Can David Cameron get his way at the big EU summit?

Nov 24, 2011

Prime Minister faces a tough task to please eurosceptics at summit called to save eurozone

A SUMMIT takes place on 9 December at which EU leaders are expected to decide on how best to tackle the eurozone debt crisis. Conservatives say it is a key test of Prime Minister David Cameron's leadership - and he'll have a hard time pleasing the various factions in his party and his EU partners.

Why is the summit important?
Markets are in turmoil - and have been for months - over fears that the eurozone debt crisis will spread from the smaller, already bailed-out, nations such as Greece and Portugal, to bigger economies. The 9 December summit in Brussels is a chance for EU leaders to calm the markets by taking decisive action.

What will EU leaders decide?
The most divisive issue is the concept of eurobonds - debt backed by the European Central Bank. France wants the ECB to be able to issue eurobonds because they would allow weaker economies to borrow money at low interest rates and stave off the threat of bankruptcy. However, Germany is dead against the idea, because it would be liable for the largest proportion of the debt.

Germany instead wants greater fiscal integration, meaning strict new rules on national budgets that would be enforced with stiff penalties. As part of this, they want to introduce a financial transactions levy - known as the  Tobin Tax - across the EU, including the City of London.

Germany's position raises the possibility that changes will need to be made to EU treaties - and is at the heart of Cameron's problems.

What are the obstacles for David Cameron?
At home, the possibility of renegotiating EU treaties has Conservative eurosceptics in a lather. Some say that any change to the Lisbon treaty will mean the UK will have to hold a referendum on EU membership – with the real possibility that the British public might vote to pull out of Europe. The fact that Ireland will hold a referendum if there are any changes to the treaty will do nothing to relieve the pressure on David Cameron.

Other eurosceptics see it as an opportunity for Cameron to "repatriate powers" given up by the previous Labour government. Among these are the working time directive, which limits the number of hours employees can work.

Cameron's main problem is the Tobin Tax, which has widespread support among EU countries. Conservatives fear a transaction tax would unfairly penalise the City of London and they could only support it if it was imposed globally.

Also causing a headache is an attempt by the 17 members of the eurozone to form a voting bloc that can take decisions which will impact on the other 10 EU members.

What can Cameron hope to achieve?
According to The Times, David Cameron has been negotiating one-to-one with EU leaders over the past two weeks to lobby for an exemption from the Tobin Tax for the City. At the same time, he has been resisting attempts by the 17 eurozone members to put in place their own voting system.

Apparently, some EU governments are now annoyed with the UK for trying to have it both ways: negotiating a tax opt-out for the City while insisting that the 17 have no right to seek their own arrangements.

Downing Street says it is all part of its negotiating strategy to keep other countries guessing what the UK will  demand at the 9 December summit.

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