David Cameron and George Osborne plot EU renegotiation
David Cameron and George Osborne are said to be considering taking advantage of the euro crisis to renegotiate Britain's relationship with the European Union.
Senior Conservatives believe Britain may be able to regain control of some social and employment regulations and secure the future of the rebate as a condition of allowing closer integration among countries using the euro.
The plan would lead to tensions in the Coalition as the Liberal Democrats are likely to block any move for Britain to dilute its relationship with the EU.
This week, Nick Clegg, the Liberal Democrat leader, was asked whether Britain should seek to capitalise on the crisis. “We want a successful Europe, full stop,” he said. “Anything now which suggests we are somehow trying to distance ourselves from that would in the long run be economically self-defeating.”
Mr Osborne is thought to be pushing to combine negotiations over the bail-out with forthcoming discussions over the EU’s budget between 2014 and 2020.
EU leaders this week agreed a new €159 billion [£140 billion] bail-out for Greece, which will technically be allowed to default on some of its debts.
The eurozone countries also extended the remit of a European rescue fund to allow countries not on the brink of meltdown to borrow from the EU. This is likely to lead to greater integration between eurozone countries. Some politicians claim the fund is now in contravention of the European Treaty, which forbids Brussels from being responsible for national finances.
There is growing speculation that the treaty may have to be revised and ratified by parliaments in every country in the EU, rather than just members of the eurozone. Conservative MPs believe this would give Britain an opportunity to push Europe for concessions in other areas.
Treasury insiders hope Europe will drop plans for regulation of the City in return for British support. The EU is seeking a possible reduction in the rebate negotiated by Margaret Thatcher.
Ed Miliband, the Labour leader, has called for the Government to take a more active role in the ongoing eurozone negotiations, saying that Britain “has an interest in relation to the growth and stability in the eurozone”.
Last night, George Osborne announced the Government was cutting the interest rate charged to Ireland for an emergency bail-out loan, a move expected to cost the exchequer up to £400 million.
The moment of truth for Europe and Britain
We are at the point where either we allow the euro to collapse or move decisively towards an integrated Europe.
At the European summit in Rome in October 1990, Margaret Thatcher derided plans to create a single currency as “cloud cuckoo land”. Ambushed by her fellow heads of government, she threatened to use Britain’s veto to block a project that she did not consider to be in the national interest. That was to prove a fateful declaration: within a month she had been deposed from office, and the march towards European integration continued. In the event, Britain did not use its veto. At Maastricht, John Major agreed to the creation of a single currency, but wisely made sure we stayed out of it. But what Mrs Thatcher foresaw has come about. She recognised – as did ardent pro-Europeans such as Edward Heath – that currency union could not be sustained in the long run without political and fiscal integration.
Like the single currency’s architects, including Jacques Delors and François Mitterrand, Heath saw the euro as a way to achieve the ambition set out in the Treaty of Rome of “ever closer union”. From this perspective, the debt crisis in the eurozone is the moment of truth, the point when a choice has to be made: either to allow the euro to collapse, or to cross the Rubicon and make a decisive move towards an integrated Europe. No one who has been paying attention over the past 20 years should have been surprised by the direction EU leaders took in Brussels on Thursday night.
In ending the prevarication that had threatened to spread the contagion from Europe’s sovereign debt crisis around the globe, they stated unequivocally that they will do whatever it takes to keep the euro on the road. This will involve the imposition of centralised economic governance, on terms to be decided by Germany and France. As President Sarkozy said in Brussels: “We have used the Greek crisis to make a qualitative jump in the governance of the eurozone. We can’t keep having a currency disconnected from economic policy.”
The agreement to restructure Greek debt and allow the country to repay its loans at lower interest rates over a longer period has calmed the markets and eased the immediate crisis. Indeed, it is in this country’s interests to see financial stability in Europe. But this was more than just a cobbled-together package: it marked a significant moment for the EU, just as important as that summit in Rome, and the Maastricht Treaty that enacted its decision.
The question that arises now, as it did then, is what Britain should do about it, and what the implications are for our future in Europe? For David Cameron these are troubling questions, since the answers could wreck the Tory-Lib Dem Coalition. He has tried to avoid a clash over Europe – but the fight has come to him. How he handles it will be crucial to the survival of his Government. As he recently told his backbenchers, the Tories now have a historic chance to renegotiate Britain’s relationship with the EU, an ambition thwarted when they failed to win the election. But Nick Clegg, the Deputy Prime Minister, has already tried to forestall this, stating that Britain should not seek any national advantage from the crisis – a peculiar position for a British minister to adopt.
For nearly 50 years, British foreign policy has been to place the UK at “the heart of Europe”. Mrs Thatcher’s fate was sealed when she unilaterally sought to change that, against the wishes of others in her Cabinet. The Tories are now prepared to contemplate a two-tier Europe, with Britain in an outer layer. It is not yet clear how this can be achieved; but any move to fiscal union would be a breach of Article 125 of the founding treaty of the EU, which should either nullify earlier treaties or necessitate a new one. It would be unconscionable for Britain to be excluded from such deliberations, so the Government must exact a significant price for any agreement to a new treaty by insisting upon a loosening of the regulatory and financial straitjacket that full membership entails. The question of a referendum will also arise, inevitably pitching the Coalition partners against each other. Not for the first time, the single currency has the capacity to rock British politics to its foundations. It has even been known to bring down prime ministers.
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