Cameron faces showdown with Sarkozy

December 9, 2011

By George Parker, Alex Barker and Peter Spiegel, Financial Times

David Cameron and Nicolas Sarkozy were heading for a confrontation in Brussels on Thursday night over Britain’s demand that any new treaty to enforce eurozone fiscal discipline also protect the City of London.

The row added to a pessimistic mood as 27 European leaders arrived in Brussels for what is seen as a “make or break” summit to try to stop the eurozone crisis worsening, and the French president warned Europe risked “disintegration”.

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French officials claimed the UK prime minister was making “unacceptable” demands, while Jean-Claude Juncker, Luxembourg’s prime minister, said he would not accept a deal that “allowed Britain to do what it wants in terms of financial regulation”. Strains were also evident between Germany, which wants tough new eurozone rules agreed by all 27 EU members, and France, which prefers a looser agreement among the 17 single currency countries.

Meanwhile pressure was also rising on Germany to agree additional resources to the eurozone’s rescue funds.

EU leaders pushed Angela Merkel, German chancellor, to accede to a plan to give the International Monetary Fund €150bn (£128bn) in new funds that could be used to shore up eurozone countries, while allowing the bloc’s €440bn rescue fund to continue running even when a new €500bn facility comes into place next year. The latter measure would increase the size of the EU’s own resources by about €200bn.

Mr Cameron is under pressure from his own Conservative party to take a tough stance in Brussels, but his list of demands falls well short of a British “opt out” on new financial service regulation that Paris and Berlin believed he was seeking.

Some of Mr Cameron’s eurosceptic MPs will regard his approach as too timid. Edward Leigh, a Tory MP, caused fury in the prime minister’s camp when he said he was tired of British prime ministers returning from Brussels with “Chamberlain-esque pieces of paper”.

“I’m not sure that Britain is the problem,” said one senior European diplomat. “There are still many unresolved issues between the eurozone countries.”

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