Britannia waives the rules

David Cameron's refusal to sign up to the deal to save the euro as fashioned by Angela Merkel and Nicolas Sarkozy has sparked fundamental questions about Britain's position in Europe and has opened up a new debate on the future of the euro.

Some see Cameron's as a courageous and decisive step to distance Britain from the European Union as he became the first Prime Minister to veto a new EU treaty. This, of course, is the eurosceptic's narrow point of view.

Less blinkered - and more sober - observers think otherwise. Writing in the 'Financial Times' last Monday, Jonathan Powell, former Chief of staff to Tony Blair, did not mince words. Under a heading that said 'Cameron has betrayed 200 years of history', he drew a parallel with Anthony Eden's decision to opt out of the European Community at its inception with the result that "Britain then spent years desperately trying to join in the face of repeated rebuffs and eventually gained admission in 1972." As a result, Britain lost the possibility of influencing the way the then European Common Market was evolving.

His verdict on Cameron's decision is scathing: '56 years later, another Conservative government has made another catastrophic decision to opt out of a treaty that will shape Europe over the next several decades, without really thinking about the consequences.'

Not surprisingly, Cameron's popularity at the polls has gone up, with a large swathe of public opinion agreeing with him. This is a typical emotional reaction and does not prove that Cameron is right. Mario Monti's austerity measures designed to 'save Italy' led to his losing nine points from his approval rating, according to a poll in the 'Corriere Della Sera'. This does not mean that Monti is wrong, of course.

The so-called 'Merkozy solution' is no straightforward plan to ease the euro out of its present problems, and many feel that it is flawed. Cameron insists that his decision was taken 'in good faith' in order to protect London's financial centre and the freedom of the UK government to regulate it as it wants, unhindered by the rules and limitations that the proposed new treaty will undoubtedly impose. He even says this in a sanctimonious manner, as if what goes on in the City is a paragon of integrity and ethical behaviour! Unwittingly, Cameron managed to deflect attention from the plan's potential pitfalls with the result that the other 26 EU member States have appeared to be more united in their resolve than they actually are. 

The main immediate fallout of Cameron's decision is the tension between his Conservative Party and Nick Clegg's Liberal Democrats that form the UK's governing coalition. Indeed, former Liberal Democrat leader, Paddy Ashdown, described Cameron's decision as 'a catastrophically bad move'. The Liberal Democrats are known for their unwavering support for the EU and the coalition certainly makes for strange bedfellows, especially considering the large number of eurosceptic Conservative MPs who recently defied Cameron and voted in the House of Commons in favour of a motion calling for a referendum on Britain's membership of the EU.

The differences between the two partners of the coalition were made even more evident by Mr Clegg's decision not to attend the sitting of the House of Commons when Cameron defended his veto in Brussels. This after Chris Huhne, the Liberal Democrat Climate Change Secretary, had already publicly commented that in Brussels, "there is an adage which is one of the first rules of negotiating:'if you're not at the table, you're on the menu'."

While Liberal Democrat ministers insist that they should have been consulted on David Cameron's EU negotiating strategy, an official spokesman said Mr Cameron's negotiating strategy had been agreed in advance with Deputy PM Nick Clegg. The plot thickens as the cracks within the coalition begin to show.

What was even more intriguing was the position of Scotland's First Minister, Alex Salmond, whose ambitions for an independent Scotland are not that impossible. He said that the Prime Minister had "achieved absolutely nothing to protect any financial sector as a result of the veto which didn't actually stop anything" and simply isolated the UK from Europe. Somewhat ominously, Salmond added: "We're not going to have the future of Scotland, the future of Wales, sacrificed and jeopardised because of the internal divisions in the Conservative party." 

Britannia is in a fine mess indeed, with a gaping chasm within the ruling coalition and serious differences between the nations that form the Union.

The British press is now trying to salvage Cameron by emphasising that some of the 26 countries have indicated they would, in principle, sign up to the treaty that would tighten up financial regulation in the eurozone are having second thoughts about some aspects which may be covered by the treaty. Some have even predicted that there will never be total agreement on the treaty which will therefore never be ratified by a number of European national parliaments... leaving Cameron as the victorious bright politician who got out of the mess before it became messier. This is all a bevy of short-sighted wishful thinking. The treaty will happen because the alternative is too calamitous.

Other British eurosceptics are pinning their hopes on the UK's so-called special relationship with the US - that relationship which saw Tony Blair taking sides against Germany and France when the US decided to invade Iraq. It is true that the Americans never liked the idea of a common European currency, jealous as they are of the dollar's standing as an international reserve currency. The idea of the euro competing with the dollar in this respect has most probably egged Wall Street to take a negative attitude towards the euro. But at the end of the day, an economically strong Europe is also in the interests of the US.

What Cameron and his eurosceptics do not seem to understand is that Britain is no longer the mighty power that used to manipulate others and provoke divisions within Europe to its advantage, as it had been used to be doing for centuries. They do not seem to understand the extent to which Britain's economic survival depends on its trade with Europe.

Cameron's decision is akin to a political version of the ill-fated 'charge of the light brigade' in the Crimean War, when confused communications led to an attempt at achieving a much more difficult objective than realistically possible.

Any alternative to the tightening of the fiscal rules as proposed by Merkel and Sarkozy would have led to the end of the euro, with each of the eurozone countries going it alone, plunging Europe into a whirlpool of competitive devaluations as had happened in the 1930s.

But Cameron has refused to heed the lessons of history.