Eurozone Treaty

Of course Cameron is acting to protect the City of London and its banksters from the tentacles of the EU and financial reform.  No financial transaction tax for Britain!

UK isolation grows as three more countries reconsider eurozone treaty

The 23 EU countries ignoring the UK veto may be joined by Hungary, Sweden and the Czech Republic, leaving Britain alone

the Guardian,

Friday 9 December 2011 12.51 GMT

The sense of unprecedented isolation afflicting Britain in Europe has been reinforced in Brussels after Hungary joined Sweden and the Czech Republic in reconsidering whether to take part in a new pact aimed at rescuing the euro.

Britain parted ways with the rest of Europe earlier on Friday morning when David Cameron dramatically wielded his veto to block Germany's drive to reopen the Lisbon treaty in an attempt to rescue the single currency.

Initially 23 of the 27 EU countries said they would ignore the British veto and negotiate a new pact outside the treaty. Later the other three waverers said they would take the agreement to their own parliaments, leaving the UK on its own.

The prime minister's unexpected move was seen as a watershed in Britain's fractious membership of the EU. He insisted on securing concessions on and exemptions from EU financial markets regulation as the price of his assent to the German-led euro salvation blueprint. The others balked, accusing Cameron of putting Britain's perceived interests ahead of resolving the EU's worst crisis.

The prime minister blocked the accord, meaning that Britain is on its own while Cameron has failed to secure the concessions for Britain's strong financial services sector. In one of the most significant developments in Britain's 38-year membership of the EU, the British prime minister said early on Friday morning he could not allow a "treaty within a treaty" that would undermine the UK's position in the single market.

Cameron's blocking tactics frustrated the German chancellor Angela Merkel's plans to secure a new punitive rulebook for the single currency by anchoring it in the Lisbon treaty. Plan B is to create a "fiscal compact" among a coalition of the willing – probably everyone but Britain – with quasi-automatic penalties for countries breaking the single currency rules and stronger powers of intervention for European institutions policing the pact.

Britain, however, is also likely to contest the new architecture, arguing that bodies like the European commission responsible to all 27 member states should not be given a role to police the euro.

The outcome on Friday morning, following nine hours of negotiation through the night, was a setback for Merkel, perhaps a disaster for Britain, and a partial victory for Nicolas Sarkozy of France, who had been pressing for an inter-governmental agreement among the 17 members of the eurozone to underpin tough new fiscal rules for the single currency.

"We could not accept this," he said of Cameron's demands.

But many other countries opposed the Merkel plan to reopen the Lisbon treaty and will not be disappointed that the German scheme has failed. Merkel nonetheless stressed that the accord would stabilise the euro. "I have always said, the 17 states of the eurogroup have to regain credibility," she said. "And I believe with today's decisions this can and will be achieved."

Cameron wielded the British veto in the early hours of the morning after France succeeded in blocking a series of safeguards demanded by Britain to protect the City of London. Cameron had demanded that:

• Any transfer of power from a national regulator to an EU regulator on financial services would be subject to a veto.

• Banks should face a higher capital requirement.

• The European Banking Authority should remain in London. There were suggestions that it might be consolidated in the European Security and Markets Authority in Paris.

• The European Central Bank be rebuffed in its attempts to rule that euro-denominated transactions take place within the eurozone.

Sarkozy rejected the demands out of hand.

Cameron defended his decision to wield the British veto on the grounds that eurozone members could have used the institutions of the EU to undermine Britain's interests in the single market without his safeguards. Speaking at 6.19am local time, he said: "I said before I came to Brussels that if I couldn't get adequate safeguards for Britain in a new European treaty then I wouldn't agree to it. What is on offer isn't in Britain's interests so I didn't agree to it.

"Of course we want the eurozone countries to come together and to solve their problems. But we should only allow that to happen inside the European Union treaties if there are proper protections for the single market and for other key British interests. Without those safeguards it is better not to have a treaty within a treaty but to have those countries make their arrangements separately."

Cameron acknowledged there were risks in striking out alone. But he said Britain would protect its position by insisting that the institutions of the EU could not be used to enforce the new fiscal rules.

"While there were always dangers of agreeing a treaty within a treaty, there are also risks with others going off and forming a separate treaty. So we will insist that the EU institutions – the court, the commission – that they work for all 27 nations of the EU. Indeed those institutions are established by the treaty and that treaty is still protected."

Cameron indicated that Britain may go further and block the use of EU institutions if eurozone countries club together to shape financial regulations and labour laws.

The decision by Cameron will transform Britain's relations within the EU. Other projects, such as the euro and the creation of the passport-free Schengen travel area, have gone ahead without British involvement. But it is the first time since Britain joined in 1973 that a treaty that strikes at the heart of the workings of the EU will be agreed without a British signature. Britain signed the 1991 Maastricht treaty after winning an opt-out on the single currency and the social chapter.

Cameron will be able to tell Eurosceptic backbenchers he refused to sign a treaty that would have undermined British interests. But some Eurosceptics may say the new treaty marks a major change in the EU and that the British people should be consulted in a referendum.

Sources in Brussels say Cameron is playing a "dangerous game" because financial service regulations are decided by the system of qualified majority voting in which Britain does not have a veto. Britain can form a "blocking minority" at the moment to stop harmful legislation. But this will shrink as more countries join the euro.

The summit also agreed that:

• Eurozone countries will provide up to €200bn in extra resources to the International Monetary Fund to help countries in difficulty.

• The eurozone's two bailout funds, the European Stability Mechanism (ESM) and the European Financial Stability Facility (EFSF), will be managed by the European Central Bank.