David Cameron has indicated that he is prepared to wield Britain's EU veto again as he seeks to protect the City of London in negotiations to shore up the eurozone.
As he arrived at the EU summit in Brussels, where eurozone leaders will discuss plans to introduce greater fiscal co-ordination, the prime minister said that he would demand "safeguards".
Cameron and George Osborne believe it is in Britain's national interests for eurozone leaders to follow the "remorseless logic" of monetary union and take decisive steps towards a fiscal union.
The prime minister believes the single currency will be unsustainable without fiscal transfers from the prosperous – and fiscally disciplined – north to the less prosperous and less disciplined south.
But Britain will not take part in the new arrangements and it is determined to fight off any changes that would change the EU's single market, which covers all 27 members and not just the 17 members of the eurozone.
The prime minister, who blocked eurozone leaders from embedding their fiscal compact in EU treaties last December, indicated that he may be prepared to wield the veto for a second time.
"Now of course we are saying to the eurozone countries they do need to do more things together to strengthen the currency and make sense of their currency," Cameron said as he arrived in Brussels. "But Britain is going to stay out of that. We want Europe to work for us, as a single market, as a place where we trade, as a place where we co-operate. I'm going in there so that we get the safeguards to make sure that can keep happening."
The prime minister acknowledged the demands from Tory MPs for a referendum on the EU. Some are demanding a referendum on Britain's membership of the EU while others are calling for a referendum on the new governance arrangements in the eurozone on the grounds that they will have an impact on Britain.
"I completely understand and in many ways share people's concerns about Brussels getting too much power," Cameron said. "That is why this government legislated to put in place an absolute lock so that governments cannot pass powers from Britain to Brussels without asking people first in a referendum."
Ministers acknowledge that it would be difficult to envisage a referendum over the eurozone changes because the "lock" is triggered when powers are transferred from Britain to the EU. But the Tories may be tempted to offer a referendum commitment in their manifesto for the next general election to ward off a threat from the UK Independence party in the 2014 European parliamentary elections.
EU leaders will discuss plans for greater fiscal co-ordination over dinner in Brussels on Thursday night when they assess a paper presented by Herman Van Rompuy, the president of the European council. This has four main elements:
• An integrated financial framework that would move towards a single European banking supervision. Britain is pleased that the paper says this needs to be done in a way that preserves the "unity and integrity of the single market".
Britain favours a banking union for the eurozone. It will insist that two key elements of such a union – a single regulator and the mutualisation of risks in which banks stand behind one another – must be limited to the eurozone.
• An integrated budgetary framework. Britain supports this for the eurozone and is pressing for eurobonds. But this is being fiercely resisted by the German chancellor, Angela Merkel.
• Moves towards an integrated economic policy framework.
• Strengthening EU and national democratic oversight over the new arrangements.
guardian.co.uk © Guardian News and Media Limited 2010
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