Explaining the EU deal: the UK and the eurozone

Published: 22nd Feb 2016

The Prime Minister’s renegotiation deal on the UK’s European Union membership is a package of changes to EU rules. It was agreed by European leaders on 19 February 2016. In this series of articles, some of the country’s leading experts in EU law explain the deal and what it changes.

In brief: The EU deal tries to reassure non-euro countries like Britain that they won’t be ganged up on by eurozone countries, who are now the majority. But EU law already bans discrimination, so it doesn’t change much. There will be a system for non-euro countries to object to laws being passed that might harm them, but it won't actually give them a legal opt-out.

The first part of the EU deal is designed to address concerns raised by the Prime Minister that countries in the EU which don’t use the single currency—such as the UK—might be put at a disadvantage or suffer discrimination compared with the countries that use the euro.

One such concern is the possibility that euro-states might engage in what’s called ‘caucusing’.

The worry is that they might discuss the single market when they meet in the ‘Eurogroup’, of which the UK is not a member. They might then come up with a done deal that is then forced through even if the non-euro states don’t agree.

Another concern is that the euro-states will force through legislation that discriminates, directly or indirectly, against the states that do not subscribe to the euro.

This is a worry because, in theory, euro-states can outvote non-euro countries—although EU decisions are often made with the agreement of all member states.

The EU deal seeks to address these concerns in different ways.

Euro and non-euro countries need to respect each other’s differences

It starts by spelling out that measures to deepen “economic and monetary union”— in other words, to take more decisions jointly on the economy and public finances—will be voluntary for non-euro states.

At the same time, those countries will not get in the way of these measures.

Discrimination based on a country’s currency is banned, and any difference in treatment must be for a good reason.

Laws about the euro area must respect the single market and not set up a barrier to, or allow discrimination in, trade between states.

There are, however, also duties on non-euro countries. Those states must not get in the way of laws about the euro area or economic and monetary union more generally.

The deal is also designed to allay fears that EU institutions with power over banking law could dictate to banks in non-euro states.

The UK’s concern that non-euro states might be required to bail out euro countries is also addressed: the deal makes clear that the former don’t have any such budgetary responsibility.

There hasn't been discrimination by eurozone countries

There is little if any hard evidence that the fears expressed in this part of the Prime Minister's demands reflect current reality.

The EU court can deal with this kind of discrimination. So far it hasn't had to, except for in one arguable case about banking.

The worry about 'caucusing' presumes that euro-states will have common goals that are different from non-euro states. That assumption is questionable.

The reality at the moment is that there are significant differences of view and interest among the euro-states themselves. The euro-zone includes both creditor and debtor nations.

They are also divided by the different nature of their economies.

Discrimination between EU countries is banned

General principles of existing EU law already ban discrimination.

This should stop countries treating euro and non-euro states differently for no good reason.

Changes to voting rules don’t give non-euro countries an opt-out

These statements are reinforced by the promise of a legally binding decision.

This will allow states that don’t participate in the eurozone banking union to indicate their opposition to some proposed laws about it.

They'll be able to argue that these laws should not be passed by qualified majority, which would allow them to be simply outvoted.

This is a response to the Prime Minister’s proposal that there should be some way to prevent the passage of EU laws that might be damaging to non-euro states.

The draft decision dealing with this issue is, however, mostly about reaching agreement among member government representatives if such an objection is raised. Going over their heads to government leaders on the European Council is merely an option.

The deal says that this “cannot result in a situation which would amount to allowing a Member State a veto”.

It doesn’t give the non-euro country a legal opt-out from any laws that are passed despite these objections.

Update 22 February

We revised the article to take into account the final version of the EU deal published on 19 February, rather than the draft of 2 February as in the original.


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