Eurozone travails pose awkward questions for coalition

Stark warning from Nick Clegg this morning about the state of the world economy and the gloomy outlook for our own. George Osborne gave the Cabinet a similarly bleak assessment yesterday.

The Treasury believes Europe shifted position in the last couple of weeks and Berlin is now resigned to a tighter inner core of Europe and a new treaty, even if it is not yet realistic about the timescale the markets might impose on it. What will the changes be? There’s a Treasury expectation that there will be Eurobond “light” – a Euro-zone bond to cover maybe more than half a member nation’s debt but individual countries required to raise the rest with national debt on their own books so that market disciplines bear down on them still and they don’t just live off the German hog.

In his speech today, Nick Clegg took time for what looked like a swipe at Tories (like George Osborne and any number of his backbenchers): “the key question is not: how do we seek to renegotiate the UK’s place in the EU in a treaty that hasn’t materialised yet.” Only yesterday George Osborne told Cabinet about how people had to start thinking about a new EU treaty. Of course, if that “key question” was posed, the Tories know where they would be on the issue: trying to keep and deepen the single market but cut back on many other EU competences. Where would the Lib Dems be though? Hard to say. Would the Tories need them? Labour has been on a bit of Euro-sceptic journey post-Blair and might feel it doesn’t want to be the wrong side of public opinion. That’s at least one senior Tory Cabinet minister’s thinking on the subject at the moment

PS My security pass for the Lib Dem Conference just arrived. Turn it over and you see this on the back. “Want to see your ad here? The perfect location for maximum exposure. Sponsor our conference passes.” It appears no-one did.