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In the first of a series on world leaders, Miles Deverson takes a look at Nicholas Sarkozy
Over the past 24 hours, you may have noticed that Europe once again is the biggest burning issue in the UK. Not since 1992 has the UK seen its news dominated by Brussels in this way.
But beyond all the technical jargon, what actually is happening and why is there a lot of anger about what happened at the European Summit? To understand that, we’ve got to understand why a decision was needed in the first place. The biggest issue facing Europe at the moment are the countries colloquially known as the ‘PIIGS’ – Portugal, Ireland, Italy, Greece and Spain – all highly indebted countries who the market fear are not able to repay their borrowing. If they don’t pay back the money that means big problems for people who leant them money in the first place, and French banks are believed to be particularly exposed to this risk.
Therefore the concern that surrounds these countries has caused borrowing rates to go sky high, further fuelling the concerns. This has created a cycle of fear which some have suggested could lead to the downfall of the Euro. Not wanting that to happen, President Sarkozy of France and Chancellor Merkel of Germany arranged an EU summit, hoping to institute financial changes in Europe which would calm the markets and restore trust in the Euro as a currency.
Yet Cameron was cautious. He did not want to see the British financial sector, which continues to dominate the European financial landscape, subject to excessive regulation by the EU. He demanded that Britain had the ability to “opt-out” from European financial regulation as well as protection for firms operating out of London.
The problem was that most of Europe saw the financial sector as causing the crisis, rather than solving it. They were in no mood to give Britain special concessions and ultimately refused to give Cameron what he wanted. For Cameron this meant he could not agree to any new European treaty, and so refused to give UK assent to any agreement.
In reality, this did not work as a ‘veto’ as he hoped. The other 26 EU countries simply agreed a deal between them, and left the UK out. For countries that have the Euro as their currency (and countries who hope to join the Euro soon) it means much stricter rules over how much their government can spend. On average, they will only be allowed to borrow 0.5% of what they make each year, and if in a single year they go over 3%, they face economic penalties. Furthermore each country will have to submit their national budget to the European Commission, who will be able to recommend changes.
By being the only European nation not to sign up to this, Cameron was sending a clear message to Europe that Britain will play tough when it comes to protecting the Financial Services industry, a sector which provides over 10% of all UK government tax receipts. In turn, Europe also sent a message to the UK that it was “our way or the highway”, and by making an agreement without the UK no doubt lessened our ability to influence decisions in future.
This creates a new dynamic in the UK-Europe relationship, which has often been tense, as leaders scramble to blame each other for the UK not signing. The future for the UK in Europe will be very different now.
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