Scots vote shows pitfalls, opportunities for EU referendum

By Paul Taylor and Alastair Macdonald PARIS/BRUSSELS (Reuters) - Scotland's vote against independence offers lessons for British politicians and their European partners faced with a referendum on whether to stay in the EU which Prime Minister David Cameron has promised for 2017. The fact that the 5.3 million mostly pro-European Scots will remain part of the British electorate makes it mathematically more likely the United Kingdom will vote "Yes" to EU membership. A Reuters Breakingviews calculator based on opinion surveys estimated the chances of a rump Britain voting to leave the EU were two-in-three, while the risk of such a "Brexit" fell to one-in-five if Scotland stayed. But three years is a long time in politics and much can change between now and then. Britain has avoided a traumatic break-up that would have caused a deep political shock and fanned English nationalism. But it has plunged into constitutional turmoil with Cameron promising at the last minute a devolution of many powers that may come close to federalism. One possibility is that Cameron's Conservatives will lose next year's general election, partly due to Scottish votes, and a Labour-led government will drop the plan for an EU referendum, which Labour leader Ed Miliband says he would only call if more powers were to be transferred to Brussels. If a plebiscite does go ahead, European officials and pro-EU analysts hope the same "better off together" arguments that worked in Scotland can be applied successfully to European Union membership. "It's very interesting to look at the parallels between the Scottish-UK debate and the UK-EU debate," said Fabian Zuleeg, chief executive of the Brussels-based European Policy Center, speaking by telephone from Edinburgh. "Look at the comments made by many of the pro-union campaigners within the UK: you could replace the benefits of the UK one-to-one with the benefits of being in the EU. But the same politicians don't seem to be making quite the same arguments." FEAR TRUMPS HOPE? One possible reading of the Scottish result is that fear trumped hope. Many Scots burned with a nationalist passion to jettison dependence on what they perceived as conservative, austere, arrogant England. Yet in the end, enough of them were worried by economic uncertainty to keep the union alive. With their hearts, they yearned for independence, but with their heads and wallets, they chose to play safe. Yet Zuleeg says fear of economic harm is not enough to sustain support for EU membership indefinitely. "We have seen a campaign which basically was about fear succeed in the end. But in the long run to maintain a union you have to have a more positive argument," he said. "You have to actually say what does this union stand for and that applies to the United Kingdom but it certainly also applies to the European Union." British politicians find this harder than their continental peers. As Roger Liddle, EU adviser to former Prime Minister Tony Blair argued in a book called The Europe Dilemma, they prefer to present a narrow case based on the comparative economic advantage of the single market rather than an emotional argument for the benefits of peace, cooperation and stability in Europe. ESTABLISHMENT DRAWBACK A second lesson from Scotland is that having the entire political establishment on your side may be a drawback if you are facing a skilled populist campaign with strong grass roots. The Irish government learned this to its cost when it lost two referendums on treaties on closer European integration in 2001 and 2008 and had to repeat the votes after obtaining special assurances from their EU partners. In both cases, the mainstream political parties all backed the "Yes" camp but were outfoxed by a motley alliance of activists ranging from radical Green and Marxist activists and anti-abortion crusaders. In Scotland too, the fact that all Britain's mainstream parties wanted to preserve the union offered an inviting target to nationalist leader Alex Salmond, who dismissed them as a posh London elite out of touch with the people. Former Labour Prime Minister Gordon Brown, a Scotsman with a deep commitment to saving national unity, resonated more with his fellow Scots than any of the English politicians. What may well have been decisive was the intervention of business leaders warning of the economic risks of losing the pound and their threats to move banking and corporate headquarters south of the border if Scotland voted to secede. Shares in Scottish-based companies tumbled and the pound fell on currency markets when a shock poll two weeks ago showed the "Yes" camp had grabbed a narrow lead. Those same forces would apply even more strongly in a referendum on Britain's EU membership. Foreign banks and investors have already warned they could leave the City of London financial center if it was outside the EU. MEDIA MATTER Even in the age of social media and blogs, traditional newspapers and broadcasters matter. While the publicly owned British Broadcasting Corporation was strictly neutral, most British and Scottish media, including newspapers owned by Australian-American magnate Rupert Murdoch supported preserving the union. By contrast, much of the British media except the business press has been strongly Eurosceptic for decades, regularly depicting "Brussels bureaucrats" as interfering in national life, tying down business in red tape and wasting taxpayers' money. This view of the EU pervades the national discourse. Successive British governments of left and right have sought to ride rather than tame, let alone slay, the Eurosceptic tiger. Cameron himself, in an effort to hold his mostly Eurosceptic Conservative party together, has played to this media gallery, notably by vetoing EU treaty change to introduce stricter fiscal rules at the height of the euro zone crisis in 2011 and opposing the choice of Jean-Claude Juncker as European Commission president this year. It remains to be seen whether the prime minister will be able to tame the Eurosceptic forces he has fed when it comes to a referendum. He is seeking to renegotiate a political settlement with Europe in advance of that vote rather than promising sweeping constitutional change on the hoof when he appeared on the brink of losing as he did with Scotland. TURNOUT IS KEY Another lesson from Scotland for the EU referendum is that mainstream political forces are more likely to prevail on a high turnout that a low one. Nearly 86 percent of Scots voted on Thursday, by far the highest participation in any UK election for decades. The silent majority got off its couch and went out to cast ballots. By contrast, the anti-EU UK Independence Party topped the poll in European Parliament elections in May on a paltry 34 percent turnout, when many mainstream voters stayed home. If political parties, activists and the media can generate the same impassioned debate about the pros and cons of EU membership as they did about preserving or breaking the union, a pro-European vote seems more likely. Not everyone is reassured that keeping the union together makes a "Yes" to EU membership more likely. Contrarian London financial analyst Louise Cooper, in a note to clients, said that by reopening Britain's constitutional settlement, Cameron has awakened English nationalism and could make an EU referendum harder to win. UKIP leader Nigel Farage, who campaigned against Scottish secession, has seized on the issue to complain that England is transferring too much money each year to the Scots. "This nationalistic fervor is likely to benefit the anti-EU politicians. And that is dangerous because it increases the risk of the UK exiting the EU," Cooper said. "In a way we have replaced one political risk - Scottish independence - with another - EU referendum. And the latter is far more of an economic risk than the former." (Additional reporting by Simon Jessop in London; Writing by Paul Taylor; editing by Philippa Fletcher)