Concern mounts at discord ahead of crucial euro talks

Thu, Dec 8, 2011, 00:00

EU LEADERS gather tonight to seek a deal to save the euro amid anxiety in Dublin over a British push for concessions in a new rescue pact and widespread concern over Germany’s rejection of a fast-track plan for treaty change.

The high-stakes summit in Brussels has been billed as a final opportunity for the leaders to assert control. It comes amid expectation that the European Central Bank will escalate its interventions in bond markets and, possibly, provide emergency loans to the International Monetary Fund. The bank has indicated, however, that it will go down this road only if leaders make a binding political pledge to reinforce budget rules underpinning the euro.

As last-minute talks continued throughout yesterday, there was concern in Brussels and beyond that a comprehensive pact to eliminate all doubt about Europe’s response to the debacle might remain elusive.

Amid gloomy signals from Berlin and warnings from Paris that any failure to reach a deal would be very dangerous, a senior European source said last night that there was still a need for compromise.

“If we are not united, this is going to be very badly perceived by the markets, investors,” the source said. Any disagreement would be unhelpful from “a confidence point of view”. As pressure builds for a deal, the attitude of British prime minister David Cameron towards treaty change is rapidly emerging as a potential flashpoint.

A senior European diplomat said this question was likely to overshadow talks, which begin tonight in Brussels and continue tomorrow.

Mr Cameron wants to extract a concession from the summit in return for his acceptance of any treaty change and argues it would be very difficult to achieve parliamentary support without it.

This has prompted worry in Dublin that he might push to exempt parts of the City of London market from Europe’s drive to intensify financial regulation or from the clamour for a tax on financial transactions.

The Government is said to be “very concerned that no sweetheart deal is offered to Britain”. Such concern centres on the danger that any move to favour the City of London would put the International Financial Services Centre at a distinct disadvantage.

Mr Cameron’s stance has not gone down well in Brussels but the senior European source acknowledged that he may have to be offered some form of inducement to ensure British support for the move.

A further question of concern to Taoiseach Enda Kenny emerged last night when France and Germany called for an escalation of the effort to harmonise the corporate tax base in Europe.

Mr Kenny travels to Marseilles today for pre-summit talks with centre-right EU leaders such as German chancellor Angela Merkel.

While the governing council of the ECB holds a meeting today in Frankfurt, it is unlikely to make public any plans for a new intervention until well after the talks in Brussels.

Looming over final preparations for the summit is Germany’s flat rejection of a proposal to fast-track changes to the Lisbon Treaty to toughen the enforcement of an EU budget. The European source said this proposal, under which Ireland would probably not have to have a referendum, has found favour with a “majority” of member states.

In Berlin, however, the response was frosty. A senior German official dismissed the initiative as a piece of “typical Brussels legal trickery” and said it would not fly. This has fanned concern that Dr Merkel will insist on full-blown treaty change, a laborious process with unpredictable political consequences in many countries.