People are criticising Cameron for using the veto, saying “this fails to protect our interests.” They fail to understand that if there had been no threat to the single market and our financial services industry (from either existing EU legislation introduced by the Lisbon Treaty or a new EU fiscal treaty) then the 26 could have easily given the safeguards he asked for and Merkel would have got the ‘stability pact’ she wanted (rather than the weaker one Sarkozy engineered: note, either way it falls a long way short of the full fiscal union needed to save the euro).
The fact that the 26 could not – and would not give those safeguards is a clear indication that the safeguards were (and still are) really needed but were not going to come unless we demanded them. It is also worth noting that what DC asked for was not that radical and could have been accommodated if Sarkozy had allowed. However, Sarkozy quite clearly wanted a) not to have full EU jurisdiction over French budgets (so needed to spike Merkel’s plan – that’s why he was smiling and she was not), b) wanted the UK out of the way and the City at his mercy.
If Cameron had not asked for safeguards he would have been accused of being weak (by left and right) – and by agreeing to a new EU treaty, he might have been forced into a ratification referendum (which the EU would have hated even more). Having asked for such safeguards, he could not back down for the same reason. Miliband says he should have built alliances (a debatable point since the coalition seems to have been very active in Europe since taking office) – but it might have been more helpful if Labour hadn’t signed up to some of the new financial regulation (with the Lisbon Treaty) in the first place.
Nor could DC have waited for a more opportune moment. This was probably the last time we would have had any real leverage on the issue of financial regulation, because the formation of the euro17 block effectively scuppers our ability to block most legislation even if it harms our national interests. Those who say DC should not have asked, implicitly accept the financial consequences of such inaction – and need to explain how they would deal with the subsequent loss of tax revenues from a shrinking City.
If Cameron had backed the 26 in a new fiscal treaty the threat of new legislation and taxes would have stood – and Sarkozy would have made good on it. The EU would also have used the new treaty for more mission creep – that is inevitable (as we have seen over the last 50 years – and as enshrined in the ratcheting clauses of the Lisbon Treaty) – and in time we would have been subject to the same German austerity (with, note, a greatly reduced stream of tax revenues from a by then depleted City), which would make Osborne look like Santa.
Finally, it is worth noting (particularly for those fans of the euro and those who think we should have backed this enhanced stability pact) that these new fiscal rules impose the same balanced budget constraints on the euro17 as the Republican Tea-Party want to impose on the US – now I wonder how the ‘progressives’ feel about that?