Little choice for Cameron in Europe à la carte

This week’s summit in Brussels has certainly been a defining moment in the history of the European Union. The UK’s decision to block any revision to the existing EU treaties as part of the package to save the euro is confirmation that we live in a Europe à la carte. Whether it proves to be a “two-speed Europe” only time will tell. That depends on how the eurozone evolves.

Given Britain’s position outside the euro and the fiercely eurosceptic mood in his Conservative party I’m not sure that David Cameron had any choice other than to veto proposed modifications to the EU treaties.

Cameron’s approach is consistent with the coalition agreement with the Liberal Democrats. This clearly stated that a referendum would only be triggered if there was a transfer of power from the UK to Brussels. The prime minister does not want to be forced into a popular vote; the best way to avert any such risk is to use the veto and to leave the 17 to work out their own solution.

Suppose Cameron had agreed to support a treaty revision aux 27, it would have been extraordinarily difficult for him to avoid a referendum. Britain is already subject to Article 126 of the EU Treaty concerning excessive deficits and government debt. Any change to the associated protocol to include new rules would surely have raised major problems in the Westminster Parliament. An alternative would be the use of Article 136, which sets out provisions specific to eurozone countries, but that too would seem to implicate the UK, particularly as it would further strengthen the powers of the Commission and the Court of Justice.

Cameron has domestic political reasons to tread carefully. There are quite a few Tory MPs who loathe his partnership with the Liberal Democrats and who would gladly use the European issue to seek to depose him and break the coalition. He may have cited the defence of the City of London as his make-or-break issue, but this seems rather disingenuous, since financial services legislation is governed by the existing treaties, while the imposition of a financial transaction tax, seen as a special danger for UK financial services, would be subject to unanimity.

There is of course an implicit danger here, that the 17 eurozone countries could decide to impose a unilateral tax on their own investment firms, whether operating in London, New York or anywhere else. And pity poor old Ireland, which dreads a eurozone agreement to harmonise corporate taxes and so threaten Ireland’s 12.5 per cent rate.

It is in areas like these that Britain’s longer term negotiating position in Europe will be seriously weakened. It is significant that six non-euro countries are already committed to join the “fiscal compact” agreed in Brussels, while Hungary, Denmark and Sweden will probably do so after consulting their parliaments. The UK will be the odd one out.

One question which the summit does raise is whether the British prime minister has worked hard enough to build alliances with his natural allies in Europe. Briefing after last month’s meeting with Chancellor Merkel suggested that some sort of agreement had been reached between the two of them, but there was no evidence of mutual understanding in Brussels this week.

Former MEP Ben Patterson has just published The Conservative Party and Europe, a comprehensive book tracking how Conservative Party opinion has switched from staunchly pro-Europe in the 1970s to viscerally anti-EU today. This switch led to the decision of the Conservative group in the European Parliament to sever links with the European Peoples’ Party. Patterson argues that this move potentially weakened David Cameron’s position with his natural allies.

The recent EPP meeting in Marseilles was perhaps a case in point, where EPP leaders met informally to agree common positions or at least to clarify reasons for disagreement in advance of the summit.

It could be argued that Friday’s blood-letting has cleared the air. The UK can now concentrate on the overriding priority, to do everything it can – including through the IMF – to help prevent the collapse of the euro. The irony is that it is the weakness of the eurozone structure, and not its strength, which has triggered the need for the new inter-governmental treaty and threatened the future of the whole European project.

Michael