Cameron walks Euro tight rope

28th October 2011

There is a fear that Eurozone countries may start to act in concert to the detriment of the non-euro EU members of which Britain is of course the largest. The big concern appears to be the impact on the City of London. This is an old concern of course. In the last two decades and certainly as the euro was formed, there have always been worries that Frankfurt or Paris could establish themselves as significant rival to London. But in the 2000s, that has certainly not proved to be the case. In fact London is regarded as having overtaken Wall Street as the preeminent global financial centre.

But could the realities of saving the euro combined with a new zeal to regulate from Europe's politicians damage London?

As the Telegraph reports, it is certainly on the Prime Minister's mind. He has been attacking the EU for its regulatory threat to the City of London on his way to the Commonwealth summit.

Cameron said: "London is the centre of financial services in Europe. It's under constant attack through Brussels directives. It's an area of concern; it's a key national interest that we need to defend. As the 27 we need to make sure that the single market is adequately looked after. There are a lot of things the eurozone is doing together. Having more meetings alone, establishing machinery – it raises the question of could there be caucusing?"

The Guardian's Wintour and Watt blog has some interesting analysis of the speech and identifies two key issues at the forefront of the Prime Minister's mind. The first is that the European Commission must not become a plaything of the French and Germans.

And they also argues that France and Germany would love to downgrade City of London and note that many of the directives concerned with regulating it are decided by qualified majority voting. In theory at least, a new eurozone caucus could actually outvote the other members in such votes i.e. Cameron has no veto.

He does however have a veto on treaty changes required to develop more institutional and fiscal infrastructure to safeguard the currency.

The bloggers write that "Cameron could say to Angela Merkel, the German chancellor, that she can have her treaty change if she will protect the City."

That's the Guardian of course. On less pro-European papers, Cameron is being urged to take a very hard line position.

Daily Mail blogger Nick Wood writes: "Cameron's first job is to spell out where he stands on the European question. Then he must set about getting the best possible bargain for Britain and not being afraid to tell the likes of Sarkozy and Merkel where to get off. Those who want a referendum on Europe should be more cheerful today. We are getting closer to that happy day."

But is the Mail closer to the public than the Guardian on this.

For example, the Guardian's Northern blog believes it has found Britain's eurosceptic heartland – the North of England.

"Despite the argument that the country does not need the distraction of a referendum, polling carried out by ComRes for ITV News this week clearly showed a deep rooted euro-scepticism across northern England. Asked about their attitude towards referendum, 69% of those questioned across the three northern regions supported a vote. Only the two Midlands regions matched that."

Of course Cameron also has to consider his coalition partners, the broadly pro-European Liberal Democrats. If he takes too hard a line, it could bring down the Government. EU and European politicians appear reconciled to Britain remaining apart and seeing its influence wane and Cameron's backbenchers are organizing to negotiate for the repatriation of employment and social legislation.

The Prime Minister is an astute politician. But it looks like quite a political tight rope he will need to walk in the next few months.  

More from Mindful Money:

What are the economic benefits of the UK leaving the EU?

What are the real benefits of the European Union?

Creativity and financial crisis: Will this provide the answers?

Will the UK “double dip”?

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