Euro crisis summit: The night Europe changed

British Prime Minister David Cameron leaves the European Council headquarters in Brussels, 9 December British Prime Minister David Cameron spent the night in negotiations in Brussels

In the long hours of a bitter Brussels night Europe changed.

A major step was taken towards closer integration. It was not as a result of popular demand by Europe's people. It came about because Europe's leaders believed their project had "never been in such danger".

Last night most of Europe's governments gave up a chunk of their sovereignty. In the future, tax and spending plans will be shown to European officials before national governments.

There will be automatic sanctions against those countries that overspend. A monetary union has moved towards being also a fiscal union.

As a result of the late-night negotiations, there is now a two-speed Europe. French President Nicolas Sarkozy accepted that. He said it was "the responsibility of those who opted out of the single currency".

Several countries outside the eurozone had argued passionately against a Europe of the "ins" and "outs", of two categories of membership. That, however, is what happened.

Europe's leaders failed to agree a change to the EU treaties. Instead the new rules will be adopted and implemented through an inter-governmental treaty.

This will be an agreement involving the 17 members of the eurozone and some other states that are willing to embrace the new rules.

British isolation

The main obstacle to treaty change was Britain. Never has the UK been more isolated in Europe.

David Cameron has antagonised many European leaders. In their view he used his veto at a time of Europe's hour of need.

If there was to be a treaty change, the Prime Minister wanted exemptions from some financial regulations but Germany and France would not budge.

In particular, President Sarkozy was determined that there be no waiver for the UK. In his view it would undermine a lot of the work to regulate the financial sector.

The French have long believed that part of the reason for the eurozone crisis can be laid at the door of a poorly regulated financial services sector. There were few voices prepared to defend the City of London.

In the end, David Cameron concluded that agreeing to a change to the EU treaties would be against British interests.

His priority was to protect Britain's financial sector and the single market, which he regards as one of the principal benefits of belonging to the EU.

Closer than planned

The arguments are not yet over. A significant question is whether European institutions can be used to implement what is an inter-governmental treaty.

The French and the Germans would like to see the European Commission and the European Court of Justice involved in enforcing and overseeing these new rules.

As far as the British are concerned, the EU institutions cannot have any formal role in an agreement outside the treaties.

If EU officials are in the room, the UK will expect to be involved. David Cameron has already issued a warning - the EU belongs to the European Union as a whole. This is a recipe for further tussles and fights.

An inter-governmental treaty will be quicker to implement than a full treaty change. It will not require such extensive ratification. However it may also prove less rigorous.

Even so, the main impact of these changes will be in the long term.

Last night's historic agreement has little to say about debt, about the absence of growth, about the European economies that continue to grow apart.

The major test will be whether a commitment to budgetary discipline frees up the European Central Bank to act more aggressively in the markets and so lower the borrowing costs of troubled countries like Italy and Spain.

The head of the ECB, Mario Draghi, was circumspect last night, saying only that the agreement was "going to be the basis for a good fiscal compact and more discipline".

For the UK this marks a fundamental change in its relationship with Europe. Never has the UK been so on the margins.

If the eurozone collapses, of course, Britain may find others rallying to its vision. At home there will be those who argue that if Britain is so marginalised it might as well go further and decide whether it wants to stay in the European Union. The cry for a fundamental re-think of Britain's relationship with Europe will not be stifled.

For the European people, they are in a closer Europe than they ever voted for. But Jean Monnet, one of the founders of the EU, said Europe would be forged in a crisis. It has been proved so yet again.

Gavin Hewitt Article written by Gavin Hewitt Gavin Hewitt Europe editor

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  • rate this

    Comment number 741.

    @740 We agree to disagree, then :)
    As for de Gaulle's opposition being accepted as correct- accepted by whom? By the French?
    As for demanding special treatment- aren't Merkozy doing the same by deciding policy between themselves, then presenting the other members with their decisions as faits accompli? What gives them the right to decide without involving the other countries in the process?

  • rate this

    Comment number 740.

    #737 D Bumstead

    -I beg to differ,

    Germans have from the beginning of the Common Market always wanted Britain as a partner --to the point of naivety.

    -the poll by ´Spiegel-online´ suggesting that 61% of Germans are no longer sympathetic to Britain´s arguments for special treatment -- has taken decades -- but now appears widespread.

    -De Gaulle´s opposition has now been accepted as correct.

  • rate this

    Comment number 739.

    I also remember that a French film maker (a man) concerned that J. Fonda was getting too much press for a ..woman (in this peace movement)

    And He directed a movie "Letter to Jane" in which many 'Intellectuals' in France participate in. How dare she!!! So, there is the joy of leaving that nation behind with its delusional behaviors..

  • rate this

    Comment number 738.

    I do remember the Vietnam war--USA (China, Asia trade for UK? in future?)

    And I remember Jane Fonda going to N. Vietnam (then a nation) and people called her a traitor for pointing out that the USA was killing all these people...

    And it turns out 1 million Vietnamese (N and S) died in that war. So beware, UK. Be aware.

  • rate this

    Comment number 737.

    @735 One should never be afraid to go it alone if necessary. I think DC made the right decision but as you say time will tell. It may be several years before we know!
    Basically nothing has changed. Merkozy ignore the UK just as their predecessors have always done and no doubt their successors will do the same. France in particular never really wanted the UK in- shades of de Gaulle's animosity.


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