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December 14 - 20 2011

News

The Telegraph

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NEWS P9

NEWS P4

Undue influence Political lobbying firm filmed boasting of access to Cameron

Is this the real Jane? Recently discovered portrait said to be true likeness of Jane Austen

CULTURE P27

WORLD NEWS P15

Stealth on show Iran shows off captured top secret US surveillance drone

Turner Prize winner announced Martin Boyce becomes third Scottish winner in three years

LOTTO 07/12

LOTTO 00/00

14 10 27 31 32 47 16 21 24 29 30 39

Bonus Ball 41

Bonus Ball 20

There were two winners of Saturday’s £15.2m jackpot but no one won Wednesday’s £10.0m prize

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1064

The Telegraph

By Patrick Hennessy and Robert Watts DAVID CAMERON faced the first cracks in the Coalition last Saturday night after derailing a new European Union treaty.

The Prime Minister was warned that Britain would not be able to ward off a wave of Brussels regulations aimed at the City. Vince Cable, the Liberal Democrat Business Secretary, said the country had finished in a “bad place” after the acrimonious Brussels summit to resolve the crisis in the eurozone in which Britain stood alone against the 26 other EU nations.

Mr Cable’s view was shared by Ken Clarke, the Justice Secretary, the Tories’ leading EU supporter in the Cabinet. Mr Clarke said in a radio interview that the outcome of the summit had been “disappointing” and “very surprising”.

However, Mr Cameron was praised by virtually his whole party as the man who had stood up to the EU and put Britain’s interests first. He vetoed a new EU treaty because Britain was not allowed safeguards for its vital financial services industry.

One Tory MP said he was the heir to Margaret Thatcher. However, hardline Eurosceptics are now preparing to step up calls for a referendum on the relationship with Europe.

The Prime Minister will also have to steer a tricky course with the Lib Dems, whose backbenchers are disillusioned.

Europe. “There’s nothing bulldog about Britain hovering somewhere in the mid-Atlantic, not standing tall in Europe and not being taken seriously in Washington,” Mr Clegg said. “I will now do everything I can to make sure this setback does not become a permanent divide.”

Nick Clegg, the Deputy Prime Minister and leader of the Liberal Democrats, has warned that David Cameron’s decision to opt out of Europe is “bad for Britain”, revealing a deep split in the Coalition.

Mr Clegg, considered to be one of the most pro-European politicians in Britain, said he was “bitterly disappointed” that Cameron had vetoed European treaty changes.

He said that any further withdrawal from Europe risked making Britain “a pygmy in the world”.

He spoke to the Prime Minister straight after the European summit at 4am last Friday morning, warning that the decision to veto a new treaty was wrong. “I made it clear to the PM it was untenable for me to welcome it,” he told BBC1’s Andrew Marr Show.

Mr Clegg blamed the “intransigence” of France and Germany for Britain’s isolation. But he also criticised Eurosceptic Tory MPs, who have been pressing Mr Cameron to show “bulldog spirit” in negotiations with

However, he dismissed suggestions that the Coalition would break up. “It would be even more damaging for us as a country if the Coalition government were to fall apart,” he said.

“That would cause economic disaster for the country at a time of great economic uncertainty.”

Mr Clegg’s comments drew a stinging rebuke from Mark Pritchard, a leading Tory eurosceptic and secretary of the 1922 Committee. “Better to be a British bulldog than a Brussels poodle,” he said.

Mr Cameron also faced warnings that the City was in fresh peril from new taxes and regulations imposed by Brussels. Experts said that Britain was particularly at risk because regulations on financial services remain the tools of the EU as a whole.

Many powers could be imposed on the City by qualified majority voting, and Britain has no power to stop them. The lack of any allies in opposing the proposed new integration treaty reduced Britain’s chances of being able to fight off costly red tape, they said.

John Cridland, director general of the Confederation of British Industry, said: “Will Britain still be in a position to stop new financial regulations that come about as the eurozone becomes more integrated? That’s the elephant in the room. We are in uncharted territory.”

Mr Cable told The Telegraph that Mr Cridland had given a “good assessment” of the dangers in Britain’s position as the only EU member state not to support the treaty providing greater fiscal integration for eurozone states.

The Business Secretary said: “I am not criticising the Prime Minister personally. Our policy was a collective decision by the Coalition. We finished in a bad place.”

He added: “I simply don’t buy the view that the British national interest is synonymous with banking and financial services.”

Nick Clegg was also said to be increasingly angry about Britain’s isolation. A source close to him said he believed that the Brussels summit had ended in “spectacular failure” and that he thought Britain was now the “lonely man of Europe”.

WHAT NEXT FOR THE TWO SIDES OF THE EUROPEAN DIVIDE?

Will Europe forgive the UK for rejecting the proposed new treaty? The French and Germans are angry with David Cameron for now. However, European leaders have a long history of disagreements that are sorted out in the end.

Britain is not part of the single currency, so there is no great practical difficulty in deciding not to integrate further. It is also still part of the European Union, so if Brussels officials are involved, then the UK will still expect to be included in discussions.

There is also an economic argument that Britain and the rest of Europe need each other. They are major trading partners, so neither side has much to gain from isolation. Three million British jobs depend on European trade, which accounts for about 40 per cent of all exports and imports. At a time when most European countries are struggling, they need all the cross-border trade they can get.

also be an increase in protectionism — where countries or a bloc make it difficult to export goods or labour over borders.

But is there a risk that France and Germany will now make life difficult for the UK? One of the worst-case scenarios is years of political sniping between the UK, France and Germany. Britain may simply find itself unpopular for a while and the butt of jokes from its European neighbours. But a more serious consequence could be if the UK finds itself without a place at the negotiating table when the other countries want to discuss important economic and foreign policy issues.

The UK’s isolated position means there could well be arguments in the future over whether it is allowed to take part in discussions. There could

Could it lead to Britain’s complete exit from Europe? If the relationship between Britain and the rest of Europe deteriorates, this is a possibility. More than 80 backbenchers want a referendum on whether Britain stays in the European Union and polls suggest that the British people are deeply split over whether to leave the EU.

However, any move towards a referendum would probably destroy the Coalition of the Liberal Democrats and the Conservatives. Nick Clegg, the Deputy Prime Minister and Liberal Democrat leader, would never allow a vote that could lead to a complete exit.

Continued from page 1

our interests,” he said. “I’ve always said if that’s the case I’ll support our membership.”

Paris and Berlin will now try to agree a treaty outside the EU that commits the eurozone members to new limits on their deficits, in an effort to restore financial markets’ confidence. As well as the 17 countries using the single currency, the nine other EU members could also sign up, making Britain the only member outside the “europlus” bloc.

Despite signs that Hungary would remain outside the treaty, it later said it was likely to sign. Sweden and the Czech Republic sympathised with Mr Cameron’s position, but signalled they too could sign up. The new group’s creation prompted warnings that a eurozone “caucus” would use its voting power to impose rules to Britain’s detriment.

Tories fear an enhanced euro group could try to impose a financial transactions tax on Britain.

The Government estimates that the tax could cost the country £26 billion a year.

Mr Cameron also faces a legal and political battle to stop the new group using the European Commission and the European Court of Justice and their staff and buildings to support its new budget rules. As institutions created and funded by all 27 EU members, they should not be used for non-EU work, he said.

Some EU officials warned that Mr Cameron had sparked long-term hostility to Britain. The Prime Minister dismissed such warnings, insisting that the decision related to the euro and would not affect other aspects of the EU.

Back in Britain, the news was greeted with jubilation by most Conservatives. Boris Johnson, the Mayor of London, said the Prime Minister had “played a blinder”.

Many Tory MPs said this should be the beginning of Britain’s journey away from the EU rather than the end.