Britain out in cold as 26 EU states press on with reform
Britain was left more isolated yesterday than at any other time in the last 20 years as the dust settled on the deal agreed at the latest European summit.
British Prime Minister David Cameron found himself left behind as the 26 other European Union leaders began negotiating the future of the region's economy.
Mr Cameron broke ranks with French President Nicolas Sarkozy and German Chancellor Angela Merkel after he failed to secure safeguards that would have stopped European Union plans to police the powerful financial services industry in London -- Europe's trading hub.
Europe went on to secure an historic agreement -- without Britain -- to draft a new treaty for deeper economic integration in the eurozone yesterday.
The outcome of a two-day European Union summit left financial markets uncertain whether, and when, more decisive action would be taken to stem a debt crisis.
In a blow to the deal, the European Central Bank is expected to keep purchases of eurozone government bonds capped for now and take no extra firefighting action. Debt markets were wary yesterday. Interbank lending rates eased but Italian 10-year bond yields rose to around 6.5pc.
Under the new treaty plan, the leaders agreed to pursue a tougher budget discipline regime with automatic sanctions for deficit sinners in the single-currency area, but Britain said it could not accept the proposed treaty amendments after failing to secure concessions for itself on financial regulation.
"This is a breakthrough to a union of stability," Ms Merkel said. "We will use the crisis as a chance for a new beginning."
After 10 hours of talks, Britain found itself without any allies around the table, diplomats said.
All the other nine non-euro states said they wanted to take part in the fiscal union process, subject to parliamentary approval.
"Once Mr Cameron said for sure he wasn't in, it only took minutes for the other 26 to agree that they would push ahead with an intergovernmental treaty," one senior official said.
Mr Cameron insisted it remained in Britain's interest to stay in the EU and take advantage of its single market. One senior EU diplomat called Mr Cameron's negotiating tactics "clumsy".
Luxembourg's Prime Minister Jean-Claude Juncker said Mr Cameron risked "losing influence" in the European Union through the decision to remain outside a pact to tighten budget rules
Mr Cameron's decision, he said, was "not good for his country and not good for Europe".
Taoiseach Enda Kenny, who was seated next to Mr Cameron during the dinner where most of the deal was hammered out, sought to play down Britain's isolation yesterday. He noted that the UK was Ireland's largest trading partner and remained inside the single market.
Mr Kenny, who has accepted possible changes, said he saw no danger to the successful International Financial Services Centre in Dublin, which is the home to many fund managers.
Meanwhile, Ms Merkel said the world would now see that Europe had learned from its mistakes and avoided "lousy compromise".
Mr Sarkozy sounded elated at having united a big group around the eurozone as the EU's core, long a French objective, and many diplomats perceived France as being the big winner.
"This is a summit that will go down in history," he said. "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."
The euro rallied in Europe and US shares gained, but analysts said the summit had done little to convince markets that a solution to the crisis was at hand.
European Council president Herman Van Rompuy, who chaired the summit, said the EU institutions would be fully involved in the new treaty, which would be signed in early March at the latest. The eurozone plus nine may hold a summit without Britain as early as January, diplomats said.
(Additional reporting Reuters)