David Cameron defends stance over EU institutions

David Cameron: "We will take legal action if our national interests are threatened by the misuse of the institutions"

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David Cameron has defended his decision not to block the use of EU institutions by a new eurozone fiscal pact.

He told the Commons the pact "places no obligations" on the UK, but he would take "legal action" if the future role of the European Court threatened UK.

Conservative MPs have accused the PM of weakening the stance he took last year when he vetoed EU treaty change.

And Labour leader Ed Miliband called it a "phantom veto" and said the PM had secured "no protections" for Britain.

Mr Cameron vetoed an outline fiscal pact in December, saying the UK had not got sufficient safeguards over the future workings of the single market and financial regulation affecting the City of London.

The Czech Republic now has joined the UK by saying it will not sign the agreement but 25 other EU states have agreed to join up.

In December the PM also suggested that the European Court of Justice and the European Commission must remain for the use of all 27 EU states, and not for the fiscal pact countries alone.

Analysis

The key point is that this is not an EU deal. It will just be a treaty between various European governments. As such, Mr Cameron made clear in December that the EU institutions should not be used to enforce the new rules. But the words he used - namely that the government will insist that the EU institutions will work for all 27 nations of the EU - allowed him some flexibility.

He has now used that flexibility to change his position. He accepts that the European Court of Justice can be used to enforce the new fiscal rules. But he reserves the right to challenge this legally if he feels that the UK's national interests are being threatened by the new eurozone-plus group.

For example, eurozone countries could insist that certain complicated financial products should be traded only within the eurozone. This might help growth within the eurozone but it would devastate the City of London.

But Mr Cameron's decision to allow the European Court to be used outside the EU is being criticised by some Conservative MPs who believe he has diluted his veto.

But he has now said he will not veto any move to use the court to enforce the accord.

Giving a statement to MPs following a summit in Brussels on Monday, Mr Cameron said there were "legal questions" about the use of the court, but the wording of the new accord was "absolutely explicit and clear that it can't encroach on the competencies of the European Union".

"But nevertheless I made clear we will watch this closely and if necessary we will take action, including legal action, if our national interests are threatened by the misuse of the EU institutions," he said.

Earlier, Mr Miliband said the prime minister had "sold us down the river on a lot of things" in Europe.

Replying to Mr Cameron in the Commons, the Labour leader said the PM's "phantom veto" had left Britain isolated in Europe without any of the safeguards discussed in December.

"With this prime minister, a veto is not for life, it's just for Christmas," he said.

"He said there isn't an EU treaty, because I vetoed it - it doesn't exist. So this agreement involves the European Court of Justice, the European Commission, the European buildings, 25 out of 27 countries, and he says it's not really a treaty."

Ed Miliband: "With this prime minister, a veto is not for life, it's just for Christmas"

Former Labour foreign secretary Jack Straw asked the prime minister: "What has been achieved by your veto except that we are outside the door?"

'Slippery slope'

The Liberal Democrats had criticised the December veto, but several senior party members gave their support to Mr Cameron for this latest development.

Sir Menzies Campbell praised the "policy of re-engagement" adopted by the PM, while Simon Hughes said Monday's summit had been "much more successful" than the previous one.

But Mr Cameron was pressed by his own Eurosceptic backbenchers for reassurance - although they stopped short of directly criticising him.

Bill Cash asked whether the UK was on "a slippery slope" and the fiscal pact could eventually be "folded into the EU treaty".

Mr Cameron said it "cannot be folded back into the EU without the agreement of every member state", and because he had vetoed a new EU treaty "we're not in danger of that happening".

Start Quote

There's a real risk that by allowing the court to have a say on the implementation of the new fiscal union we will actually do ourselves harm”

End Quote David Davis Conservative MP

Bernard Jenkin questioned why "a subset of member states can by-pass a veto and hijack the institutions for their own purposes".

The PM said there were already groups within the EU that used the institutions and the UK "had the ability to exercise leverage" to ensure the new fiscal pact did not exceed its remit.

Several Eurosceptic Conservatives said earlier that there should now be a full referendum on UK membership of the EU.

Douglas Carswell suggested the "cast-iron guarantees" apparently won earlier had "rusted away", and Europe was "back to business as usual - ministers and mandarins cutting deals, the people of this country ignored".

Senior Tory backbencher David Davis told BBC Radio 4's World at One that the European Court had "a history of expanding its brief and applying principles in the treaty to areas where nobody thought they would".

"We've suffered from it in the past in the fishing industry, and there's a real risk that by allowing the court to have a say on the implementation of the new fiscal union then we will actually do ourselves harm, without realising it, in the future," he said.

A Downing Street spokesman said earlier there had been "agreement round the Cabinet table" when the PM reported back on the outcome of the summit on Tuesday.

Work and Pensions Secretary Iain Duncan Smith raised legal issues over the use of EU institutions, the spokesman said, but "recognised" that they had been "registered in the treaty".

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