UK isolated as Europe moves ahead on fiscal union

Europe divided on Friday in a historic rift over building a closer fiscal union to preserve the euro, with a large majority of countries, led by Germany and France, agreeing to forge ahead with a separate treaty, leaving Britain isolated. Twenty-three of the 27 leaders agreed to pursue tighter integration with stricter budget rules for the single currency area, but Britain said it could not accept proposed amendments to the EU treaty after failing to secure concessions for itself. After 10 hours of talks, all 17 members of the euro zone and six countries that aspire to join resolved to negotiate a new agreement alongside the EU treaty with a tougher deficit and debt regime to insulate the euro zone against the debt crisis.
Sweden, Hungary and the Czech Republic said they needed to consult their parliaments. “Not Europe, Brits divided. And they are outside of decision making. Europe is united,” Lithuanian President Dalia Grybauskaite said in blunt English on arriving for the second day of the bloc’s eighth crisis summit this year. One senior EU diplomat called British Prime Minister David Cameron’s negotiating tactics “clumsy”. Active ECB support will be vital in the coming days with markets doubting the strength of Europe’s financial firewalls to protect vulnerable economies such as Italy and Spain, which have to roll over hundreds of billions of euros in debt next year.
BRITAIN OUTSIDE? Merkel and French President Nicolas Sarkozy had wanted to get the whole EU to agree to change the Lisbon treaty so that stricter budget and debt rules for eurozone states could be enshrined in the bloc’s basic law.
But Britain, which is outside the euro zone, refused to back the move, saying it wanted guarantees in a protocol protecting its financial services industry, roughly one-tenth of the country’s economy. Sarkozy described Cameron’s demand as unacceptable.
Sarkozy and Merkel said the intention was to forge an intergovernmental treaty among the euro zone countries and any others that wanted to join. They indicated that could be up to 25 countries in all, with only Britain and perhaps Hungary left outside the tent for now.
“This is a summit that will go down in history,” said Sarkozy. “We would have preferred a reform of the treaties among 27. That wasn’t possible given the position of our British friends. And so it will be through an intergovernmental treaty of 17, but open to others.”
Meanwhile, British Prime Minister David Cameron said Friday he took a “tough but good” decision to block a change to the EU treaty presented by France and Germany as the way to resolve the eurozone debt crisis.
“Where we can’t be given safeguards, it is better to be on the outside,” Cameron told a news conference after demands termed “unacceptable” by French President Nicolas Sarkozy. “It was a tough decision, but a good one.” Amid fears Britain could be sidelined by his decision not to go ahead with the closer integration signed up by 23 other EU countries, Cameron said he had insisted that European institutions would continue to work for all 27 members.
Unable to convince his peers that Britain should be given veto power over any changes to financial regulation that could affect the powerful City of London, Cameron said he would not sign up to an EU-wide treaty change.
Meanwhile, Croatia signed an EU accession treaty Friday, a move paving the way for the former Yugoslav republic to join the bloc in mid-2013, after almost a decade of long and often fraught negotiations.
“You are warmly welcomed in the European family,” said EU president Herman Van Rompuy. The signing ceremony attended by European Union leaders was the culmination of a long-held ambition.
Prime Minister Jadranka Kosor and President Ivo Josipovic signed the legal paperwork alongside the EU’s 27 heads of state or government. Croatia will then take up observer status at the EU summit.