Continent gives Cameron the cold shoulder

The Prime Minister left for Brussels declaring he would have “no hesitation” in wielding Britain’s veto to block a European Union treaty to resolve the eurozone crisis if it did not meet UK requirements.

But French President Nicolas Sarkozy and German Chancellor Angela Merkel said swift action was necessary, and the pair have made it clear if they cannot secure support for a treaty change from all 27 EU members in Brussels, they are ready to press ahead with an accord limited to the 17 countries using the single currency.

As well as tough new controls on eurozone economies, including automatic sanctions if eurozone states breach debt and deficit criteria, the pair are calling for a tax on financial transactions within the zone, common corporate tax rates and harmonised employment rules.

Mr Sarkozy warned: “The longer we delay, the more costly and less productive the solution will be. If we don’t have an agreement on Friday, there won’t be a second chance.”

None of the Franco-German proposals would apply to the UK, which is one of 10 EU states outside the eurozone.

Finland’s European affairs minister Alexander Stubb said Britain was “not, to be very frank, a central player in this game right now” while the German leader of the Socialist Group in the European Parliament, Martin Schulz, also attacked Mr Cameron.

“If there is too much insistence on treaty change there is a danger of backroom deals and trade-offs, which we do not want to see. I want clarity and transparency,” he said. “I understand those who refuse to engage in horse-trading with a non-euro country.

“But we cannot allow the division of Europe into a 17-10 structure. Maybe, we should think about a 26-1 solution.”

European Commission President Jose Manuel Barroso urged all 27 member-states to stand together to show the world that the euro is “irreversible”.

“What I expect from all heads of state and government is that they do not come saying what they cannot do but what they will do for Europe,” he said.

“All the world is watching us, and what the world awaits from us is not more national problems but European solutions.

“It is extremely important that we all together, all the European Union, shows that the euro is irreversible, that we are all standing supporting the euro –and I believe that this is possible.”

The European Central Bank yesterday cut its key interest rate by a quarter percentage point to one per cent to help the eurozone economy as it slides toward recession. It last cut rates only five weeks ago.

New ECB head Mario Draghi said there was no deal with eurozone governments for it to step up government bond purchases in return for political leaders reaching a deal on tougher rules to prevent governments piling up debt. Bond purchases would lower borrowing costs for indebted government but the ECB has said it is up to governments to fix their finances.

Chancellor George Osborne issued a chilling warning of the “enormous damage” which the collapse of the euro would inflict on the British economy.

“It would do huge damage to the British economy, and I think those who say we’d have a year or two of hardship and then bounce back out of it, may be somewhat optimistic,” he told the House of Lords Economic Affairs Committee.

“There have been studies that suggest a very significant drop in UK GDP (gross domestic product) were the euro to fall apart.”

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