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Q&A: David Cameron and the EU summit on the eurozone Q&A: David Cameron and the EU summit on the eurozone
(about 21 hours later)
  
UK Prime Minister David Cameron is facing political pressure in the UK and in Europe over proposed action to help the eurozone. Here is a guide to the position he finds himself in: UK Prime Minister David Cameron has effectively vetoed an EU-wide treaty change aimed at tackling the eurozone crisis, saying it was not in Britain's interest. Here is a guide to the position he finds himself in.
What is happening?: What has happened?:
The EU summit on Thursday and Friday is billed as one of the most crucial in the European Union's history. The issue being tackled is the single currency - the euro. It is used by 17 out of the 27 European Union member states and its credibility is on the line as a result of a debt crisis that has seen Greece, Ireland and Portugal all having to be bailed out by the EU and the IMF. UK Prime Minister David Cameron says he has blocked changes to the EU's Lisbon Treaty which would affect all 27 member states because it was not in Britain's interests. Instead the 17 EU countries which use the euro, and nine other EU states, most of whom intend to join the single currency in future, will press ahead with a separate agreement - called an "intergovernmental accord" - aimed at preventing a repeat of the current debt crisis.
Why does there need to be any change to the euro rules? Why did David Cameron refuse to sign up?
When the single currency was created in 1999 it joined together a series of countries which had very different economies. There were rules for keeping balanced budgets, but those rules were broken and as we have seen recently some investors have lost confidence in the value of some countries' debt. Before the summit, Mr Cameron said he would not sign up to any change involving all 27 member states that did not protect British interests - particularly on financial services and access to the single market. The UK has long been resisting calls from other EU leaders for a Europe-wide bank transactions tax which it says would hit the City of London hardest. It is not thought such a tax was specifically discussed but Mr Cameron sought a separate legally-binding "protocol" to protect the City of London from more EU financial regulations. He didn't get one. France's Nicolas Sarkozy argued that much of the financial crisis was down to a lack of regulation and it would not have been right to give the UK a "waiver".
What changes do Germany and France want? What else did the UK government demand?
Their view is that the only way to restore confidence in the euro and ensure no countries face similar debt crises in the future is to enshrine the budget rules in EU treaties. This would mean there were strict penalties if a country overshot the agreed deficit limit. So far there has not been agreement on details of a possible treaty change. Mr Cameron also wanted an agreement that the European Banking Authority would remain in London, protection for US financial institutions based in London that do not trade with the rest of Europe, and an agreement that any changes - including a financial transactions tax - would require the unanimous backing of all EU members. He didn't get any of those either.
So it's a treaty change that's being discussed at the summit? Who is to blame?
Yes. But it tends to take years for the EU to agree a new treaty, so one option is to amend the Lisbon Treaty to add tougher penalties and beef up surveillance of eurozone countries' budgets, including possibly giving the European Commission powers to scrutinise budgets before they are presented to national parliaments. If it is limited in scope it will avoid the need for referendums in Ireland and Denmark - which have caused problems in the past for the EU. There is talk of a new "protocol" to bring the rules in without changing existing treaties. French President Nicolas Sarkozy has laid the blame squarely at Mr Cameron's door. He says he would have preferred a deal involving the 27 EU states but that wasn't possible "thanks to our British friends". But the UK government says it was not asking for anything unreasonable. Foreign Secretary William Hague said EU leaders had made "nothing like enough of an effort" to meet UK concerns. Deputy PM Nick Clegg, whose Liberal Democrat party is much more pro-European than their Conservative coalition partners, said the UK's demands had been "modest" and affected the single market as a whole, not just the UK. Labour say the PM failed to build alliances in Europe ahead of the summit and has achieved nothing that will protect the City of London.
Would treaty change involve all 27 countries? What happens now?
There are two different options here. Germany and France have said they want treaty change and would like all EU countries to agree to the changes in the eurozone. But they have also said that as an alternative the 17 eurozone countries could agree to the new rules if countries such as the UK refuse to sign a new treaty. It looks like all other EU states will join a new fiscal arrangement aimed at stopping a repeat of the eurozone debt crisis. For eurozone countries, it means they will have to enshrine in their own national constitutions tougher budget rules which were in the Maastricht treaty, but have since been broken. These include an agreement that structural budget deficits never exceed 0.5% of gross domestic product (GDP), sanctions for those whose deficit exceeds 3% of GDP and a requirement that they submit their national budgets to the European Commission. The non-eurozone countries will not be immediately effected - but most intend to join the euro eventually. Denmark has an opt-out of euro membership and Sweden has said it has no plans to join in the near future.
So what does the UK want out of the talks? What does this mean for the UK?
UK Prime Minister David Cameron, who has described himself as a Eurosceptic, has pledged that there would be a referendum in the UK before any "significant" transfer of power from London to Brussels. But he has said the primary national interest is to make sure the euro does not collapse. The Labour Party say Mr Cameron's decision will leave the UK isolated in Europe - outside an EU club that is making the big decisions which will affect the UK - and has done nothing that will protect the City of London from increased financial regulation emanating from Europe. But Eurosceptic Conservatives believe it should be the beginning of efforts to start completely renegotiating Britain's relationship with the European Union. Foreign Secretary William Hague rejected the idea that there would be a "two-speed Europe" - as there were other groups within the EU, like the Schengen arrangement, that cooperated on different subjects. He said by stopping a full treaty change, key decisions on issues like the single market would still have to be made by the full 27 EU members. For a full brief on the financial and economic implications for the UK, href="http://www.bbc.co.uk/news/uk-16082752" >click here.
So will the UK agree to a treaty change? What does it mean for David Cameron?
Downing Street say they do not believe the talks this week will involve any significant transfer of powers. Mr Cameron talked last month about getting some powers repatriated to the UK in return for agreeing to any new treaty signed by all 27 members - reports suggested it included EU rules governing the length of the working week. But in the run-up to the summit he has focused more on protecting British interests such as financial services - the government wants to make sure there is no EU-wide Financial Transaction Tax brought in by the EU, which would damage the City of London. The UK prime minister has faced a difficult balancing act on Europe - at the head of an increasingly Eurosceptic party in coalition with the pro-European Liberal Democrats. His stance has been backed by some of his Eurosceptic backbenchers, but they may yet press him to hold a UK referendum on the changes, by arguing the new "fiscal compact" still amounts to a big change that will affect the UK - something the government has been insisting will not be necessary. Separately there may be some disquiet on the Lib Dem benches. Leader and Deputy PM Nick Clegg has expressed support for the PM, saying he had made "reasonable" demands. But others are not so sure - Lib Dem MEP Sharon Bowles said she was "gutted" and predicted "revenge attacks" by other EU states. Mr Cameron's stated priority at the summit was for an end to the euro debt crisis, which he says is having a chilling effect on Britain - so ultimately its long-term impact will depend on whether this week's deal succeeds in pleasing the financial markets and boosting growth.
Sounds like a deal. What's the problem?
The issue for David Cameron is that his Conservative Party has a large number of Eurosceptic MPs who see this as a once in a lifetime opportunity to "get powers back" from the EU. There is a widespread view among them that the euro is generally doomed. London Mayor, Boris Johnson, seen as a possible successor to Mr Cameron, said he feared that the summit may end up "treating the cancer, not the patient".
Might there be a UK referendum then?
At the moment Downing Street is saying that is very unlikely but a growing number of Conservative MPs say that a referendum will be needed if the summit decides on treaty changes. Some want a referendum even if the changes are restricted to the 17 eurozone countries.
What do Labour say?
The leader of the official UK opposition, Labour's Ed Miliband, has accused Mr Cameron of backtracking on his previous promises to Eurosceptic Conservatives. He has also said that Mr Cameron has effectively got little influence on decisions being taken which could have a big impact on the UK economy even if they are restricted to the 17 eurozone countries.
How can you judge whether or not the deal's good for the UK?
The primary aim for the UK is said to be the end of the euro crisis, so on one level, any deal that pleases the financial markets and enables economic growth on the continent will be seen as a good one. But there are so many different possible versions of such a deal it is difficult to say ahead of time how good a deal it is. To a certain extent people's view of the deal may depend on their general view of the euro and the European Union. To help you, the BBC's deputy political editor James Landale has produced a ready reckoner to measure the success or failure of this summit from David Cameron's perspective.