There is looming recognition at 10 Downing Street that if the euro falls, Britain will sink along with everyone else. But if Europe manages to pull itself together by forging closer unity among the 17 countries that use the euro, then Britain faces being ever more marginalized in decisions on the Continent.
Many Europeans have been irritated by British Conservatives’ quiet satisfaction throughout the crisis with the decision not to join the euro (the United Kingdom ostentatiously kept its currency, the pound), particularly when juxtaposed with the panic over Britain’s inability to have any significant impact on Europe’s biggest crisis since the end of the cold war.
“Germany is the unquestioned leader of Europe,” said Charles Grant, director of the Center for European Reform. “France is definitely subordinate to Germany, and Britain has less influence than at any time I can recall.”
Of particular concern here is the health of Britain’s financial industry, a vital economic engine at a time of slowing growth and deep cuts in government spending, which is seen to be vulnerable to new European regulations that could hurt British competitiveness in global markets.
Despite all that is at stake, Prime Minister David Cameron’s coalition government looks doomed to be cast in the role of impotent bystander, torn between anti-Europe forces and European leaders’ moves toward greater fiscal integration on the Continent — with or without Britain.
On Wednesday, Mr. Cameron told a fractious Parliament that his main goal in Brussels was to “seek safeguards for Britain” and “protect our own national interest” by resisting measures like a proposed financial transaction tax. But such Britain-centric rhetoric has annoyed the brokers of Europe’s future, Chancellor Angela Merkel of Germany and President Nicolas Sarkozy of France, who are trying to find a way to save the euro while imposing legally binding fiscal discipline on the Continent’s floundering southern economies.
They have not been shy about expressing their frustration. Just six weeks ago, after Mr. Cameron tried to inject himself into talks about the euro, Mr. Sarkozy said bluntly, “You have lost a good opportunity to shut up.” He later added: “We are 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.”
Steven Fielding, director of the Center for British Politics at the University of Nottingham, said: “Cameron might sound off to look good to his backbenchers, but in Europe, he hasn’t got much to negotiate with. It’s been made clear that France and Germany can do whatever the hell they like and Britain can say yes or no, but it doesn’t matter, since they’ll do it anyway.”
The paradox of this is that plans for tighter integration among the 17 euro zone countries are at the same time destined to create greater divisions within Europe — divisions between countries that use the euro and those that do not, and divisions within the euro zone itself, depending on the health and importance of the various economies. A two-, three-, four- and even five-tier Europe could possibly emerge.
“The markets have defined who are the good guys and who are the bad guys, and their interest rates are in many ways the manifestation of this,” said Alexander Stubb, Finland’s minister for European affairs. “When we look at future E.U. rules, it is the triple-A countries that are running the show.”
The political price of Britain’s self-proclaimed exceptionalism was made clear with a vengeance to Mr. Cameron on Wednesday, when he was pounded from all sides in a raucous session in the House of Commons. Fractious Europe-hating Conservative backbenchers called for him to stand firm on Europe, to “show bulldog spirit,” in a “resolute and uncompromising defense of British national interests,” as one legislator, Andrew Rosindell, put it.
Trying to placate them, the prime minister pledged not to sign anything that did not contain “British safeguards.”
Sarah Lyall reported from London, and Stephen Castle from Brussels.
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