UK isolated after eurozone summit
Prime Minister David Cameron has used his veto to block a new EU treaty proposed by France and Germany to help restore economic stability in the eurozone.
The proposed changes to the Lisbon Treaty would have imposed tougher financial regulations on all members of the European Union but Mr Cameron was unwilling to support the changes unless the UK was allowed to opt-out on tighter financial services regulations.
Mr Cameron’s decision to use his veto has left the UK isolated with at least 23 member states now going ahead with a ‘fiscal compact’ rather than the planned new treaty.
As well as the UK, Hungary, the Czech Republic and Sweden initially held back from the new deal, but reports suggest that these three countries are now ready to sign up to the fiscal compact, leaving the UK as the only EU member state to remain outside the agreement.
The new agreement is expected to include a cap of 0.5% of GDP on countries’ annual structural deficits with measures automatically being taken against countries whose public deficit exceeds 3% of GDP.
Countries signing up to the agreement will have to contribute up to 200 billion euros to the IMF to help eurozone members who have fallen into debt.
The European Stability Mechanism, a permanent rescue funding programme, which was due to come into force in mid-2013, will be launched around a year earlier and its £427 billion limit will be reviewed.
The new rules will be enshrined in countries’ constitutions.
Mr Cameron is facing criticism at home over his veto, with Labour leader Ed Miliband accusing him of ‘letting down the country’.
Mr Miliband said: ‘The lesson for the Prime Minister is that to treat Europe as merely an excuse for the failure of your economic policy, or a problem to be negotiated with your backbenchers, serves us ill.
‘It makes us marginal to the big decisions on Europe. It is no way to run a foreign policy. And it lets down our country.’
After the summit Mr Cameron insisted that not signing the treaty was ‘a tough decision but the right one’.
Earlier this week the Chancellor, George Osborne, warned that the UK economy would suffer long-term damage if the euro collapsed.