Sat, Dec 10, 2011 - Page 1 News List

Europe moves ahead with fiscal union, UK isolated

GOING IT ALONE:The UK wanted guarantees in any new protocol that would protect its financial services industry, a call which the French prime minister called unacceptable

Reuters, BRUSSELS

Europe divided yesterday in an historic rift over building a closer fiscal union to preserve the euro, with a large majority of countries led by Germany and France agreeing to forge ahead with a separate treaty, leaving Britain isolated.

Twenty-three of the 27 leaders agreed to pursue tighter integration with stricter budget rules for the single currency area, but Britain said it could not accept proposed amendments to the EU treaty after failing to secure concessions for itself.

After 10 hours of talks, all 17 members of the eurozone and six countries that aspire to join resolved to negotiate a new agreement alongside the EU treaty with a tougher deficit and debt regime to insulate it against the debt crisis.

Sweden, Hungary and the Czech Republic said they needed to consult their parliaments.

“Not Europe, Brits divided. And they are outside of decisionmaking. Europe is united,” Lithuanian President Dalia Grybauskaite said in blunt English on arriving for the second day of the bloc’s eighth crisis summit this year.

One senior EU diplomat called British Prime Minister David Cameron’s negotiating tactics “clumsy.”

European Central Bank (ECB) President Mario Draghi called the decision a step forward for the stricter budget rules he has said are necessary if the eurozone is to emerge stronger from two years of market turmoil.

German Chancellor Angela Merkel said she was very satisfied with the decisions. The world would see that Europe had learned from its mistakes and avoided “lousy compromise,” she said.

The euro, shares and commodities fell in Asia because of growing doubts about whether Europe can forge a convincing financial firewall to arrest contagion in bond markets, but the currency regained ground in Europe and European stocks were narrowly higher in feverish trading.

Merkel and French President Nicolas Sarkozy had wanted to get the whole EU to agree to change the Lisbon Treaty so that stricter budget and debt rules for eurozone states could be enshrined in the bloc’s basic law.

However, Britain, which is outside the eurozone, refused to back the move, saying it wanted guarantees in a protocol protecting its financial services industry, about a 10th of the country’s economy. Sarkozy described Cameron’s demands as unacceptable.

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