A good deal for the UK - or the euro?

David Cameron Image copyright AFP
Image caption Critics say Mr Cameron has torn up a promise to re-balance the economy

So many questions today. But here are the big two: can the plan agreed in the early hours of Friday save the euro? And was David Cameron right to judge that it was in the UK's national interest to keep us out of it?

There's room for plenty of doubt on both fronts. Where there's no argument is that the world has changed.

Considering this new landscape, and the flaws in the plan to save the euro, some brave souls may even say that it is no longer even in the UK's long-term interest for the single currency to survive in its current form.

But given the short-term catastrophe that would follow from one or more countries leaving the euro, that is not something any serving UK politician is likely to wish for any time soon.

Let me focus on the arguments over the UK deal.

Critics say the prime minister has torn up the government's promise to re-balance the economy, to focus on "making things again", and stop putting the City first.

Not only did he put the financial sector first in last night's negotiations, in the critics' view, but he let the desire for an open-ended veto on all matters relating to the financial sector put us on the outside of Europe, perhaps irrevocably - potentially endangering our long-term relationship with a region that accounts for half of our exports.

And the bulk of those exports, these critics will also add, do not come from the financial sector.


Here's what UK officials say to all this. They say that first it wasn't an "open-ended veto" they were after, but a handful of quite specific demands, in areas where ministers had reason to worry that a more integrated Europe would take Britain in the wrong direction.

Specifically, here's what they wanted enshrined in any revised treaty:

First, a solid principle of non-discrimination. So, for example, the European Central Bank (ECB) couldn't demand that all financial clearing houses that deal in euros be located in a eurozone economy. The UK is currently taking the ECB to court on precisely this point.

Second, the UK wanted the area of "maximum harmonisation" to become subject to unanimity. In plain English, this would mean that the UK - and everyone else - would have a veto on any decision to set a ceiling or maximum on a given part of financial regulation.

This would mean, for example, that in implementing the Vickers report on banks, the UK could not be prevented from requiring UK banks to hold more capital - or liquidity - than required under EU regulations. This is another ongoing dispute with the European regulators, in which the IMF has recently taken the UK's side.

In that sense, officials say it's wrong to argue - as some have - that the government was trying to protect the City from more regulation. Here, at least, David Cameron was trying to obtain the freedom to regulate more.

A third demand was for all transfers of supervisory or regulatory powers to EU institutions also be made subject to a unanimous vote - again, effectively giving the UK a veto. This is an area where team Cameron sees the Commission eager to expand its reach. They wanted to stop it.

'Fundamental disagreement'

So, the way UK officials tell it, this wasn't about an open-ended veto for the City, it was about preserving the single market in a number of specific areas, where the wind in Brussels has not been blowing our way.

It so happens that these are largely in the financial sector. But that's because the Commission's energies are currently focused on matters financial. "If they were doing something that put our manufacturers at a disadvantage, we'd be arguing about that," officials would say.

What's more, these officials would add, that desire to protect the single market and the principle of non-discrimination related to all of the economy - not just financial services.

Perhaps. But many will say these "specific" changes did involve granting the UK a veto, on quite a lot of things that the other members of the EU might well want to move forward with. And, as officials would admit, the demands go to a fundamental disagreement about the best way to build a competitive single market - and a successful European economy.

Put simply, this government thinks you get the best outcome if individual countries can go their own way, as far as is feasible, within a framework that gives a level playing field to companies and individuals, wherever they operate in the EU. Many around the table last night favour giving more powers to the centre - and more harmonisation.

So much for our long-term future in Europe. What about right now? Well, right now, as Robert Peston has written, most people would say the best deal for the UK last night was more or less any deal that saved the euro. Because if there's more crisis, let alone a break-up, that could easily sink our recovery for a long time, and cause havoc for Britain's banks.

Are the decisions taken last night sufficient to lift that threat? More on that later - in these pages, and on Newsnight at 22.30 on BBC2, which I'll be presenting.