A stitch-up unravels.

Europe's Wrangling Compounds Cameron Brexit Woes

Mark Gilbert is a Bloomberg View columnist and writes editorials on economics, finance and politics. He was London bureau chief for Bloomberg News and is the author of “Complicit: How Greed and Collusion Made the Credit Crisis Unstoppable.”
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A delicately stitched accord between the European Union and its most disaffected affiliate, the U.K., is threatening to unravel. The brouhaha, over a British nominee to the European Commission, illustrates the difficulties Prime Minister David Cameron faces in trying to renegotiate membership terms of a club it has treated much like Groucho Marx might.

Jonathan Hill, a former leader of the House of Lords, failed to win approval from the European Parliament's economic and monetary affairs committee to take the post of financial-services chief after three hours of questioning yesterday. Instead, he'll be recalled next week for a second cross-examination.

Hill's award of a brief covering financial stability, financial services and capital markets union was meant to be a consolation prize -- a pretty tasty one at that -- for the U.K. It's a higher-profile position than a nation that has shunned euro membership might reasonably expect.

The compensatory post was an apology of sorts after horse-trading confounded Cameron's efforts to prevent Jean-Claude Junckerfrom becoming President of the EC. Cameron invested a ton of personal political capital in that campaign, only to find the backing he thought he had from fellow EU leaders disappearing. Juncker, viewed by Cameron as an architect of the ever-closer union that the U.K. opposes, was elected with 26 votes to two; only Hungary backed Britain.

The backdrop to all this is Cameron's effort to placate the euroskeptic wing of his party by pledging a 2017 referendum on whether Britain will remain part of the EU. His peers, including German Chancellor Angela Merkel, are adamant that they'd prefer the U.K. to stay; it's far from clear, however, that they'll accede to Cameron's demands for national sovereignty on issues including human rights (whether prisoners should be allowed to vote in elections, for example), or immigration (which would delay cross-border settlement rights for citizens of new EU members).

Financial reform is one of the key potential scalps Cameron needs to be able to boast about back home. Financial servicescontribute about 10 percent of U.K. gross domestic product, the highest among Group of Seven nations and compared with about 4 percent for Germany. Hence the importance of Hill's nomination -- and the discomforting signal sent by his failure to secure immediate approval.

His standing with the committee that's blocking him probably wasn't helped by this tweet, typographical error included from his colleague Kay Swinburne, a Conservative member of the European parliament:

You'd hope Hill might have spent more than 10 days mastering his brief, especially since Cameron announced his nomination on July 15. Committee chairman Roberto Gualtieri said legislators are seeking "better clarification, more concrete answers on specific issues that have been raised during the hearing." A rejection of Hill's candidature by the EU Parliament, which has veto powers over potential commissioners, would undermine Cameron's claims that he can secure sufficient EU reform to go into a 2017 referendum backing Britain's membership. Brexit -- a British exit of the EU -- remains a non-negligible threat.

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To contact the author on this story:
Mark Gilbert at magilbert@bloomberg.net