EU 26 fight to stop pact unravelling

Several non-eurozone nations having doubts about 'fiscal compact', while Sarkozy inflames divisions with attack on 'kid' Cameron

Hopes of an early end to the eurozone's troubles were fading yesterday as Nicolas Sarkozy launched a personal attack on David Cameron amid growing signs that last week's agreement struck by the other 26 European Union countries without Britain is fraying at the edges.

Click here to view EU divided graphic

Blaming the Prime Minister for the collapse of the Brussels summit, the French President told his MPs: "Cameron behaved like a stubborn kid, with only one objective: protecting the City [of London], which wants to carry on behaving like an off-shore tax haven. No other country supported him, which is what you call a clear political defeat."

But an unrepentant Mr Cameron told Tory MPs last night that other EU countries were now having doubts about the plan for a "treaty outside the EU treaty". He insisted: "There is no question of it being 26-1. There are a number of countries not at all sure what they are being asked to be signed up for." Officials from EU countries will meet in Brussels today to discuss the detail of the"inter-governmental" agreement.

The Prime Minister, who spoke to his Irish and Swedish counterparts by telephone, said there were "alliances to be built". He appears to be trying to rally opposition to the Brussels deal in the hope that Britain could return to the negotiating table without him having to climb down. Any retreat by him would infuriate Tory MPs, who hailed him at their meeting last night for using the veto.

The German Chancellor Angela Merkel took a conciliatory line towards the UK, saying: "It is beyond doubt for me that Great Britain will in future continue to be an important partner in the European Union. Great Britain is a reliable partner for Europe not just in questions of foreign and security policy; Great Britain is also this partner in many other questions – in competitiveness, in the internal market, for trade, for climate protection."

Doubts about last week's deal are surfacing in several European capitals. Michael Noonan, the Irish Finance Minister, said Ireland might have to hold a referendum on it. "Our legal people won't be able to call it until we see a text, because it's a fine legal position in Ireland. You have to go to the people if it requires constitutional change," he said.

Senior finance ministry officials from EU countries will meet in Brussels today in a first attempt to flesh out the contents of the "inter-governmental" agreement on greater fiscal union due by next March. Brussels officials insisted that there was no immediate threat that the latest in a long series of "last chance" deals to save the euro would fall apart.

Although the "fiscal compact" to impose greater budgetary discipline on the eurozone was accepted in outline by all EU countries except Britain, four non-eurozone governments – the Swedes, Danes, Czechs and Hungarians – have since warned that they might not be able to go along with it. Tensions have also emerged in eurozone countries, including Germany, France, Italy, Ireland and the Netherlands. The uncertainty, coupled with investors' and pundits' doubts about the substance and legal basis of the agreement, unsettled financial markets yesterday. The euro fell to its lowest value against the dollar for 11 months.

Petr Necas, the Czech Prime Minister, made clear that his government's signature would depend on the resolution of this question among others. "Right now, there is not much more than a blank sheet of paper and even the name of the future treaty might still change," he said. If some non-eurozone countries declined to sign in March, Brussels officials said, the "core" of the eurozone could still go ahead. Perhaps the most dangerous straw in the wind was the resignation of Christian Lindner, the general secretary of the Free Democrats, the junior partner in Ms Merkel's coalition. Although Mr Lindner did not refer directly to the Brussels deal, many Free Democrats oppose German involvement in a permanent mechanism for shoring up the debts of struggling eurozone members.

Labour claimed Britain's isolation would be underlined by its absence at a jobs summit for the 17 euro members in the new year being proposed by France and Germany. Labour said it should be open to all 27 EU members but illustrated the consequences of Mr Cameron's "empty chair" policy.

In the Commons, Mr Cameron brushed aside a call by Ed Miliband, the Labour leader, for him to re-enter talks on an EU-wide deal. "I make no apologies for standing up for Britain," he said. Later the Prime Minister told the 1922 Committee of Tory MPs that the split with the Liberal Democrats over Europe would not break the Coalition and lead to an early general election. "We must not be blown off course," he said. "We have to get to 2015, working with our Coalition partners."

He said the Liberal Democrats also needed "to show that Coalition works". He insisted that Nick Clegg and his party had signed up to his negotiating position ahead of the Brussels summit, but argued they had not "fully thought through" how they would feel if Britain's demands were not met and it could strike an agreement.

Ireland could sink deal with referendum

The Irish Finance Minister, Michael Noonan, right, said Ireland might be forced to hold a referendum on the new EU "compact" agreed in Brussels last week.

"We don't know at this stage," Mr Noonan said in London, before a meeting with the Chancellor, George Osborne. "Our legal people won't be able to call it until we see a text, because it's a fine legal position in Ireland. You have to go to the people if it requires constitutional change." Irish officials warned that the public, experiencing a severe austerity drive, would be most unlikely to vote "yes" to a new EU treaty. Ireland is pushing for the new deal to be limited to avoid triggering a referendum that could create a new shock to the fragile eurozone if it were lost.

Ireland is legally bound to hold a referendum on any agreement that alters the Irish constitution. The Irish public rejected the EU's Nice Treaty in 2001 and the Lisbon Treaty in 2008, although both were accepted in later referendums. Mr Noonan said: "We have won every referendum that has been put to the people, though on occasion we had to have two goes at it. I certainly wouldn't like a replay."

Ben Chu

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