Cameron Treaty Veto Leaves U.K. Alone as EU Leaders Negotiate Fiscal Unity

David Cameron found himself alone as the 26 other European Union nations began negotiating the future of the region’s economy. Delivering on a veto threat his predecessors carried with them to Brussels for the past 30 years, Cameron strengthened the hand of members of his Conservative Party who want Britain to pull out of the EU.

It was Conservative Prime Minister Edward Heath who took Britain into an embryonic EU, the European Economic Community, in 1973. His three Tory successors have each battled to maintain influence in Europe while refusing to sign up to the federal dreams of their neighbors.

“We wish them well,” Cameron told reporters after all- night euro-crisis talks in Brussels ended early yesterday. “My judgment was that what was on offer just wasn’t good enough for Britain. It’s better to allow those countries to do their own thing on their own.”

Cameron’s move was greeted with delight and comparisons to wartime leader Winston Churchill by Conservatives at home. Opposition politicians said he was now unable to protect U.K. interests in any treaty agreed upon by the 26 other countries, reaping the harvest of failing to make alliances in Europe during his 19 months in power.

In a clash that may reshape Europe’s balance of power, the 17 euro countries opted to enshrine closer fiscal union in a new treaty that leaves out the U.K. instead of amending EU agreements that date back to the 1950s. Nine non-euro members -- Denmark, Poland, Bulgaria, Hungary, Sweden, the Czech Republic, Latvia, Lithuania and Romania -- indicated they may follow suit.

Financial Services

The trigger was Cameron’s refusal to back a 27-nation pact without ironclad guarantees of a British veto right over future financial regulations. Cameron called them a threat to London’s standing as Europe’s leading financial center.

“It’s not good for us to have Britain stepping away from the mainstream we’ve developed, but it’s not good for Britain either because if it wants to play a central role in Europe, it has to be a part of all the common policies we are developing,” Luxembourg Prime Minister Jean-Claude Juncker told reporters in Brussels. “A country which is not part of the central piece of policy making is losing influence.”

Briefing reporters on his decision, Cameron twice refused to rule out Britain one day leaving the union altogether. “British membership is in our interest and I have always said that if that’s the case I will support our membership,” he said.

‘Profound Shift’

“There’s been a very profound shift in the Conservative Party from euro-enthusiasm to soft euro-scepticism to hard euro- skepticism,” said Tim Bale, professor of politics at the University of Sussex. “Europe was always going to be the iceberg issue for the Conservatives in government. So much of our trade and so much of our diplomacy is done with and through Europe that it’s difficult to see isolation being in Britain’s interest.”

The EU is the U.K.’s largest market, responsible for 54 percent of its exports last year. Cameron and Chancellor of the Exchequer George Osborne have repeatedly said that a resolution of the euro-zone debt crisis is vital for Britain as they wrestled with their Conservative Party whose priority was ensuring that powers aren’t ceded to Brussels.

At his weekly question session in the House of Commons on Dec. 7, the prime minister was assailed from his own side for assurances that he wouldn’t cede authority to the EU and would grant a referendum on any deal. In October, more than a quarter of his party lawmakers voted in favor of a referendum on British membership of the bloc.

‘Chamberlain-esque’

On Dec. 8, Conservative lawmaker Edward Leigh referred in a debate to Neville Chamberlain, made infamous for striking a deal with Adolf Hitler in the run-up to World War II. He warned Cameron not to return from Brussels “with a kind of Chamberlain-esque piece of paper saying, ‘I have negotiated very, very hard, I have got opt-outs on this and that and I have succeeded.’”

Yesterday, Conservative lawmaker Bill Cash welcomed Cameron’s blocking of an EU-wide treaty, telling Sky News the U.K. was “now embarked on a very serious, responsible path towards renegotiating in a fundamental way the whole of our treaty relationship with the EU. The Germans and the French precipitated this by their demand, throwing down their gauntlet saying we had to do what they wanted.”

The London Evening Standard newspaper reprinted a cartoon it first ran after the fall of France in 1940, showing a British soldier standing on a beach shaking his fist at German bombers and saying “Very well, alone.”

Lethal Issue

Europe has been a lethal issue for Conservative prime ministers since at least 1990, when it led to Margaret Thatcher’s downfall over her refusal to agree to a timetable for joining the single currency. Her successor, John Major, had an official hide under the table at one set of EU talks to advise him as he negotiated an opt-out. That was still not enough to satisfy the most euro-skeptic of his party, who undermined his leadership.

“This is a terrible outcome for Britain because we’re going to now be excluded from key economic decisions that will affect our country in the future,” Ed Miliband, leader of the opposition Labour Party, told Sky News yesterday. “Really what he has done is spent many months not promoting the national interest but more interested in dealing with the splits in his own party. That has served Britain very badly and I fear the consequences this will have for our country.”

To contact the reporter on this story: Gonzalo Vina in Brussels at gvina@bloomberg.net; Robert Hutton in London at rhutton1@bloomberg.net.

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net.

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