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Mr Cameron comes to Brussels

Gavin Hewitt | 14:39 UK time, Wednesday, 16 June 2010

cameron_retuers_595.jpgThere was a time when many of Europe's leaders and Eurocrats trembled at the thought of David Cameron as prime minister. They imagined long painful negotiations with an administration determined to roll-back the EU's powers and block mission creep from Brussels.

So many have been surprised by the Cameron administration's charm offensive. A good slice of the new cabinet has already passed through Brussels and have picked up good reviews.

The British approach is to be pragmatic, active and constructive when they can be, whilst vigorously defending national interests. One British official said it made a "big impression" when the new Environment Secretary Caroline Spelman strode into a meeting speaking fluent French and German.

On Thursday David Cameron will attend his first summit. It will be dominated by the crisis in the eurozone, which has not gone away. Amongst some officials and some governments the lessons of the crisis are that the EU should integrate further. That could trouble David Cameron, but many of the proposals lack definition and there are deep differences in approach between the French and the Germans.

One proposal was for EU finance ministers to get a preview of national budgets. The British were quick to point out that the British budget would be unveiled first in the House of Commons. There may be room for compromise.

EU officials now talk of a "peer review" of the assumptions underlying a budget. And in the draft summit document it mentions EU member states presenting their budgetary plans to the Commission each spring, "taking account of national budgetary procedures". There may be enough wriggle room here for the British to avoid a clash.

There remains room for disagreement over plans to impose sanctions on countries that break the rules meant to underpin the Growth and Stability Pact, which governs countries in the euro. The Germans and Angela Merkel, in particular, want those sanctions to apply not just to the 16 members of the eurozone, but to all EU members.

Britain agrees with the discipline of sanctions but does not see why they should apply to countries that do not use the euro. For sanctions to be introduced, however, there would most likely be a need for a treaty change.

Many leaders fear that would bog the EU down again in endless meetings on structures, but if a new treaty went ahead the British government would face the potentially awkward question of whether it involved giving new powers to Brussels. If that was the case it could trigger a referendum in Britain - something which the new government wants to avoid.

Another potential source of tension is the bail-out of troubled eurozone countries. As it stands the British did not contribute to the massive . But if a country draws on the funds - and all speculation centres on Spain at the moment - pressure will build on the UK to become involved.

The argument would be that any bail-out of Spain would indirectly help British banks that have investments in Spain. (The British stake in the Spanish banking industry is about 10%). In effect Irish or Slovakian tax-payers could be indirectly subsidizing British banks or so it would be argued. We are not there yet and the British government will resist propping up a currency it regards as flawed.

On some of the key arguments lie ahead. The draft summit document talks of the need for a "safer, sounder, more transparent and responsible financial system".

The British would sign up to that. They will be more wary with proposals to regulate short-selling and credit default swaps. The British approach will be to support regulation, in principle, but to ensure it is targeted at products and practices that really did impact on the crisis.

On a to build up a kitty to avoid a future crisis the British are on board, but they are not convinced of the need for a pan-EU bank levy. They would prefer this to be agreed and organised at the G20 summits.

In briefings before the election senior Conservatives made it clear they were not looking for battles in Europe. They would be a distraction from dealing with the economy and they remember how previous bouts of euro-fighting destroyed the premiership of previous Conservative leaders.

Compromises have already been made to secure the coalition with the Liberal Democrats. No longer will they be looking to secure opt-outs from the EU treaties on social policy, justice, or the Charter of Fundamental Rights.

They will insist on a referendum if a new treaty envisages . In the wings the idea remains of a Sovereignty Act, which could limit the impact of EU laws and court rulings. But it remains unclear how enthusiastically the government will pursue that.

What the British will argue for is an extension of the single market into the service sector, energy and the internet. They believe in trade liberalisation. They want greater labour market flexibility. But many of those ideas are in fashion anyway as a sluggish EU looks to grow itself out of its crisis.

There will be arguments at some stage. There always are. But, for the time being, Britain is going out of its way to find allies and to avoid the old headline "Britain isolated in Europe".

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