The United Kingdom’s refusal to participate with the other member states of the European Union in an agreement on treaty change left it isolated at the European Council on 8-9 December. It now faces repercussions that are likely to extend beyond the immediate eurozone crisis.
At the summit, David Cameron, the British prime minister, presented a series of demands that, he said, would protect the interests of the UK and the City of London, chiefly by re-introducing unanimity into the decision-making process on financial-services legislation. Rules for the single market – including financial services – have been adopted by qualified-majority voting since 1986’s Single European Act.
José Manuel Barroso, the president of the European Commission, told the European Parliament on Tuesday (13 December) that, in exchange for its support for treaty change, the UK had asked for “a specific protocol on financial services that, as presented, posed a risk to the integrity of the single market”.
Barroso said that he offered a compromise, proposing an amendment to the leaders’ final statement with an assurance that “any measures adopted by the Council and applied to the euro area only must not undermine the single market, including financial services”. This did not, however, satisfy British concerns.
The UK wanted to protect the City from what it sees as excessive regulation from the EU, including wanting the flexibility to allow member states to set bank capital requirements higher than the maximum proposed by the Commission and agreements safeguarding London as the site of the new European Banking Authority.
Martin Callanan, the leader of the UK Conservatives in the European Parliament, said after the summit on Friday (9 December) that Cameron’s decision to veto the EU treaty change plans were “justified” and that an agreement would have “bargained away Britain’s rights, freedoms and economic well-being”.
However, as several EU officials have pointed out in the past few days, the UK has almost never been out-voted on financial-services legislation in the 25 years since the Single European Act.
Cameron also made much of his opposition to an EU-only financial-transaction tax, already proposed by the Commission and supported by Angela Merkel and Nicolas Sarkozy, the leaders of Germany and France. However, this would, in any case, require unanimity under current rules.
Many observers believe that Cameron won nothing during the negotiations and that his actions could, in fact, damage the UK’s position. Graham Bishop, an expert on EU financial legislation, said that, as a consequence of antagonising the other member states, “the UK can expect to be systematically out-voted on single-market measures”.
“In 2014, the new double-majority form of Council voting weights will become operational and the non-euro states will not have a blocking minority – even if they wish to act together,” Bishop said. “The fact that six non-euro states have signed up for the agreement already suggests the signatories will almost always have a massive weighted majority.”
He said that the UK will now need to convince other member states on its position on each piece of financial-services legislation – and that it will win only if its “intellectual argument is extremely powerful”.
Writing in the UK’s Daily Telegraph yesterday (14 December), Michel Barnier, the European commissioner for the internal market and services, criticised the notion of a return to unanimity in decision-making, saying that the single market could not exist if every country had a veto. He said unanimity “opened the way to other demands for protection of sectors considered to be of national importance and ultimately to a patchwork of arrangements undermining the very notion of a single market”.
EU officials say Cameron’s failure to win over other leaders to his point of view was compounded by the last-minute nature of his request and the simple fact that many member states did not in any case share Germany’s appetite for treaty change.
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