UK 'fully engaged' in eurozone deal talks

image captionFrance and Germany want the new agreement to be concluded as soon as possible

Downing Street says Britain will be "fully engaged" in talks to decide what should be in a new eurozone fiscal pact - despite deciding to stay out of it.

David Cameron argued it was not in UK interests to join, but officials will take part in "technical discussions".

A spokesman said the PM wants the pact to succeed and to "engage constructively" with the process.

Labour said he was "being forced to backtrack on his damaging decision to flounce out of the room".

Mr Cameron vetoed the prospect of an EU-wide treaty change which would have included Britain last week - arguing there were not sufficient safeguards for the UK.

'Given up seat'

Instead all EU states apart from Britain are considering signing up to a new agreement which aims to introduce closer fiscal integration in the eurozone with tougher rules on debts and deficits.

He faced criticism from Labour's Ed Miliband that by doing so he had "given up our seat at the table" and with it, the chance to secure the best deal for Britain.

But Downing Street said on Friday it had been invited to join technical discussions about what will go into the intergovernmental accord - which EU leaders hope will be drawn up by February.

Following reports the UK officials would have "observer status" - Downing Street said they have been invited to join as "equal participants".

"We will be fully engaged," she said.

Whether the EU Commission and other EU-wide bodies can be used to enforce and monitor rules applying to the new grouping is likely to be one of the most controversial points up for discussion.

Tax policies

However the UK will not have a vote and BBC Brussels correspondent Matthew Price said it was unlikely that the UK would be present at future meetings of the grouping, once the text of the fiscal pact was agreed.

Although all other EU states apart from the UK agreed to consider signing up to a new intergovernmental treaty - some doubts have been expressed by some non-eurozone states.

It is not yet known what will be in the new accord - France and Germany have floated ambitious proposals for a common eurozone corporate tax base and financial transactions tax, which were not in the text of the agreement at last week's Brussels summit.

The Czech and Hungarian leaders said they would not sign anything that would force them to give up independent tax policies.

Shadow foreign secretary Douglas Alexander said: "David Cameron is already being forced to backtrack on his damaging decision to flounce out of the room last week.

"But accepting limited participation in technical discussions will not give us any leverage where it really matters.

"While the Czechs and Hungarians are negotiating hard from a position of strength, David Cameron has deliberately chosen to sit on the sidelines, forced to lobby others to do his work for him."

Mr Cameron has denied claims that relations with French President Nicolas Sarkozy have been strained by his refusal to sign up to the EU-wide treaty last week.

'Simply unacceptable'

France has been warned by US credit ratings agency Standard and Poor that it could be downgraded over the eurozone crisis.

On Thursday, the chairman of the French central bank, Christian Noyer, suggested that any downgrade should instead start with the UK "which has more deficits, as much debt, more inflation, less growth than us". French PM Francois Fillon also made similar comments on a trip to Brazil.

Deputy PM Nick Clegg - who has also been critical of the outcome of last week's summit - spoke to Mr Fillon by phone on Friday. Mr Clegg's office said the French PM had made clear he had not intended to question the UK's rating but to make a point about ratings agencies.

"The deputy prime minister accepted his explanation but made the point that recent remarks from members of the French government about the UK economy were simply unacceptable and that steps should be taken to calm the rhetoric," his office said.

Downing Street downplayed the remarks, saying: "We have put in place a credible plan for dealing with our deficit and the credibility of that plan can be seen in what has happened to bond yields in this country."

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