The broad market sell-off Tuesday on news from Greece only makes that outcome more uncertain.
Before this latest jolt to the euro zone, the British prime minister, David Cameron, was already in a delicate dance, trying to defend his relevance in the European Union while trying to sidestep politicians and policy makers in London who would just as soon pull out of the bloc altogether.
Notably, Mr. Cameron, as prime minister of one of the 10 member states that do not use the euro, was not invited to dine with government leaders of euro nations in Brussels last week. And he was excluded from the talks on how to save the single currency. Those were significant snubs.
But Britain’s concerns go far beyond dinners missed and meetings not attended. There is a growing fear in London that a closer fiscal union among the 17 countries that share the euro, if such a consolidation is an eventual outcome of the crisis, would curb Britain’s influence on decisions that could affect the British economy.
The outline of a rescue plan that the euro zone leaders agreed to last week would result in “more meetings alone,” Mr. Cameron said Friday during a trip to Australia. The 17 nations that share the euro, he said, could possibly create a united voting bloc against the other 10 members of the European Union.
“It is very important that the institutions of the 27 are properly looked after and that the commission does its job as the guardian of the 27,” Mr. Cameron said. The “crisis means that greater fiscal integration in the euro zone is inevitable, but this must not be at the expense of Britain’s national interest.”
In some ways, analysts say, Britain has more at stake in the crisis than the other nine members that do not share the euro. Britain, after all, is home to Europe’s largest financial center, a crucial part of its domestic economy.
At the same time, the British economy is tightly linked with the Continent. As a bloc, the euro zone nations, led by France, Germany and Italy, are by far Britain’s largest trading partners.
“The fear is that a strong caucus of euro zone members would say, ‘Here’s what we want and we’ll push it through,’ ” said Iain Begg, a professor at the London School of Economics.
But some economists argue that such concerns are overblown, saying Britain’s voice would continue to be an important one in European decision making. Fanning any fears to the contrary, they say, mainly serves the ambitions of the British politicians and policy makers who would prefer that Britain leave the union.
It further stoked Britain’s anti-European Union contingent when word emerged that Mr. Cameron had been chided by President Nicolas Sarkozy of France at the Brussels meetings for trying to get too involved.
“You’ve lost a good opportunity to shut up,” Mr. Sarkozy told Mr. Cameron according to an exchange leaked by British officials and not denied by France. “We’re sick of you criticizing us and telling us what to do. You say you hate the euro, and now you want to interfere in our meetings.”
Mr. Cameron, who wants Britain to remain in the European Union but under better terms, faced a rebellion in his own Conservative Party last week. Several members ignored his orders and voted in favor of calling a referendum on Britain’s membership. The referendum plan was eventually rejected in Parliament, but Mr. Cameron was criticized by some of his own party members for not pushing Britain’s interests enough in Brussels.
Mr. Cameron also faces pressure from his coalition partner, the Liberal Democrats, which favor the union. Nick Clegg, the Liberal Democrat who is deputy prime minister, warned that any attempt by Britain to leave the union would be “economic suicide” and that Britain’s interests are best served by a “united and liberal Europe.”
“Euro skeptics tend to gaze longingly across the Atlantic, but the Americans are interested in us, in large part, because of our sway with our neighbors,” Mr. Clegg wrote in an article in the British Sunday newspaper The Observer last week. “We stand tall in Washington because we stand tall in Brussels, Paris and Berlin.”
The president of the European Council, Herman Van Rompuy, said in the run-up to the meetings in Brussels last week that he was fully aware of the concerns and “all the sensitivities of the relationship between the 27 and the 17 member states, so my intention is to have this exchange of views if possible each time before the euro summit meetings.”
Much of the British anxiety focuses on the City, London’s financial center and a hub for Europe’s hedge funds, derivatives trading and other investment banking activities. About 70 percent of global euro bond trading takes place in London, also a global center for foreign exchange transactions and derivatives trading.
“In London, E.U. legislation is increasingly seen as a threat to the City,” said Philip Whyte, a senior research fellow at the Center for European Reform in London. But the Continent does not always hold London traders in high regard.
Some euro zone members have started to push for a tax on financial transactions across the European Union to limit speculation and raise additional money, an idea Britain strongly opposes — unless it were a worldwide mandate — for fear of hurting London’s competitiveness in global finance. The tax proposal is to be presented to European finance ministers on Nov. 8.
Wolfgang Schäuble, Germany’s finance minister, has said that even if Britain blocked the agreement on such a tax in the full union, the euro zone should press ahead on its own. Mr. Schäuble said he was aware of Britain’s opposition “but it would be wrong to say it is hopeless before we have even discussed it.”
Article source: http://www.nytimes.com/2011/11/02/business/global/euro-crisis-holds-both-hopes-and-fears-for-britain.html?partner=rss&emc=rss
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