Bloomberg News

Cameron Rebuffs Merkel Push for More Europe Political Union

November 16, 2011

(Updates with Dutch prime minister starting in second paragraph. EXT4 <GO> for more on the euro-region debt crisis.)

Nov. 15 (Bloomberg) -- U.K. Prime Minister David Cameron rebuffed a call by German Chancellor Angela Merkel for political union in Europe, underlining Britain’s growing distance from the 17-nation euro area as it seeks to resolve its debt crisis.

The crisis offers an opportunity for powers to “ebb back” from Europe to nation states, Cameron said in a speech in London last night. Hours earlier, Merkel told her Christian Democratic Union party in the eastern German city of Leipzig that it’s time to push for closer political ties and tighter budget rules. Dutch Prime Minister Mark Rutte said today that the debate was deflecting attention from the fiscal crisis.

“We should look skeptically at grand plans and utopian visions; we’ve a right to ask what the European Union should and shouldn’t do,” Cameron said. Europe should be “outward- looking, with its eyes to the world, not gazing inwards” and should have “the flexibility of a network, not the rigidity of a bloc,” he said.

Merkel’s drive for closer union and Cameron’s riposte set up a potential tussle at a summit on Dec. 9 that’s due to discuss an overhaul of the 27-nation EU’s guiding treaty to bolster the euro. Cameron, who will be in Berlin for talks with Merkel on Nov. 18, has pledged to use any changes to EU rules to claw back powers from Brussels.

‘Turning Point’

Evoking the 1989 pro-democracy protests that began in Leipzig and led to the fall of the Berlin Wall, Merkel, in her most explicit prescription yet to tackle the crisis, said it must be seen as a “turning point” in shaping EU and euro policy.

“The task of our generation now is to complete the economic and currency union in Europe and, step by step, create a political union,” Merkel said in an hour-long speech to more than 1,000 CDU delegates at the party conference. “It’s time for a breakthrough to a new Europe.”

Merkel’s address marked an escalation in her rhetoric as the debt crisis that began in Greece in October 2009 sent Italian and Spanish borrowing costs to euro-era records last week and roiled French markets. After leadership changes in Italy and Greece, the chancellor is turning her attention to shaping the euro and the EU’s future.

Stocks fell for a second day today and credit-default swaps rose after a surge in Italian borrowing costs intensified concern that the debt crisis will worsen. The euro lost 0.2 percent against the dollar, extending yesterday’s 0.9 percent retreat.

‘Opportunities’

Cameron also invoked the fall of the Iron Curtain in his speech, though in contrast to Merkel he said it marked a turning away from the requirement for the EU to act as a tight alliance in the west to keep peace in Europe after 1945 to the need for a loose union of democratic states working together across the whole continent.

The EU should be an alliance “that understands and values national identity and sees the diversity of Europe’s nations as source of strength,” Cameron said. “Change brings opportunities: An opportunity to begin to refashion the EU so it better serves this nation’s interests and the interests of its other 26 nations too; an opportunity, in Britain’s case, for powers to ebb back instead of flow away.”

Appearing in London today with U.K. Deputy Prime Minister Nick Clegg, the Dutch premier said the EU must make it a priority to prevent splits between the euro and non-euro nations.

‘Taking Energy Away’

“My worry is that we have the 17 looking inward, that we have the U.K. and Poland, all the nations focused on growth and jobs outside,” Rutte told a news conference. “All this institutional debate is taking energy away from what should be our main focus: getting growth going.” He said any treaty change should be “very limited.”

Clegg, who leads Cameron’s pro-European coalition partners, the Liberal Democrats, said there could be no question of Britain leaving the EU.

“The absolute priority has got to be growth and jobs,” Clegg said. “That must remain the priority, rather than any painstaking lengthy debate about the future design of the EU.”

More than a quarter of the lawmakers in Cameron’s Conservative Party defied the Cabinet last month and voted to back a call for a referendum on continuing British membership of the EU, underlining the pressure on Cameron to oppose further integration. Instead, the government has pledged a popular vote on any treaty changes that hand further powers to the bloc.

--With assistance from Brian Parkin and Tony Czuczka in Leipzig, Germany. Editors: Eddie Buckle, James Hertling

To contact the reporters on this story: Thomas Penny in London at tpenny@bloomberg.net; Robert Hutton in London at rhutton1@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net


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