10 Dec 2011

Ten curiosities about David Cameron’s veto

1. Britain has been vocally championing the idea of closer fiscal union for eurozone nations as a solution eurozone crisis with “remorseless logic” for six months now. It started with a George Osborne FT interview in July. The Chancellor said the same thing to me on the Eurostar then.

To do this for half a year, and then pop up with concerns, at 2am during the summit without the support of your allies, does not seem like potent statecraft.

2. There was nothing agreed or proposed yesterday by European nations that mounted any additional threat to the City. The Tobin tax can and will be vetoed separately and was not  mentioned in the EU leaders’ communique (although the even more terrifying word “flexicurity” was mentioned) or even in the Eurogroup leaders’ statement.

3. The prime minister chose to use this moment of high European drama to extract copper-bottomed extra guarantees that Britain could not be outvoted on City matters from future hypothetical attacks.

Mr Cameron was trying, as Ed Conway writes here, to “claw back”, basically obscure, so far unused powers from Brussels, that had no connection to the establishment of closer Eurozone fiscal union.

4. This was, we’re told, to protect the EU single market (fact: the single market was invented by a Brit Lord Cockfield). Yet how is the single market protected by giving one country a special status, legal exemption and voting veto specifically for its favourite “industry”? What about German cars, Estonian Internet companies?

5. These “financial safeguards” for the City were rejected by 26 of 27 European nations, who have nonetheless pushed ahead with everything they had planned in the first place, though in a more legally convoluted way.

6. The euro-plus inter governmental pact will now be negotiated specifically without Britain, which was one of the main concerns briefed by Downing Street beforehand. That is to say, we now have far less say on negotiating the new relationship between euro-ins and euro-outs, which should surely be the number one strategic objective.

7. This is rather helpful to some in the EU who are trying to help Ireland avoid having a referendum, which would surely be lost. The Taoiseach now has wriggle room to avoid one, which would not have been there had it been a full-blown treaty change. So perhaps the PM fell into a carefully laid trap.

8. Sweden’s foreign minister, the respected Carl Bildt, approvingly circulated on Twitter a scathing article by Charles Grant of the Centre for European Reform, which included the line: “Sweden [has] grown impatient with the Cameron government”. This doesn’t surprise me. I sensed it when PM Reinfeldt was asked by Jon Snow at the October Summit whether Mr Cameron was being helpful.

But Sweden is a key ally in the EU. Did the PM know that traditional allies in the new eastern EU, freer market Scandinavians, were not going to be on his side?

9. Is the prime minster going to carry through with the veto in practice, and actually scupper elements of the euro-rescue by mounting legal obstacles to the use of EU-27 institutions by the euro-plus-26. ECJ verifying fiscal deficits etc? If not, expect some degree of U-turn.

10. The logical endpoint of the PM’s position is that we should exit the EU and join the European Economic Area. It begins to make sense if he believes the euro is doomed.

To sum up, it appears the PM claimed to have vetoed something that wasn’t there. What, in effect happened, is that he was vetoed, for trying to say no to a hypothetical future threat to an industry he believes needs safeguards, that would probably have preferred at this stage that he stay in the tent to prevent further damage.

Even if you believe 100 per cent  in the argument that protecting the City is an in/out matter for Britain, logically you would have wanted to play your cards in a way that protected City primacy in the Eurozone financial services market, to keep Deutsche Bank, BNP Paribas, all the investment bank arms here. You would have used the threat of veto to deliver concrete results in conjunction with allies. The main strategic aim: to define the border between euro outs and ins in Britain’s favour.

This is not what happened yesterday. Put simply: what did the UK “win” that justified deploying the tactical weapon of the veto? I haven’t had a decent answer to that yet.

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58 reader comments

  1. Ben Jones says:

    It would appear that Cameron has let himself be led down this path by people who would like to see the UK sidelined. Too rash a move methinks

  2. Cormac89 says:

    I think David Cameron is afraid to concede that the UK is no longer the major player that it once was. He wants to protect our collective sense of importance by trying to stand tall against other countries, but he does so without any bargaining chips. It seems to me as though he was outmanoeuvred quite effectively by much more seasoned politicians and instead of accepting that the UK is not in the same league as Germany or France, he decided to use the veto to try and assert himself as a leader. He didn’t want to seem powerless.

    On the other hand, maybe he just wants the UK out of the EU so he sabotaged his own seat at the table.

    I don’t know why anyone expected him to be remotely qualified to handle the situation in the first place. It’s only in our little UK bubble that someone so inept could be leading the nation. We just don’t hold our politicians to account.

  3. Richard says:

    “So perhaps the PM fell into a carefully laid trap.”

    Don’t give him ideas, Faisal. When it all starts going tits up, he’ll be claiming he was knobbled by those nasty, untrustworthy Krauts and Frogs.

    1. Joe. says:

      I have got news for you ,he was!On Europe i am not his biggest fan but this time he is right,the last laugh will be on those Krauts and Frogs when we withdraw our funding of the EU via a in/out referendum!

  4. no name says:

    Whether or not the new treaty binds all 26 in a tighter fiscal union is surely secondary to the original aim of the summit.Namely to protect the euro.

    If there are those who cannot meet their commitment and have heavy fines imposed then surely that will exacerbate the problem. They are not able to meet their obligations now and are more rules going to heal this or merely mean that the enlarged bail out fund will be dipped into, presumably with all 26 bearing responsibility for propping up those in trouble.

    Is the economy of globalisation realistically going to permit these failing economies to succeed in the forseeable future? The problems facing Italy and Greece are not going to go away.How are drastic changes to those failing economies going to come about? I wish I understood more about the impact
    of the new treaty. I hope the 26 are not idealistically attaching themselves to a slowly sinking ship.

    Do Euro sceptics have more knowledge and insight as to the depth and scope of the problems facing this idealistic union than many who are not. David Cameron will presumably interact with those government leaders individually to make his points on the future direction of…

  5. pierregonzalez says:

    You are right about the special status for German cars and Estonian Internet Companies , but you forgot Spanish Paella and Italian Pizza industries!
    When instructions from their national governments will start affecting the activities of French and German banks in the City the PM will have a better idea of the kind of protection he has been reaching.
    He surely never heard about the say ” if you cannot beat them , join them ” not leave them !

  6. no name says:

    Perhaps there will now be moves for implementation of world wide financial reforms if the bigger picture[ ie the USA and China etc.] is concerned about current directions.

    There are so many unknowns in this emerging scenario for me anyway.

    Realistically is the euro going to succeed in the near future?

    If not, what pressures are going to be put to ensure that stability for this currency happens?

    I have had some thoughts which I have mentioned previously.I cannot see any other alternative.

    What are the longterm implications for western economies if the euro zone continues to lack credibility, let alone the impact on other economies of the trading world.

    It is more than an ideology for those who dream the European dream. Let us hope that the treaty and resolution for success will over rule the long term inevitability of hardship for many, to ensure success of one European currency.

    I just cannot see what has changed economically except that there are now, more countries abiding by the same fiscal terms , but how long will this support last and how long will it take for the failing economies to succeed? I do not know.

    Another question, what are the…

    1. pierregonzalez says:

      I thin the Euro will succeed in the future for several reasons :
      1) The Eurozone economy is in a much better shape than the UK and the US.
      2) Financially they could afford to put more money to solve the mess and I think that now Merkel after obtaining what she wanted in terms financial control she will let the cash flow more easily.
      In any case she will most probably lose the next election and both the Socialists and the Green are in favor in putting more money in the pot ; so one way or another more money will appear.
      3) China needs the Euro until the Yuan is stronger enough to compete with the Dollar as the reference currency.
      So to avoid going back to the Dollar as the only currency they will put money in the pot also.
      They sold several billions of Federal Reserve Bonds to have the cash.
      Why don’t they do it immediately ? Because they want to bargain favors from the EU like getting help to join the WTO or getting better taxes status on their sales.

  7. billyb says:

    Wasn’t the real issue

    “and national budgets will be approved by the European Commission.”

    Why should a non EZ country sign up to have it’s budget approved (or set) by Brussels?

    1. pierregonzalez says:

      National budgets control will only apply to Eurozone countries so the UK didn’t have to worry about that.
      If not many non Eurozone countries would not have signed.

    2. Alastair Sutherland (@Silveradical) says:
    3. Philip says:

      only in the Eurozone

  8. no name says:

    that we would have to give up had we signed up. How far reaching and how detailed would this submission of approval to a central beaucrocracy have been. I think I may well have been wary.

  9. Jay Blanc says:

    Er… No it wasn’t BillyB. That only applied to Euro Zone countries, and the UK is not compelled to join the Euro Zone.

    1. billyb says:

      Er…Jes it was Jay Blanc. Quote from BBC report

      “European leaders say 26 out of 27 EU member states have backed a tax and budget pact to tackle the eurozone debt crisis.

      Eurozone members and others will adopt an accord with penalties for breaking deficit rules.”

      Sounds like control of national budgets of both EZ and non EZ countries to me.

  10. Pete 3000 says:

    I take exception to point 4 about ‘the UK having protected interests so what about German cars’.

    No-one is threatening German cars. As Germany is the biggest beneficiary of the Euro why are German cars not being taxed instead of something with a particular UK interest. Taxing Financial Transactions isn’t going to stop bad investments, if only it would, so they might as well tax German cars it will help the environment as well.

  11. Michael f says:

    And the eleventh curiosity is…how on earth could Nick Clegg agree to it?

  12. Meg Howarth says:

    The ‘decent answer’ to your question is ‘Nothing’.

    Particularly liked point 9 – my thought too; point 10 means Cameron’s behaving like a hedge-fund manager. Detect less-than-full endorsement by Mr GO, suggesting this is a purely political move. In which case, a u-turn becomes more likely than not.

    Interesting to see the little Englanders and the Euro-sceptic Left agreeing with one another and with DC.

    Delighted you put [financial] ‘industry’ in inverted commas. Like ‘job’ – as in ‘finishing the job’ [military and sport!], creating ‘jobs’ – and ‘work’ these words have become so plastic they can mean anything.

    Real economic issue isn’t Euro/EU or even banks. Surely it’s the need for a new economic model? GDP growth is now a knee-jerk populist mantra, with the main parties all in it together. Need to re-define: ‘wealth’ [of a nation/world], essential jobs, socially useful work; end the ideology of the 8-hr day; and discuss what constitute the basic needs of a civilised society living within its environmental and ecological means. Suggest: 4-hr day, Citizens/Basic Income and taxing land.

    Keynes is surely summersaulting in his grave as…

  13. William Blakes Ghost says:

    Written like a true European.

  14. muggwhump says:

    This whole thing is just political theatre designed to take the need for referenda off the table.
    Yes Britain has been arguing for closer fiscal union for months, but how likely is that fiscal union if there have to be a series of referenda in various countries that will all vote NO?

    Run the alternative scenario where Britain signed up with the other 26. You can bet they did…

    Could Cameron have got away with signing up without a referendum? No.
    If we had one would other countries find their populations wanting a say? Yes.
    If there were referenda in multiple countries would it all be done and dusted by March 2012?
    How could the EU control events if multiple countries were first in then out…March 2012 is only 3 months way?
    How would the markets react to each rejection and delay?

    If, as a result of Cameron’s walkout there are no referenda and the deal is done in 3 months time isn’t that what Britain, France and Germany wanted all along?

    Its hard to see what else we’ve won or lost here other than take referenda off the table thereby speeding the agreement.
    All the rest is political theatre and of course spin.

    1. gunner says:

      @muggwump – can’t fault your logic. So they all knew what they were doing all along – creating the only feasible outcome that allowed the ECB to act with its liquidity measures and give more time.

  15. archibald gruntfuttock says:

    OK so have I got this straight?

    We are part of a European union whether we like it or not, because we have been denied a referendum, twice.

    Due to the reckless and fraudulent behaviour of major financial ‘institutions’ this union has suffered a complete financial meltdown, as has the rest of the world.

    As a last ditch measure to save the union, it has to agree to massive changes so this does not happen again.

    Our prime minister (who has been accused of being too close to the financial ‘institutions’ concerned) decides not to vote with the rest of Europe (which he in trying to convince us, is in our best interests to stay part of) because he fears that the planned changes will be detrimental to ‘Britain’s important financial institutions’.

    That cant be right can it?

  16. StuartM says:

    Cameron’s use of the veto was due to a number of factors that contributed to his decision:
    1. He needs to secure his own position within his own party.
    2. He is a PR/marketing man NOT a negotiator. His negotiating skills are poor.
    3. He and his party have infuriated Sarkozy since before the last election (remember Osborne’s joke about Sarkozy using a higher podium !) – so Sarkozy was never going to be helpful.

    Cameron is already showing signs of his uncertainty over what happened. His return to a “GloatFest” at Chequers – surrounding himself with those who agree with him is nothing more than a psychological “prop” to reassure him.

  17. Chowdhury Kolkata,India says:

    Monetary union of unequal ended in failure!Fiscal union of differing economy will be any different!
    Perhaps political union is not far off!
    Mr.C and U.K public opinion is too proud to even consider that.
    Perhaps history will decide who won really at Waterloo!

  18. Chowdhury Kolkata,India says:

    Monetary union of unequal ended in failure!Fiscal union of differing economy will be any different!
    Perhaps political union is not far off!
    Mr.C and U.K public opinion is too proud to even consider that.
    Perhaps we are really heading for United States Of Europe.

  19. Gary says:

    I have to say that I think that “Call me Dave” did a very brave thing. The upshot of this is that IF the Eurozone want the UK in their ‘club’ then they will have to come to us and we can ring concessions out of them.

    But, on the other hand, if we want to go into the Eurozone, then we will have to go ‘cap-in-hand’ to them and they can run roughshod over our sovereignty.

    Cameron now has the Euro verson of the “Sword of Damocles” over his head now. He cannot afford to make any mistakes now.

    1. ballefrans says:

      “Call me Dave” did a brave thing? He obviously didn’t know WHAT he was doing. Stumbling across a minefield unawares isn’t bravery, even if you happen on the the other side unharmed. Earnest Dave was probably buggered by sly French bureaucrats. It might not make much of a difference for Britain, anyway, since you probably ended up right where you need to be. Maybe it just shows the importance of being earnest, lest you outmaneuver yourself

  20. Philip Edwards says:


    I do wish you would stop using the comical term “free markets.” When it come to using international power there is not and never has been any such thing at a level that matters. Unless of course you consider the British Empire as a “free trade area.” In which case you deserve all the derision you get.

    Neocon Western economists (that is, almost all of them) use this term the same way they use the word “democracy.” What they really mean, sophistries aside, is the forcing of their capitalist evils onto everyone else. There won’t be many sensible free-thinking citizens left who fall for their garbage, not after the latest transnational banking scam. When eventually it comes, however near or distant, the international reaction will be to shovel the whole disgusting kleptocracy into the dustbin of history. Maybe then we can get down to living like human beings instead of consumer units.

    Such economists will then find their proper level as clerks employed in Las Vegas as fruit machine mechanics. They can’t say they haven’t got it coming.

  21. noodle says:

    I think billyb has hit the nail on the head here, Faisal.

    I can not see ANY uk government, tory, labour or LD, agreeing to a treaty which says that the UK budget will be subject to scrutiny by Brussels (or Bonn).

    Markozy wanted to wrest control over the EZ from the EU. They got that. And they made it look like the UK was the loner. What a great political win.

    1. pierregonzalez says:

      The treaty means budget control only for Eurozone countries , so was not going to apply to the UK !

    2. Hugh says:

      You’re an idiot: we’re not a Eurozone member so our budget wouodn’t be under security.

      How many times do dumb eurosceptics need to have this pointed out to them?

  22. Saltaire Sam says:

    Only ten curiosities? You are being kind, Faisal.

    Think not what you can do for your country, think rather what you can do to get cheers from your back benchers.

    Even Etonians must be embarrassed how someone so obviously born to be PM can turn out to be so inept.

  23. Mr. Harry says:

    I enjoy Faisal’s blogs and perspective. But I think time will prove that it is the very last sentence in his very last point (10) that drove Cameron’s brave gamble.

    A Greek default is inevitable early next year as the natural continuation of their pathetic failure to meet any of the targets laid out in the first rescue plan. In a world of emerging economic titans like South Korea, Turkey and (most of all) China, the complacent Greeks simply do not realize they have been living a better quality-of-life than their risible efforts deserve in the new world-order. The comparison with Turkey is particularly instructive; the Greeks go on about having the “best beaches in the world” which will rescue their corrupt economy…..when the equivalent product can be found next-door at half the price (even less after the fall in the Turkish Lira this year). And when Greece goes the contagion-effect will take down all of these complacent Europeans who have been living beyond their means for the last 15 years.

    Well done to Cameron for seeing this and staying out of it.

  24. pierregonzalez says:

    JOE ! Can you give me a splitting of the UK funding to the EU ? Because since the Thatcher agreements the UK gets a refund of the difference in between what is paid and what is received .
    So if the UK leaves the EU it will make no financial difference for the EU budget.

  25. adil says:

    Do you think that perhaps a possible change of the investment culture could take into account the sustainability of the investment? Perhaps a way to do that would be to delay the bonus perhaps for a few years (maybe 5) to see if the investment was a wise one. Perhaps that would encourage the undoubtedly smart people in finance to look at the longer term?
    Just a thought. Perhaps it’s misguided (in which case I apologise).

  26. AustrianBanker says:

    1) In the FT interview it was stated:

    “the first step towards a necessary fiscal union in the single currency area…But he said Britain would not take part in any eurozone solution…Britain’s taxpayers stand behind the pound, Europe’s taxpayers are going to have to stand behind the euro”

    Where Islam is the confusion for you? Do you read any article you refer to, before using it to justify your own confusion over the matter?

    Regarding the Swedes. The Swedish prime minister stated after the summit:

    “It’s not about us joining or not joining the new treaty, because the treaty text is only about EZ countries. It is therefore an odd situation to be in, to agree to something that does not affect us.”. Later he has also clarified that he will not be putting up any money to help the EZ. The only way Sweden will help is via the IMF.

    Now, contemplate that comment in the context of what the UK PM was facing. The destitute EZ countries, their panic state, wanted to impose a financial transaction tax. Clearly if the UK said yes, it would affect the UK. If they said no, it would not.

    So it was a clear choice for the UK.


  27. archibald gruntfuttock says:

    lets not lose sight of the real problem as we argue over the fine print. This is all irrelevant if we allow the banks to continue to invent money using the fractional reserve banking system. That is the real problem which brought us here and which everybody seems to have forgotten about. Its all beginning to look like a smokescreen, Lets not fight among ourselves we should be fighting the banks that caused all this mess.

  28. Jonathan Lawlor says:

    Good article.

    Looking on the Commission website it says the inter-governmental agreement will “adopt a balanced budget rule at constitutional or equivalent level, and recognise the jurisdiction of the Court of Justice to verify its transposition”

    I don’t get why any country would agree to someone outside their country deciding what they can or can’t spend. However, I would like to see a balanced budget rule … but not subject to penalties by a non-UK body.

    Also “urgent decisions in the ESM can be taken by qualified majority” – who decides whether a decision is urgent?

    “the European Council also sent a strong signal to investors of their commitment to defend the euro” But at what cost? Various articles in the UK press suggest the “EU” proposals amount to several more years of austerity. Who is correct? If Labour is correct and that we need to spend our way out of recession then a EU balanced budget situation is the wrong solution … and Labour should refute the EU proposals.

    However “All 27 EU governments agreed to speed up priority growth and job measures” Didn’t see much of that in your article or the UK press. Must read on…


    1. Saltaire Sam says:

      While I’m no great fan of budgets being controlled from Brussels, I don’t think it’s the biggest danger. Our governments are already controlled by that amorphous, unelected entity, the markets. And we have seen how they behave when they think they can get away with it.

  29. e says:

    1. Britain has been unhelpfully crowing and banging on about how the euro differs from the £, and can’t easily step out of the way of yet another market failure.
    2. Given the EZ’s weaknesses Britain expected agreement on a “not open to discussion rule” on changes to taxes or regulation affecting “The City” and workers welfare [flexicurity]
    3. Grandstanding is what our Prime Minister does; it’s what he has to offer.
    4. But the trouble with grandstanding as a tactic, like tantrums and emotional blackmail, political grownups know such behaviour must be ignored.
    5. Our Prime Minister has proved again just how unsuccessful he can be.
    6. I read somewhere, can’t remember exactly but so apt, something like, if you give up your seat at the negotiating table you risk being on the menu.
    7. But not to worry, we have at least avoided the horror of watching the better part of our political hierarchy trying to win a referendum argument within a media environment that maintains a knowledge blackout as best they can.
    8. Ok, Britain has pissed off a few important friends.
    9. We have the tactic of lining up the lawyers to argue this…

  30. e says:

    10. But really it doesn’t matter anyway, because during these testing times all “right thinking” neo-fascist should concentrate on making money while watching sufficient numbers of the little people suffer the ‘natural’ consequences of becoming unsustainable in a neo-fascist world order.

  31. Andrew Curry says:

    Could be as simple as David Cameron wanted to be out of the whole issue, the two previous Tory PMs, Thatcher and Major, we’re ultimately brought down by the fact that the Conservative Party is divided on the Europe issue and he didn’t want to open the door. Once open and the divisions are exposed he begins to look like a very weak leader.

  32. Mark Law says:

    What is the difference, in cash terms, between being inside the EU (and paying in) and being outside, but covered by WTO & GATT Agreements?


    How much more in tarrifs would we have to pay?

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