ANALYSIS: Britain faces difficult balancing act at crucial EU summit

By Anna Tomforde Dec 7, 2011, 15:33 GMT

London - Despite having gained a reputation for sniping from the sidelines, non-eurozone member Britain has a vital interest in securing the future health of the eurozone at a crunch summit this week.

For Prime Minister David Cameron, the overriding need to preserve national interests clashes with demands from his own backbenchers to show the British 'bulldog spirit' and use the crisis to repatriate powers conceded to the EU.

Cameron's dilemma has been comparted to a trapeze artist walking a tightrope which is being pulled by opposing forces at either end.

The fight that could be looming within his own Conservative Party is dwarfed by the strain any open disagreement about Europe could place on the cohesion of the Conservative-Liberal Democrat government coalition.

That is why Cameron has adopted a markedly moderate language in laying down Britain's demands. He would make sure that any agreement struck in Brussels would 'protect British interests,' but solving the eurozone debt crisis was 'of the utmost priority,' Cameron said.

He is in an unenviable position. If a deal is agreed that requires the backing of all 27 member states, eurosceptic parliamentarians in London are likely to fuel a damaging rebellion in a parliamentary vote.

If a deal is struck involving just the 17 members of the eurozone, Cameron's government will appear isolated and powerless to resist being 'force-fed a federalist diet,' as one British commentator put it.

'Clearly, a new set of rules for 17 countries and a new relationship between the 17 countries who have the euro could have implications for those countries outside the euro, and that is why we have been talking about this whole issue of preserving the single market and making sure we have the safeguards in place,' said a government spokesman.

Some commentators, meanwhile, have raised the prospect that Cameron could end up in the same situation as former Conservative prime minister John Major, whose 1990-97 government was effectively destroyed by internal party rebels in the acrimonious debate over the Maastricht Treaty.

So far Cameron, backed by his coalition partner, the Liberals' Nick Clegg, has successfully dismissed calls for a British referendum on any EU treaty changes by saying such a vote would only be required in the event of an 'additional surrender of sovereignty' to the EU.

Britain, which exports around 50 per cent of its products to EU countries, would, first and foremost, insist on the protection of its interest relating to its powerful City of London financial services sector, which accounts for 10 per cent of the country's gross national product, Cameron has made clear.

A study released this week by ING's financial markets research showed that a break-up of the eurozone would have 'grave consequences' for Britain.

The scenario predicts a 9-per cent drop in economic output, a rise of unemployment to over 4 million, a 25-per cent fall in export and a sharp surge in the value of the British pound.

'Our requirements will be practical and focused. But eurozone countries should not mistake this for any lack of steel,' Cameron wrote in the Times newspaper Wednesday.

He is clearly hoping that his fellow-European leaders will show some understanding for his political predicament at home, while also appreciating his political - if not financial - support for ending the eurozone crisis.

'We fully support the eurozone's determination to reform its own rules and structures, but not if they are just papering over the cracks and threatening Britain's own interests in the single market,' wrote Cameron.

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