Could David Cameron have done anything other than walk away from a new EU treaty?

By Bagehot

COULD David Cameron have done anything different at Thursday night's EU summit, when he refused to sign Britain up to new EU treaty rules overseeing taxation and spending in the euro zone, after failing to secure safeguards to shift key areas of financial regulation to vote by unanimity?

I was asked this question on the BBC today, and I did not come up with a good answer. During the interview, I had already set out the view that I still hold: that those in Britain cheering the Prime Minister for wielding a veto are missing the bigger point, namely that a true veto stops others from doing something you dislike, whereas Mr Cameron's decision to walk away from the table did not stop the majority of other EU members from agreeing to push ahead without him.

I mentioned the accusations from some other EU players that Mr Cameron negotiated and prepared his position clumsily, as set out in my last post quoting the scathing analysis of one (well-placed but avowedly partial) source.

But I also wanted to be fair to Britain's position. I think that a big part of the problem of Britain's relationship with Europe is that we genuinely are different. To simplify, as I said on the BBC this morning, I think that to some extent what happened on Thursday night was the logical end-point of a relationship based on distrust. Successive British governments have believed that on balance membership of the EU is in their interests (or is worse than non-membership). But because we are different (and because we take a common law as opposed to Napoleonic view of regulation, favouring a world in which everything is allowed unless it is expressly prohibited), we seek at every turn to pin down every detail of new rules or schemes being proposed, in case some of it turns out to be harmful. What was on the table on Thursday night was not clear in all its details when it came to the implications for the single market, so it was genuinely a tricky document for Mr Cameron. That being so, you can see why he wanted to secure some safeguards.

Since writing my last post, I have spoken to British officials who advance a number of arguments in defence of what Mr Cameron did. The request for unanimity decision-mkaing for the City was really pretty modest, one says. It was not sprung on other EU governments as a surprise. George Osborne, the chancellor of the exchequer, had briefed colleagues extensively, for instance. What is more, France and Germany negotiated with real aggression, it is said: it was not Britain that was being unreasonable.

Mr Osborne was interviewed on the Radio 4 Today programme. He firmly dismissed talk of British isolation, saying that the country had "gained" by walking away. He told the BBC:

The integration of the eurozone, which we think is necessary to make the single currency work, is not taking place within the full panoply of the European treaties, with the full deployment of the European institutions enforcing those treaties. And because we were unable to get British safeguards that might have allowed that to happen, we're not allowing it to happen...If we had signed this treaty - if David Cameron had broken his word to parliament and the public, gone there and caved in without getting the safeguards he was looking for - then we would have found the full force of the European treaties, the European Court, the European Commission, all these institutions enforcing those treaties, using that opportunity to undermine Britain's interests, undermine the single market

Mr Osborne added that Britain remained a full member of the EU of 27 countries, noting that he, along with government colleagues, would still be attending monthly meetings of ministers from across the club.

Read Mr Osborne's argument closely, and he is candidly describing a Europe that includes hostile forces willing to undermine Britain's interests. He is further suggesting that Mr Cameron's decision to walk away from a formal EU treaty has denied those hostile forces the ability to use the "full panoply" of EU institutions against us.

Now, I am not going to mount some blanket defence of the other EU countries and say there are no hostile forces at work out there. It is clear that France, for example, takes a radically different view of the City of London and whether Britain has any right to seek to secure it from intrusive euro-rules. The veteran Brussels correspondent for Libération, Jean Quatremer, describes on his blog, for instance, how:

As Nicolas Sarkozy told a group of journalists [after the summit meeting], Mr Cameron wanted "to create an off-shore zone in the heart of Europe" by securing an exemption from financial market regulation, "when at the same time he insists that the single market's integrity must be protected."

That is a deliberate distortion of Mr Cameron's actual request, which in at least one area (the regulation of capital cushions for banks) sought to secure the right for Britain to impose tougher standards than those being proposed at the EU level.

But, here is the problem. To believe that Mr Cameron has done something to protect British interests by walking away from the table, you have to believe that Britain can continue to use its membership of the full EU to keep a firm grip on the new euro-plus club (membership at 23 so far, and likely to rise). On paper, legally, that belief works. It is certainly tricky to see the legal route that would allow a non-EU club within the club to start using the European Commission, European Parliament, European Court of Justice as regulatory battering rams against Fortress Britain.

Mr Osborne is also right that he will be invited to monthly gatherings of EU finance ministers, despite what happened on Thursday. But if five years reporting from Brussels taught me anything, it is that in Europe, (a) politics trumps law, and (b) in Europe, supreme political power flows downwards from summits of heads of state and government. Other bits of the machine have influence, but for the trickiest and most painful questions, only "heads" as they are known in diplo-shorthand, will do.

There is a grave crisis under way in the euro zone, which lots of European governments feel as an existential threat. That makes me doubt that any magic piece of paper exists that a single, dissenting country can brandish to stop 23 (or 24, or 25) threatened, panicking governments from using the tools they feel they need to save themselves. If the crisis deepens, and the euro-plus countries start to feel that they are being made to defend themselves with one hand tied behind their backs, they will not tolerate a legalistic British veto for very long. At that point, expect to hear lots of European politicians calling for the euro-plus 23 or 24 or 25 simply to become the new European club. (Indeed, reports Bruno Waterfield in the Telegraph, it has already started among low and mid-ranking Euro-politicians).

Can a legal way be found to do that? I am not a lawyer, but I do note that one of Mr Sarkozy's greatest boasts after Thursday is that he has secured agreement for heads of state and government from the euro-plus pact to meet every month for as long as the euro-zone crisis lasts. Britain will not be invited. And that will be an astonishing source of political power, I would argue, for just those hostile forces identified by Mr Osborne.

A final thought. The MPs, commentators and columnists cheering most loudly this weekend are Eurosceptics who do not believe full EU membership can work for this country. Many of them want to leave and negotiate a Swiss or Norwegian-style trading association. In other words, although they are hymning their praise for the government and Mr Cameron, they do not actually agree with the government's analysis as set out by Mr Osborne.

They do not believe, as the chancellor tells the BBC, that integration in the euro zone is needed to make the single currency work, and they do not believe that Britain's interests are going to be marvellously defended by British ministers going to Brussels for monthly meetings of the various EU councils of ministers. They think the euro is doomed, integration cannot and should not work. They hope that Britain is detaching itself from the folly that is the EU, and are already arguing that Mr Cameron must soon seek a radical renegotiation of relations, tested by a referendum of the British people.

Avowed "better-off-out" Conservatives are a (substantial) minority among Tory MPs. Most Conservative MPs would not want to leave the EU outright tomorrow, but want to try for the return of powers from Brussels. Yet it is that minority that is cheering most loudly right now, and which is asserting with great confidence that it was their pressure in recent weeks that made Mr Cameron realise that he could not risk presenting a new EU treaty to the House of Commons without huge concessions.

As Charles Moore writes in the Telegraph:

Several factors gradually bore in upon Mr Cameron as the day approached. He learnt from his mishandling of the Commons vote on an EU referendum last month. Literally never have so many Eurosceptic Tories filled the lobbies against their party line. This was followed up by serious, though discreet, ministerial protest, most notably from Iain Duncan Smith and the Northern Ireland Secretary, Owen Paterson. The Prime Minister realised it would be impossible to return to Parliament promising his party a new treaty that they distrusted while refusing them the referendum that they demand.

Then he worked out that the Liberal Democrats, however fervent their europhilia, were not going to kill the Coalition for a treaty which was expressly being advanced by President Sarkozy (in re-election mode) as a means of making London pay for the euro.

Dreadfully late in the day – as is so often the case with Mr Cameron and his “government by essay crisis” – everything became clear to his cool mind. He could stave off a referendum, hold together his Coalition, win over his party and prevent further encroachments on British commercial freedom by the use of that one little, previously unsayable word, “No”.

At the top of this blog posting I said I felt I had not answered the BBC's question well, when they asked me what Mr Cameron had done differently on Thursday night. On the radio, I talked about how he could perhaps have prepared his negotiating position with more skill.

I think I should have said, on reflection, that his problems date back six years, and left him with very little room for manoeuvre long before Thursday night. Ever since his campaign to become Conservative leader, Mr Cameron has spent years saying he believes in the benefits of full EU membership while offering concessions and pledges to colleagues who not believe in full EU membership. That sort of political contortionism is not sustainable forever.

Perhaps, as one official suggested to me this weekend, France set a trap for Britain on Thursday. If so, I have a nasty feeling that by the time Mr Cameron walked into the room, he had left himself little choice but to walk into that trap, eyes open.