Andrew Grice: Divisions on Europe point to a rocky road ahead for Coalition

Inside Wesminster

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"The Coalition will never be the same again," one Liberal Democrat minister concluded at the end of a turbulent week in which the two governing parties' fundamentally different views on Europe were suddenly exposed to the daylight.

After four days of public squabbling over David Cameron's veto at the EU summit in Brussels, the two party leaders realised the Government would be damaged if it was defined by the Europe issue, and resolved to carry on their heated debate in private. However, the anger among Liberal Democrats is still evident. Some even use the word betrayal.

Nick Clegg had asked for one of his civil servants to join the British team in Brussels but Mr Cameron refused. Before the summit, the pair discussed the prospect of it ending in division, but their assumption was a split between the 17 eurozone countries and the 10 "outs", including the UK.

Mr Clegg thought he had a promise to be consulted by telephone if Britain risked being totally isolated. But Mr Cameron phoned him after the talks collapsed. Having walked out of the negotiating room, it would have looked weak to walk back in, as Mr Clegg would have urged. Perhaps that's why Mr Cameron's call wasn't made until it was too late.

In the aftermath of the summit, the bruised Liberal Democrat leader extracted some concessions. He didn't get everything he demanded in a six-point memo to the Prime Minister, but he will be consulted during future EU summits and is demanding that one of his officials be included in Team GB at such meetings.

Mr Clegg is determined to "unstitch" what he regards as a disastrous outcome for Britain. He has been open about rallying business to lobby the Government to take a more positive stance on Europe, as this newspaper reported on Thursday. In addition, he is working with the pro-EU Business for New Europe group chaired by the prominent City PR man Roland Rudd. The hysterical reaction from Tory Eurosceptics to this highlights a rocky road ahead for the Coalition.

Mr Cameron's veto has raised great expectations among his party's Europhobes that he will be unable to fulfill. The Prime Minister did not go to Brussels with the intention of wrecking the summit, but he intended to return with something that would get the Eurosceptics off his back. His dramatic veto did the trick but hasn't solved anything. Mr Cameron must still perform a delicate balancing act – trying to keep his backbenchers, the Liberal Democrats and European partners happy at the same time. It looks even harder after after the summit. Now the Liberal Democrats are seriously unhappy and, as yesterday's attacks on the UK by French ministers showed, Nicolas Sarkozy is playing the anti-British card in his presidential election campaign.

Despite his attempt to patch things up with Mr Clegg, I suspect that Mr Cameron would again put his party first if he were forced to choose. That's politics; even in a coalition, there is only one prime minister.

This is the second time the Deputy Prime Minister has felt badly let down by Mr Cameron. After being warned his own position could be threatened because the Yes campaign could win the May referendum on the voting system, Mr Cameron gave the nod to personal attacks on Mr Clegg by the No camp, even though he had promised his deputy that wouldn't happen.

The scars after the No camp won healed quickly. The Liberal Democrats adopted a "differentiation" strategy and were allowed a big policy "win" – watering down the Government's NHS reforms.

It won't be so easy this time. Memories of the referendum faded quickly, but Europe is here to stay because the eurozone crisis shapes the economic debate. Neither Mr Cameron nor Mr Clegg wanted Europe to rise up the agenda, but events beyond their control have put it there. Both leaders now fear their party may look to the public like "swivel-eyed" Europhobes or Europhiles respectively and will try to turn the spotlight on to domestic issues.

But the genie is out of the bottle and it was Mr Cameron who opened it. Ravenous Tory sceptics, while hailing him as their all-conquering hero, are already demanding more red meat. They are "banging on about Europe" again, ignoring one of the tenets of the Cameron project to modernise their party. Unlike Labour, the Liberal Democrats are not prepared to trim their pro-European sails because of public hostility to the EU. Mr Clegg was made to look impotent by Mr Cameron's handling of the Brussels summit, so will fight his corner hard now. He won't be fobbed off by a compensatory "win" on another policy; he wants a positive government stance on Europe, believing that is in the national interest. Some Tory MPs welcomed Mr Cameron's summit performance by saying that "with one bound he was free". But he isn't. And the Europe story is only just beginning...

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