the EEC that were significantly lower than the fiscal contribution paid by the UK to the Community.²⁷

In 1979, during a meeting of the Council of Ministers in Dublin, the Prime Minister proposed a renegotiation of the return’s budget and rejected the proposal of the

19 1978-1979 are remembered and known as the”Winter of Discontent”. As reported in the article

“Margaret Thatcher and Conservative Politics in England”; http://www.crf-usa.org;

20 The Prime Minister was elected on 5 April 1976, sustained by Wilson. His mandate lasted still the 1979;

21 Margaret Thatcher was not a feminist and she never embraced feminist movement; even though she was proud to be the first scientist as Prime Minister. As reported in the article “Margaret Thatcher and Conservative Politics in England”; http://www.crf-usa.org;

22 Austrian economist who won the Nobel Prize in 1974;

23 American economist who won the Noble Prize in 1976;

24 Due to the von Hayek’s theory; it means private control of key industries and businesses away from the government control;

25 Due to the Friedman’s theory; it means controlling the national supply of money that should grow at fixed rates;

26 “Value-Added Tax”

27 The ratio was 20% of contribution from UK and 10% receive from the total budget of the Community.

As reported in Minford P., Mahambare V., Nowell E (2005): “Should Britain leave the EU? : an economic analysis of a troubled relationship”; Cheltenham, UK: Edward Elgar in association with the Institute of Economic Affairs;

17

European Community. This request met the disappointment of France and Germany that were called to cover the gap caused by e reduction of UK contribution.

In 1982, Thatcher reached an important deal on agricultural prices. In 1984, during a European Council meeting in Fontainebleau, the “Iron Lady” achieved the economic target. London obtained a compensation budget equal to 66% of its contribution²⁸.

"We are not asking the Community or anyone else for money.

We are simply asking to have our own money back".²⁹

Even though the conditions proposed by Thatcher in the first meeting with the Community were different, she was forced to accept the agreement drated by the EEC.

This mechanism passed at the history as “UK rebate” and was adopted in May 1985 by the European Council. It was a complex calculation based on the VAT contribution of UK and the spending return³⁰.

At that time, 70% of the EEC expenditure was used for agricultural resources and financing the Common Agricultural Policy (CAP). Every country was obligated to contribute to the maintenance of this economy. The UK was one of those countries that paid the highest taxes to finance the agricultural sector, even if, in 1980s, the country was the third poorest Member State, with the smaller agricultural sector and registered fewer possibilities to share contributions with farm subsidiaries. For this reason, for many years, UK has been the biggest net contributor to the EU budget³¹.

Through this formula, Thatcher was able to demonstrate that the British payments were excessive with respect to its GNP³². On these grounds, the British contribution to EEC annual budget was reduced and the gap was covered by the other Member States.

Another important point of the Thatcher government’s was the heavy opposition to the creation of the European Union.

28 Moore, L. (1999): “Britain's trade and economic structure: the impact of the European Union”; London:

Routledge;

29 As Thatcher said at a summit in Fontainebleau; as reported in the article “Q&A: The UK budget rebate” from BBC; http://news.bbc.co.uk/2/hi/europe/4721307.stm;

30 "Commission Working Document", European Commission. 14 May 2014; retrieved 14 May 2016;

31 As reported in the article “Q&A: The UK budget rebate” from BBC;

http://news.bbc.co.uk/2/hi/europe/4721307.stm;

32 “Gross National Product”;

18

In 1986, the Single European Act was proposed and entered into force in 1987, as a supplement and an integration of the Treaty of Rome.³³ This new agreement had the clear intention to build up a strong alliance and a monetary union among the Member States.

The speech of Margaret Thatcher in 1988³⁴ in Belgium was crucial to explain the position of UK in those years. The British government refused the European Union and, above all, the creation of an Economic and Monetary Union. The focus was to limit the European Community power to promote free trade and the true competition among the Member States. The main UK concern was the creation of the European Central Bank and the possible future political scenarios stemming from the creation of a supranational European Government. Thatcher sustained that the creation of a common market was not related with the existence of a central political authority and the replacement of national currencies with a common single currency.

The British decision to opt-out a unified European monetary system was made in to maintain a complete autonomy on sterling pound and in the monetary policy.

This political decision raised political problems among the Member States and the UK government remained isolated³⁵. In that moment the interest rate was very high (due to an unsustainable boom). For this reason, at the European Council meeting in Madrid, in 1989, Geoffrey Howe³⁶ and Nigel Lawson³⁷ forced Thatcher to vote in favour of the creation of the monetary union and the governing principles currency control.

The “European Exchange rate Mechanism” was adopted and the inflation in Europe decreased. Margaret Thatcher resigned in 1990, no longer after having joined the exchange rate deal.

33 In that case the British government presented a document, called “Europe-the future”, that it had already explained during the meeting of Fontainebleau, in which it demonstrated the situation of the UK and the intention of the state in the EEC;

34 «Speech to the College of Europe (“the Bruges Speech”)»; 20 Sep 1988; Margaret Thatcher;

https://www.margaretthatcher.org/document/107332;

35 Forster, A. (2002): “Euroscepticism in contemporary British politics: opposition to Europe in the British Conservative and Labour parties since 1945”; London: Routledge;

36 Howe was a Conservative politician; Cabinet minister during the Premiership of Margaret Thatcher;

then he became Chancellor of the Exchequer, Foreign Secretary, Leader of the House of Commons, Deputy Prime Minister and Lord President of the Council. He resigned on 1 November 1990.

37 Nigel Lawson, Baron Lawson of Blaby, was a Conservative politician and journalist. He was a Member of Parliament from 1974 to 1992, and served in the cabinet of Margaret Thatcher from 1981 to 1989.

Prior to entering the Cabinet, he served as the Financial Secretary to the Treasury from May 1979 until his promotion to Secretary of State for Energy. He was appointed as Chancellor of the Exchequer in June 1983, and served until his resignation in October 1989. He resigned after the European Community summit, after that his demands were not met.

19 1.2.2. The European Monetary Union

The integration of the goods markets contributed significantly to the evolution of European Integration³⁸.

The Treaty of Rome described the principles of the monetary union and the exchange rate policies. The necessity to create a common market became stronger. A real agreement was reached in 1969 at the summit in Hague. At the end of the 1970s, the French President, Valéry Giscard d’Estaing, and the German Chancellor, Helmut Schmidt, proposed the European Monetary System. The focus of the proposal was to conceive a “stability common zone”, whose core was the Exchange Rate Mechanism (ERM).

The 1980s and 1990s were crucial years for this delicate theme. The Single European Act (SEA) signed in 1986 declared the terms of the creation of the European Integration and the completion of the internal market. In 1988 at the Hannover summit, the Committee, guided by Jacques Delors, proposed a plan for the creation of the Economic and Monetary Union (EMU), based on the introduction of a single currency, regulated by a central and supranational Central Bank.

During the Treaty of Maastricht (better known as Treaty on European Union, TEU), in 1992, the EMU was adopted and signed by the leaders of European Member States.

This led to the creation of the European Union and the formation of the constitutional basis of EU. The established three pillars³⁹ were:

1) Creation of the European Union, through a single European Market, regulated by the European Central Bank;

2) Unification of internal and legislative policies of the Member States;

3) Definition of Foreign Policies and Defence.

38 J. de Haan, S. Oosterloo, D. Schoenmaker, (2012): “Financial Markets and Institutions. A European Prespective”; Cambridge University Press;

39 The leaders of the Member States also led the basis for the creation of the Euro; they also reinforced the policies of the Human Rights and introduced the concept of European Citizenship;

20

In this essential phase, the negotiations with the United Kingdom were difficult. After the German reunification and the high interest rate, the situation among the members of Exchange Rate Mechanism changed. In particular, the UK political and economic situation deteriorated with the depreciation of the United States Dollar. This period is known as “Black Wednesday”, started on 19 September 1992. The Prime Minister John Major (member of the Conservative Party), broke the deal with ERM in order to enhance the value of the pound sterling.

Major was a supporter of the European Union. Nonetheless, he strongly opposed the creation of a supranational institution, a centralized control of the economy, and EU social policies, as provided for the Treaty of Maastricht⁴⁰.

The UK made a strong opposition to the “Eurocracy” and “Eurocurrency. The adoption of a single currency could have been a bad decision for the British government, leading to greater financial and economic problems.

The negotiation ended with a deal that allowed the UK the so called “Opt-Out Clause”.

The British government decided not to take part to the agreement, keeping the door open to a possible entrance, in case the UK met the convergence criteria established in the Treaty of Maastricht for entering in the European Union. In such case, the UK could be integrated into the single currency.

Even though the agreements reached during the negotiation, the internal and external discrepancy grew. The UK faced the necessity to dialogue with the other European Leaders and to cover the divergences between Labour and Conservative Parties⁴¹. The stressing situation in UK had a bad impact on the social relationship with EU. The voice of the British government was not as strong as it expected and the conditions proposed in Treaty of Maastricht could not found approval on the political arena.

The strength of UK in the global scenario was threatened. It lost the central role and the credibility it gained in the first years of the European agreement. These events caused several problems in national and international affairs and led to the new election of 1997.

The new elected Prime Minister became Tony Blair, member of the Labour Party.

40 He proposed a different way to solve the problem of social policy, through the acceleration of the economic growth and the private enterprises.

41 As the vote of confidence called by Major in 1993, after an amendment proposed by the Labour Party on the Social Protocol;

21

In the same years, the European Union achieved other important goals in the European integration.

In 1997 was signed the Treaty of Amsterdam, which identified employment and social protection policies.

At the beginning of 1998, the European Council approved the entry into force of the single currency. Starting from 1999, the 11 Member States that signed the Treaty of Maastricht joined the euro-area and adopted the euro.

The European Central Bank (ECB) acquired political and financial power, being the European authority in charge for the management of the monetary policy⁴².

1.3. The UK before Brexit: the beginning of the crisis

From the Conservative to the Labour Party, every British government worked very hard to reach positive agreements with the EU. Nonetheless, any negotiation attempt was not enough to stop the general discontent of the UK citizens. The membership of the UK in the EU did not meet the needs of the country. Being independent and protecting the national sovereignty have always been fundamental pillars for the British society.

1.3.1. The era of the new Labour Party

The internal division in the Conservative Party and the difficult agreement reached in the Maastricht Treaty provided a good opportunity for the Labour Party⁴³. In the 1990s

42 As in the Treaty on the Functioning of the Europe (TFEU) the primary objective of ECB is to maintain the price stability, to guarantee financial regulation and supervision, to promote smooth operations of payment systems.

43 Bulmer S. (2008): “New Labour and the European Union 1997-2007. A Constructive Partner?”;

Working Paper FG 1, 2008/05, March 2008 SWP Berlin;

22

it adopted a pro-European policy and supported the idea of a close cooperation between the EU and the UK. During his speeches, Tony Blair gave a positive feedback concerning the European integration. For the Labour Party, joining the single market might have been the right way to reach other important goals, such as the economic competitiveness.

The election manifesto in 1997, proposed by Blair, included several considerations that changed the public opinion (which voted for the Labour Party in the same year). The aim was holding a referendum to participate in the single currency and leading reform in the EU.

The main object for Blair in the Treaty of Amsterdam (signed on 2 October 1997 and come into force on 1 May 1999) was to bring the UK within the Social Contract and to develop an agreement in the Security Policy field. In this way, the British government could have prevented hypothetical new world wars and to fought against internal and external threats.

In 1998, the UK took over the presidency in EU. It was a great achievement for the government. The presidency represented an opportunity to enhance the credibility of the country at international level. It meant taking part in all meetings of the Council Ministers, in external and inter-institutional relations, and intervening in matter of European political agenda.

In domestic terms, it improved the public impression about the government of Blair.

From the European point of view, the decision to opt-out from the European Monetary Union did not allow the UK to be determinant and to play a strategic role in the European policy agenda.

Nonetheless, the approach of Labour Party in the European collaboration was different from that of the Conservative government. It opted for cooperation and integration.⁴⁴ The British government gave an important input in the identification of economic strategies⁴⁵ within the EU and in the construction of the European Security and Defence

44 A good example to explain the progress in international affairs is the Kyoto agreement, on controlling the greenhouse gases;

45 That culminated in the Lisbon Strategy for making the Europe Union more competitive in the global economy. Source: Bulmer S.: “New Labour and the European Union 1997-2007. A Constructive Partner?”; Working Paper FG 1, 2008/05, March 2008 SWP Berlin;