Q & A: Why the veto, and will Britain pay a price?


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The Independent Online

What did the EU summit in Brussels decide?

The 17 countries in the eurozone agreed to create a "fiscal union" to enforce greater budgetary discipline to prevent a repeat of their debt crisis. This came after David Cameron vetoed a treaty expected to be signed by all the other 26 EU members, including those outside the euro.

Why did the Prime Minister wield the veto?

Mr Cameron demanded specific measures to prevent the City of London being undermined by the eurozone reforms. When they were rejected, he refused to sign the treaty. He was under intense pressure from Tory Eurosceptics to use the veto unless he could return with a good deal for Britain.

Does it matter for the UK that other countries have gone ahead without us?

Yes. Particularly as most – possibly all – of the other nine nations outside the eurozone look likely to sign the inter-governmental agreement. The summit will fundamentally change Britain's relationship with the EU. This is the first time since Britain joined in 1973 that a treaty at the heart of the EU's workings will be agreed without it. The UK signed the 1991 Maastricht Treaty after winning two opt-outs.

Will Britain pay a price for being outside the EU mainstream?

Almost certainly. Privately, British officials fear that the UK – despite having one of Europe's biggest economies – will increasingly be marginalised. Far from protecting the City of London, there is a risk that the "euro plus" group will push through changes at EU meetings on financial regulation that will damage London and benefit the rival centres of Frankfurt and Paris. Although Britain has a veto on tax matters, financial measures are decided by qualified majority voting.

Are the Conservative Eurosceptics happy?

For today, yes. Many doubted that Mr Cameron would carry out his threat to wield the veto. He has proved to them he is "one of us". But the euphoria may not last long. Although Britain now has no treaty to ratify, hardline Europhobes are likely to maintain their demand for a referendum to resolve Britain's relationship with Europe once and for all.

Where does it leave the Coalition?

Nick Clegg, leader of the most pro-European of the main parties, backed Mr Cameron's veto. But he would have preferred a 27-nation deal – and devoted many hours to telephone diplomacy before the summit to try to prevent the rift. Vince Cable, the Liberal Democrat Business Secretary, believes Mr Cameron should have done a deal. Some Liberal Democrat MPs and MEPs have criticised Mr Cameron but the Coalition will survive as long as the Prime Minister avoids a UK referendum.

Who is the biggest winner?

Nicolas Sarkozy. He wanted a "euro plus" deal for the 17 eurozone nations plus as many of the "outs" as he could muster. Angela Merkel and the European Commission wanted an agreement of all 27 member states to prevent a two-speed Europe.