The day Europe lost patience with Britain

There was plenty of talk of history in the making in the  week before the Dec 8/9 gathering of European Union leaders –  the eighth this year. But it was all about the currency and  whether it would survive the strains of a debt crisis that over  the past two years has engulfed Greece, spread to Ireland,  Portugal, Spain and Italy and now threatens France and even  mighty Germany.

David Cameron

As the summit began, there was no hint of the drama that was  to come in the early hours of Friday, the moment when Europe  split, 26 against one, after about 10 hours of talks. Britain  has always had an uneasy relationship with its EU partners,  choosing not to join the single currency or sign the open  borders Schengen treaty and often kicking against what it sees  as Brussels “interference”.

But this was a low point. The first time in 39 years that a  British prime minister had used a veto to block an EU  agreement. David Cameron cast it is a bold and necessary  decision to protect British interests. Most of the rest of  Europe appeared to regard it as reckless and went a different  way. Hours later, when the leaders briefly reconvened to finish  their discussions, Cameron cut a lonely figure. French President  Nicolas Sarkozy appeared to avoid an extended hand as Cameron  walked to his seat.

The build up to this last summit of the year had been much  like the previous seven. The language had been recognisable too,  even if market pressures had added an unprecedented degree of  urgency to glacial EU decision making. Overnight borrowing from  the European Central Bank hit its highest level since March at  the start of December, showing the degree of tension amongst  banks.
 PROFOUND CONCERN  
U.S. Treasury Secretary Timothy Geithner had spent several  days in Europe before the summit. The United States, like all of  Europe’s trade partners, had been watching the accelerating debt  crisis with profound concern, worried for their own economies  and banks.

In meetings with the head of the ECB, Mario Draghi, and euro  zone finance ministers the conversation was all about the  two-year-old debt crisis and how to resolve it. The issues: the  role of the ECB, how far should or would it stand behind  countries to buy them breathing space, the scale of the euro  zone’s rescue fund, the part to be played by the IMF, and should  the EU let private bondholders off the hook.

Geithner spent time in Frankfurt, Berlin, Paris, Marseille  and Milan. London didn’t figure on his itinerary. During the  same week, German Chancellor Angela Merkel and Sarkozy spoke  frequently and met in person. There were contacts with Spain’s  incoming Prime Minister Mariano Rajoy. Draghi was closely  involved in discussions at all stages, insiders say. Once more,  Cameron was peripheral.

Immediately before the summit, the U.S. assessment of  Europe’s progress was, in broad terms, they know what they need  to do but they need to work out how they’re going to do it. As  one U.S. official put it, fixing the flaws of the 13-year-old  single currency – a monetary union without coordinated budget  policy – could not happen overnight. But the Europeans were  moving closer to addressing the problem at its root.

That assessment captured well the mood in the hours heading  into the latest in a long line of “crunch” summits.

Germany – Europe’s biggest economy – was intent on changing  the European Union’s treaty to enshrine stricter budget  discipline and penalties for countries that failed to adhere to  them, to ensure there could be no repeat of the current crisis.  From the German perspective, only by reforming economies,  cutting social benefits and working longer would the indebted  members of the euro zone and the single currency emerge from the  turmoil. Printing money would buy only a temporary respite and  would remove the incentive to reform.

France was ready to back Germany in a push for full-blown  treaty change, but really favoured the idea of an  intergovernmental treaty – akin to a sideline agreement – among  the 17 euro zone members, anchoring the single currency and its  members at the heart of a new Europe.

NATIVITY PLAY
Britain’s prime minister, under pressure from a sizeable  anti-EU element in his own party, set off for the Brussels  meeting straight from his son’s school nativity play, having  promised during a particularly raucous session of parliament the  previous day that he would defend Britain’s interests at the  summit.

With hindsight, the choreography on the evening of Thursday,  Dec 8 probably should have been clear to Cameron and everyone  else.

Speaking a few hours before the summit began, European  Commission President Jose Manuel Barroso issued this challenge  to Europe’s leaders: “What I expect from all heads of  governments is that they don’t come saying what they cannot do  but what they will do for Europe.”

Luxembourg Prime Minister Jean-Claude Juncker, who chairs  euro zone finance ministers’ meetings, was the first to arrive  at the Brussels venue. Juncker said he preferred to see  unanimity on treaty change among the 27, but if that wasn’t  possible, the 17 members of the euro zone would have to go it  alone. “Their relationship is more intimate than between the  27.”

When Cameron arrived in Brussels on Thursday it was after 6  p.m.. His first meeting was with Italy’s new Prime Minister  Mario Monti, an unelected “technocrat” charged with getting  Italy’s finances in order. Europe’s fourth biggest economy has a  debt to GDP ratio of 120 percent after years of stagnation under  Silvio Berlusconi. The meeting was brief and was followed by 45  minutes of talks with Merkel and Sarkozy. Cameron was  accompanied at that meeting by Foreign Secretary William Hague  and Jon Cunliffe, the prime minister’s most senior EU adviser,  the architect of the rules that helped keep Britain out of the  euro and Britain’s next ambassador to the EU. One official who  saw the three leaders emerge said they were “visibly tense”.

 BRITAIN’S ISOLATION
Then came dinner and the start of the meeting that was to  end in Britain’s isolation. Sources involved described how  events unfolded. The intention was to get the 27 leaders to  agree on what they wanted for a stronger euro zone first, and  then work out how to achieve it, officials said. It was  disagreement over the means, not the objective, that led to the  break down.

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