EU Suffers Worst Split In History As David Cameron Blocks Treaty Change

EU suffers worst split in history as David Cameron blocks treaty change (Telegraph, Dec. 9, 2011):

Britain was left isolated this morning with just three other countries, Sweden, Hungary and the Czech Republic, as an exultant Nicolas Sarkozy hailed a “historic” breakaway “euro plus” bloc that would pursue fiscal and economic union via a new treaty outside the EU.

The Prime Minister insisted that he had been prepared to support treaty change among all 27 of the EU’s members to allow the 17-strong eurozone to take measures to tackle its debt crisis and to enforce tough new fiscal rules for the single currency.

But after 11 hours of bad-tempered talks, Mr Cameron said that he had blocked the changes because France and Germany had refused to agree to a “protocol” giving the City of London protection from a wave of EU financial service regulations related to the eurozone crisis.

“I came here with one of two outcomes in mind: safeguards that made a treaty within a treaty, a complex legal structure, or if we could not have that, allowing others to go off in a treaty on their own and ensuring that the EU is maintained as a single market,” he said.

“I had to pursue very doggedly what was in British national interest. It is not easy when you are in a room where people are pressing you to sign up to things because they say it is in all our interests.”

After coming under intense pressure from the French president and Angela Merkel, the German Chancellor, Mr Cameron told EU leaders in the early hours of Friday morning unless he had the safeguards he could not, in conscience, asked British MPs to agree to treaty change.

“It is sometimes the right thing to say, ‘I cannot do that, it is not in our national interest, I don’t want to put that in front of my parliament because I don’t think I can recommend it with a clear conscience, so I am going to say no and exercise my veto’,” he said.

The Prime Minister had demanded that a legal “protocol” to protect the City and to preserve the EU single market was inserted in any new treaty.

The draft text, seen by The Daily Telegraph, does not create any new opt-outs but seeks to protect Britain’s financial sector from a tide of EU legislation.

If it had been agreed, the protocol would require a unanimous vote, giving Britain a veto, if the EU sought to give European financial supervisors new powers to overrule national authorities, such as the FSA.

This follows constant attempts by the European Commission to chip away at Britain’s regulatory sovereignty over the City through piecemeal legislation, recently on derivatives and hedge funds.

The safeguard also ruled out “discriminatory” measures by the European Central Bank to restrict certain euro transactions to the eurozone, a move that threatens thousands of jobs in London.

The new breakaway “euro plus” group of 23 EU members will meets later today to begin work on a new, separate inter-governmental treaty creating legal chaos and confusion.

Mr Cameron warned the new bloc that it would not be able to use the resources of the EU, raising real doubts as to whether the eurozone would be able to enforce fiscal rules in order to calm the markets.

“Clearly, the institutions of the European Union belong to the union, they belong to the 27. They are there to do the things that are in treaties that we have all signed up to over the years,” he said.

“That is an important protection for Britain. Obviously in terms of financial services we do have concerns, we don’t think regulations have been competitive, we think they have been discriminatory, the single market and the institutions are the best way to protect against it,” he said.

“Is it better to have a new treaty within a treaty, a group of countries within the 27 using the institutions, constructing a new legal structure and having the institutions serving two masters at the same time within the same structures?

“That is only worth it if you can get the proper safeguards. We couldn’t get those safeguards so better to let those countries do their thing, on their own, and keep the EU focused on what matters, for Britain, trade, the single market, investment and the rules that flow form that.”

President Sarkozy said that British demands had been “unacceptable”.

“We would have preferred a deal at the level of the 27,” he said. “That wasn’t possible taking into account the position of our British friends. In order to accept treaty revision among the 27 EU states, David Cameron asked us – something we all judged unacceptable – for a protocol to be inserted into the treaty granting the United Kingdom a certain number of exonerations on financial services regulations.

“We could not accept this, since we consider, quite on the contrary, that a part of the world’s woes stem from the deregulation of the financial sector.”

Mr Sarkozy has celebrated the split as new development in the EU and as a “a summit that will go down in history.”

In a tactic designed to isolate Britain and to split the 10 non-eurozone member states, Chancellor Merkel and Mr Sarkozy yesterday invited all 23 members of a “Euro Plus” economic pact to special monthly summits.

The invitation made in a letter signed by the German Chancellor and French President left Britain, the Czech Republic and Hungary outside the room for key talks on “policies to foster growth, competitiveness and fiscal stability”.

The move, which splits the key non-euro countries Poland, Sweden and Denmark away from Britain, will lead to decisions on broader economic policy being taken without British involvement.

“Cameron was clumsy in his manoeuvring,” a senior EU diplomat said. “It may be possible that Britain will shift its position in the days ahead if it discovers that isolation really is not a viable course of action.”

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