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Prime Minister Cameron and Europe

Gavin Hewitt | 11:45 UK time, Wednesday, 12 May 2010

Britain's new Prime Minister David Cameron (left) and new Deputy Prime Minister Nick CleggEurope's leaders have phoned in their congratulations to the new Conservative prime minister. The French Prime Minister, Francois Fillon, spoke of the "special partnership" that exists between France and the UK. President Sarkozy sent his "warm congratulations". All of this is to be expected.

But Europe will be curious and wary. Curious, because Europe is the issue that divides the new Conservative-Liberal Democrat coalition more than any other. The Conservatives have deep, ingrained doubts about the European project; the Liberal Democrats are enthusiastic.

During the election the Lib Dems accused the Tories of being isolated in Europe. Nick Clegg said that David Cameron had in effect allied himself in the European Parliament with crazies. He said the Tories had abandoned the mainstream alliance of parties supported by President Sarkozy and Chancellor Merkel.

But that was in the heat of the campaign. Today is the reality of power-sharing. When it came to negotiating over the new coalition "Europe" was one of David Cameron's red lines. He would not compromise on his commitment to hold a referendum if Brussels seeks to increase its powers. The new government will not seek to join the euro and the Liberal Democrats accept that. There is no appetite to join the single currency in the UK and that has only increased after the euro's recent turmoil.

Today the new foreign secretary, William Hague, said he hoped there would be no "difficulties" over Europe. "We have written into this agreement that we agree there should be no transfer of sovereignty or powers over the course of the next Parliament, and that was not a difficult item to agree with the Liberal Democrats."

What is less clear is whether the Tories will try and reclaim some powers from Brussels in the field of employment or social policy. Any attempt to do that will meet with fierce resistance among other European leaders. It is not clear what view the Liberal Democrats take of that.

During the election campaign, William Hague stressed that he was not looking for confrontation in Europe and the expectation is that the new British government will be pragmatic in its dealings with Brussels.

It will be interesting to see whether the Conservatives's grouping in the European Parliament survives or whether the new government might be tempted back into joining the larger European People's Party. The initial impression I get is of no change, with one Tory MEP saying that they wanted to be "friendly neighbours, not awkward tenants" with the EPP.

You can sense Europe's wariness in the comments of the President of the European Commission, Jose Manuel Barroso. He said that "many of the challenges ahead... are common across the EU and require a common response". Europe's leaders are feeling defensive; their much-vaunted currency has been revealed as vulnerable and their inclination is to push for greater integration. Most of that will relate to those countries in the eurozone, but the UK can be expected to resist any suggestion from the Commission that looks like a fresh power grab.

President Sarkozy said he hoped the UK would "continue to make its contribution to progress regarding European construction in the spirit of trust and friendship which inspires them". It is the French hope that the new British government will prove to be "constructive Europeans".

Even with Labour in power some in Europe felt the UK was still an outsider. There has been some criticism of Britain's refusal to back loan guarantees to the eurozone countries. This was the attitude of Jean-Pierre Jouyet, the chairman of France's financial services authority. "There is not a two-speed Europe," he said, "but a three-speed Europe. You have the Europe of the euro, Europe of the countries that understand the euro... and you have the English." That was even before David Cameron became prime minister.

David Cameron arrives at a time of great uncertainty in Europe. The euro's reputation has been battered. The wall of money that has been thrown at rescuing the eurozone at the weekend does not address Europe's fundamental problems - debts, low growth and inflexible labour markets. Many of Europe's leaders have not faced up to the core of the crisis - that the continent's generous social model will have to be pared back. In a nutshell, Europe has been living beyond its means. Europe has to change and there will be opportunities for the Conservatives to contribute to this.

The most interesting relationship will be between Chancellor Merkel and David Cameron. They may even become surprising allies. It is only just sinking in in Germany that the EU has become the means of transferring hard-earned German money to weaker economies. This was precisely what was not supposed to happen when the euro was set up. It was why the rules of the Stability and Growth Pact were set up. The growing doubts in Germany as regards what kind of union they belong to may well chime with David Cameron's view that the EU is over-regulated and that the biggest challenge is to strengthen the single market and get Europe's economies growing again.

Already there are calls for much closer economic integration. A new battle for what kind of European Union is wanted lies ahead, and that may test the new ties that bind the Conservatives and Liberal Democrats to power.

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