9 Dec 2011

A British veto, but Europe edges towards saving the euro

Dateline Brussels: Strip out the British veto on a new full EU Treaty, and you are left with what appears to have been a pretty successful night of negotiations here. That is, if success is measured in terms of a middle to long- term commitment to secure and enhance the euro and the eurozone itself.

From the vantage point of my 11th floor hotel room window I was able to gaze down on what I estimate to be the seventh floor in the commission building in which the eurocrats toiled away during the night hours – they were clustered in shirt and blouse sleeves at round tables, six or seven to a table. At times somnolent, at other moments animated, as the discussions behind closed doors ebbed and flowed.

At 5am David Cameron did not disguise the progress toward saving the euro. His emphasis on his own veto did not obscure the reality that 17 euro members plus some half a dozen aspirant members have agreed a much tighter fiscal regime, trading significant areas of sovereignty to achieve it. They also agreed an immediate infusion of some €200bn for short-term bailouts.

That UK veto is designed to protect the huge financial service industry centred in the City of London – a sector that accounts for a significant proportion of UK GDP. The very sector that precipitated the 2008 crisis has not however derailed attempts to save the euro. Britain’s withdrawal from the process may indeed render it easier, because without having to battle for a new EU wide treaty (process that could have taken years) a much speedier solution can be triggered.

The sense here is that Britain has finally left the top table, that a two-speed Europe  is under way – the UK, Czech Republic, Hungary, and Sweden in Division Two, the rest in Division One – or trying to get into it.

From the British perspective, Europe is likely now to become a far bigger issue. No one knows how damaging isolation may prove. Nor how advantageous.

Politically, euro-sceptics may sense the whiff of victory in their nostrils. My own idiosyncratic sense is that there could be a backlash particularly from new businesses, big businesses and the younger generation who, in a globalise world, may wish to explore the option of belonging to a wider, deeper, more fiscally responsible union, who knows.

But looking at David Cameron this morning, sitting 10ft from him, I wondered how comfortable he felt in his newly defined position.

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