Denis MacShane: Slash and burn: less Brussels, better Europe

Has the word "leadership" been expunged from the dictionaries of Europe? It is not just David Cameron, Nicolas Sarkozy and Angela Merkel who are all on holiday. The crisis of the eurozone exposes a Europe whose institutions no longer work.

For Britain, George Osborne has had the boldest response to the crisis, when he welcomed the idea of joint economic governance and fiscal policies for the 17 eurozone nations – a startling change from previous British policy, which for centuries has been dedicated to preventing the formation of a hegemonic ideological, economic or religious continental puissance. The Osborne doctrine in favour of a single economic governance for 75 per cent of the EU is dramatic and new.

Can this open the way to changing the sterile, petty, point-scoring dialogue of the deaf between Europhiles and Europhobes, federalists against nationalists, that most voters treat with contempt?

Britain could take the lead in a new argument about changing the way the EU is run. The first priority is to stop the unending growth of the Commission. It now has 27 commissioners, with more in the Balkan waiting room. Most do overlapping jobs with an army of officials justifying their existence by producing ever-increasing minutiae of regulations that drive most European citizens mad with fury. Less Brussels will make better Europe.

Second, the European Parliament sees fewer and fewer voters electing barmier and barmier MEPs at each election. The near-10,000 national parliamentarians in the 27 EU member states feel completely excluded from all European decision-making. The answer is to connect national parliaments to Strasbourg, where the European Parliament should be elected in thirds every two years so that it is more in tune with national electorates. A second chamber consisting of national MPs should be set up to check legislation. The Commons committee system needs revision so that EU policy and laws are examined jointly by MPs and MEPs.

Third, the EU should see if direct democracy can play a role. Handling this is tricky. The Commons will have to debate and say no to hanging because most petitions and plebiscites bring out the worst atavistic and xenophobic instincts. Anyone can follow a mob. In Switzerland, referendums cannot challenge judicial rulings and there may be ways of consulting people to reduce the sense of the EU being run by elites and for elites.

Britain is neither going to fold into Europe nor quit the EU. In the middle ground, new politics and institutions are needed to shape a better 21st-century EU. Britain can opt out of the euro but we cannot opt out of being a European nation. A historic compromise is needed so that Britain can be inside the EU tent, and leading in Europe.

Denis MacShane is MP for Rotherham and was Britain's longest-serving minister for Europe