George Osborne threatens referendum over place in the EU

Warning comes after Germany rejects demands for immediate action to save euro

George Osborne delighted Tory MPs yesterday – and fired a shot across the bow of European leaders – as he signalled that ministers were prepared to call a referendum over Britain's place in the European Union.

The Chancellor also warned that the Government was ready to wield its veto in Brussels if there was an attempt to impose fresh controls on British banks as a result of moves to tackle the deepening eurozone crisis.

He spoke out after David Cameron returned from talks in Berlin with the German Chancellor, Angela Merkel, at which she rejected Britain's demands that Germany come up with an immediate plan of action to prevent the implosion of the euro.

He is pressing for Germany to take decisive action within weeks to rescue such beleaguered economies as Greece and Spain and shore up the currency. But she told him that it would "take years" to fix the single currency's problems.

Britain strengthened its rhetoric over Europe yesterday after months of demands from Tory MPs to use the chaos to stage a referendum on British membership of the EU. The Coalition's policy is to stage a nationwide vote only if there is any attempt to transfer power from Britain to Brussels.

But in remarks that were aimed as much at EU leaders as the Tory right-wingers, Mr Osborne suggested that could happen if negotiations over the eurozone resulted in a "reshaped relationship with Europe". He said: "A reshaped relationship with Europe would imply, would involve, a transfer of sovereignty or powers to Brussels. I think we have a very clear safeguard in the system now, thanks to this Government.

"If there is any transfer of power from this country, transfer of competence or transfer of sovereignty from this country to the European Union, then there will be a referendum."

Although Mr Osborne said there was a "remorseless logic" to creating "something more akin to a banking union or a financial union" among eurozone members, he made clear Britain would not be part of it.

In a warning that the country would use its veto to prevent fresh curbs on the City of London, he said: "Let me be absolutely clear: there is no way that Britain is going to be part of that banking union. We are not part of the eurozone. We chose not to join the euro, precisely because of the loss of national sovereignty that would be involved, the loss of flexibility to manage our banks in the way we wanted to, to manage our public finances in the way we wanted to."

Mr Cameron went to the Berlin talks with Barack Obama's backing to urge Ms Merkel to come up with an "immediate plan" to put the brake on the crisis sparked by spiralling Greek debt and Spain's continuing inability to recapitalise its banks to the tune of €80bn (£65bn).

The need for action was brought into sharper focus last night as Fitch, the ratings agency, downgraded Spain's sovereign debt rating three notches, from A to BBB. The agency said the likelihood of external financial support is rising.

Fitch also said Spain's financing difficulties will make it hard for it to intervene decisively in a banking-sector restructuring and raise the likelihood of outside external help.

Mr Cameron urged Ms Merkel to accept the introduction of eurobonds to provide an immediate remedy, but Ms Merkel gave no sign that Germany was prepared to alter its opposition to eurobonds. She told Mr Cameron: "It is human to think that the euro crisis could be solved in one fell swoop, but I don't think this would work. The euro crisis developed over 10 years and it is going to take several years before we can repair the system and make it viable again."

Mr Cameron told reporters after the meeting: "I am pressing the case for action to solve the financial crisis, recapitalise the banks and build the big firewall to get growth going. All these things need to happen."

In a television interview given earlier, Ms Merkel stressed the need for far greater convergence in Europe at all levels.

"We need not just a currency union, we also need a so-called fiscal union with more common budget policies," she said. "We need above all a political union. That means we must give up powers to Europe."

Start your day with The Independent, sign up for daily news emails
Sport
England's women celebrate after their 3rd place play-off win against Germany
Women's World CupFara Williams converts penalty to secure victory and bronze medals
Arts and Entertainment
Ricardo by Edward Sutcliffe, 2014
artPortraits of LA cricketers from notorious suburb go on display
News
newsHillary Clinton comments on viral Humans of New York photo of gay teenager
Arts and Entertainment
The gang rape scene in the Royal Opera’s production of Gioachino Rossini’s Guillaume Tell has caused huge controversy
music
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Recruitment Genius: Sales Administrator - Spanish Speaking

£17000 - £21000 per annum: Recruitment Genius: This is a fantastic opportunity...

Recruitment Genius: Sales Administrator - German Speaking

£17000 - £23000 per annum: Recruitment Genius: This is a fantastic opportunity...

Recruitment Genius: Sales Administrator - Japanese Speaking

£17000 - £23000 per annum: Recruitment Genius: If you are fluent in Japanese a...

Recruitment Genius: Graphic Designer - Immediate Start

£16000 - £25000 per annum: Recruitment Genius: This is a fantastic opportunity...

Day In a Page

The Greek referendum exposes a gaping hole at the heart of the European Union – its distinct lack of any genuine popular legitimacy

Gaping hole at the heart of the European Union

Treatment of Greece has shown up a lack of genuine legitimacy
Number of young homeless in Britain 'more than three times the official figures'

'Everything changed when I went to the hostel'

Number of young homeless people in Britain is 'more than three times the official figures'
Compton Cricket Club

Compton Cricket Club

Portraits of LA cricketers from notorious suburb to be displayed in London
London now the global money-laundering centre for the drug trade, says crime expert

Wlecome to London, drug money-laundering centre for the world

'Mexico is its heart and London is its head'
The Buddhist temple minutes from Centre Court that helps a winner keep on winning

The Buddhist temple minutes from Centre Court

It helps a winner keep on winning
Is this the future of flying: battery-powered planes made of plastic, and without flight decks?

Is this the future of flying?

Battery-powered planes made of plastic, and without flight decks
Isis are barbarians – but the Caliphate is a dream at the heart of all Muslim traditions

Isis are barbarians

but the Caliphate is an ancient Muslim ideal
The Brink's-Mat curse strikes again: three tons of stolen gold that brought only grief

Curse of Brink's Mat strikes again

Death of John 'Goldfinger' Palmer the latest killing related to 1983 heist
Greece debt crisis: 'The ministers talk to us about miracles' – why Greeks are cynical ahead of the bailout referendum

'The ministers talk to us about miracles'

Why Greeks are cynical ahead of the bailout referendum
Call of the wild: How science is learning to decode the way animals communicate

Call of the wild

How science is learning to decode the way animals communicate
Greece debt crisis: What happened to democracy when it’s a case of 'Vote Yes or else'?

'The economic collapse has happened. What is at risk now is democracy...'

If it doesn’t work in Europe, how is it supposed to work in India or the Middle East, asks Robert Fisk
The science of swearing: What lies behind the use of four-letter words?

The science of swearing

What lies behind the use of four-letter words?
The Real Stories of Migrant Britain: Clive fled from Zimbabwe - now it won't have him back

The Real Stories of Migrant Britain

Clive fled from Zimbabwe - now it won’t have him back
Africa on the menu: Three foodie friends want to popularise dishes from the continent

Africa on the menu

Three foodie friends want to popularise dishes from the hot new continent
Donna Karan is stepping down after 30 years - so who will fill the DKNY creator's boots?

Who will fill Donna Karan's boots?

The designer is stepping down as Chief Designer of DKNY after 30 years. Alexander Fury looks back at the career of 'America's Chanel'