Euro Crisis: David Cameron Defends Decision To Veto EU Treaty (LIVEBLOG)

09/12/2011 17:40 | Updated 09 December 2011

David Cameron has insisted that his decision to block changes to an EU treaty was "the right thing for Britain" and that the UK is not isolated in Europe.

The prime minister said the treaty "didn't have sufficient safeguards for Britain".

"There was a treaty on the table: a treaty that would have meant a lot of loss of sovereignty from countries around Europe, a lot of changes in the European Union, a lot of extra bureaucracy and law-making, and it didn't have sufficient safeguards for Britain, so I wasn't prepared to support it", he told Sky News.

The prime minister said the proposals went beyond his "bottom line".

"I said to people in Britain, if I couldn't get a treaty that was good for Britain, I wouldn't sign up to it, and I was good to my word."

But he denied that Britain would now be isolated within the EU.

"We're not being excluded: we are in the European Union, we are a leading member of the single market, and when it comes to defence we're the leading member of Nato. When it comes to driving forward European foreign policy, we're actually one of the leading members of that," he insisted.

Instead the leader insisted he was simply doing his job.

"You've never seen Britain actually say no to a European treaty before: that's what's changed. There was a treaty on the table, it didn't adequately protect Britain's interest. Instead of going along with it, I said no to it. I think that's my job."

In a sign of emerging coalition tensions in Westminster, Nick Clegg said eurosceptics who were "rubbing their hands in glee about the outcome of the summit last night should be careful what they wish for."

"Conservative MPs have to be careful about what they wish for because clearly there is potentially an increased risk of a two-speed Europe in which Britain's position becomes more marginalised and in the long run that would be bad for growth and jobs in this country."

Earlier in the day the Lib Dem leader had defended the prime minister's demands had been "reasonable".

"The demands Britain made for safeguards, on which the coalition government was united, were modest and reasonable. They were safeguards for the single market, not just the UK," he said.

However there could be trouble ahead for Clegg, as several Lib Dems have expressed unhappiness at the outcome of the summit.

Former Treasury minister Lord Oakshott said Cameron had been "very, very foolish" and it was vital that the UK kept friendly relations with European nations.

"We're like the grumpy uncle who has walked out and is on the fringe," he told Sky News.

The prime minister has come under heavy criticism for vetoing the EU deal. Ed Miliband said it was a "terrible outcome" for Britain which would lead to the UK being "excluded from key decisions that affect our future".

“I really fear the consequences for our country. David Cameron has not put in the hard yards of negotiation. He could have carried on negotiating today to get a better outcome for Britain", the Labour leader told Sky News.

Former foreign secretary Lord Owen asked: "Is this coalition able to really represent British interests or are we being driven by about 80 to 90 Conservatives who really want us to get us out of the European Union?"

The treaty governing all 27 EU members is now likely to be abandoned, but the 17 eurozone countries will continue to negotiate a separate stability pact, and nine of the 10 EU members not in the single currency have chosen to endorse that process.

The UK will be the only EU member left outside the deal, the Council of Europe has indicated, despite earlier suggestions that Sweden, Hungary and the Czech Republic would not take part.

German Chancellor Angela Merkel said Europe would not "make a lousy compromise" to placate Britain.

In a press conference on Friday she said: "The British were never part of the euro, they had an opt out from the beginning so we are familiar with the situation.

"We couldn't make a lousy compromise for the euro but we had to set up hard rules. That's how it was. But that will not stop Europe going forward together on other issues."

The treaty would, if agreed, have created mechanisms to harmonise budget and tax rules across Europe and to enforce fiscal responsibility - keeping budget deficits in check - in all of the members of the eurozone. It would have used existing EU institutions to enforce the new rules.

UKIP leader Nigel Farage said that Cameron's actions on Thursday night "marked the beginning of the end of Britain's membership of this union", adding: "I expect in the coming weeks and months for there to be an overwhelming demand in Britain for an in/out referendum."

13/12/2011 15:17 GMT

State Bailouts For European Banks May Be Necessary, Spurring 'Vicious Cycle': Report

Banks that need to raise extra capital to meet the European Banking Authority's capital requirements may need to turn to their governments for help, and that could spur a vicious cycle of rising borrowing costs for European governments and increasing strains on banks, Bloomberg News reported on Sunday.

The European Banking Authority ordered banks in the European Union last week to raise $154 billion in new capital by June of 2012. But not all banks may be able to meet those requirements, especially since 70 percent of banks that need to raise new capital reside in countries that are in danger of default, according to Bloomberg. If governments aid their banks, then investors would lose more faith in those countries' abilities to pay their debts and demand higher interest rates, which would further trouble banks' balance sheets.

"If the Southern governments put money in their banks, their sovereign debt will go up, exacerbating their problems," Karel Lannoo, chief executive of the Centre for European Policy Studies in Brussels, told Bloomberg. "Then the banks' losses will rise because they hold the government debt. That’s a vicious cycle. It's hard to know which one to stabilize first, the sovereign bonds or the banks."

--Bonnie Kavoussi

12/12/2011 23:24 GMT

Market Panic Hurting European Economy: Fitch Ratings Director

Gergely Kiss, director at Fitch Ratings, said in an interview with The Huffington Post that "financial tension" in Europe is "feeding slowly into the real economy."

"There is the fear that this will have an impact on domestic demand," he said.

Fitch Ratings released a report today forecasting that the eurozone economy would grow 0.4 percent in 2012, with growth slowing throughout the year.

--Bonnie Kavoussi

12/12/2011 23:16 GMT

German Bank In Talks With Government About Possible Bailout: Report

The German bank Commerzbank is in talks with the German government about the possibility of obtaining a bailout, Reuters reports.

Commerzbank, the country's second-largest ban has said that it wants to avoid a bailout but still needs to raise $7 billion in capital by the summer of 2012 to meet the European Banking Authority's requirements, according to Reuters. Commerzbank is 25 percent owned by Germany.

--Bonnie Kavoussi

12/12/2011 23:03 GMT

Niall Ferguson: Europe Could Cause Great Depression

Harvard historian Niall Ferguson wrote in a column on Friday that Europe is in danger of repeating the mistakes of the early 1930s, when the Great Depression became truly great. He wrote:

In the past few months, incompetent leadership has brought the euro-zone economy, and with it the world economy, to the edge of a precipice strongly reminiscent of 1931. Then, as now, it proved impossible to arrive at sane debt restructurings for overburdened sovereigns. Then, as now, bank failures threatened to bring about a complete economic collapse. Then, as now, an excessively rigid monetary system (then the gold standard, now the euro) served to worsen the situation....

The course on which the continent has now embarked means not just the creation of a federal Europe, but a chronically depressed federal Europe. The Eurocrats have exchanged a Stability and Growth Pact—which was honored only in the breach—for an Austerity and Contraction Pact they intend to stick to. The United Kingdom has no option but to dissociate itself from this collective suicide pact, even if it strongly increases the probability that we shall end up outside the EU altogether.

--Bonnie Kavoussi

12/12/2011 22:53 GMT

Hussman: European Debt Crisis Helps Cause 'Unusual Concern'

John Hussman, president of Hussman Investment Trust, wrote in a report on Monday that "the present market environment warrants unusual concern" largely because the European Central Bank is unlikely to come to the rescue in Europe. He wrote:

Read [Mario] Draghi's lips: the ECB will not be initiating massive purchases of distressed European debt unless and until the EU Treaties themselves are explicitly changed.... In effect, if a fiscal union is achieved without treaty changes, the ECB is unlikely to act. But even if treaty changes are achieved, the ECB is unlikely to act forcefully unless those changes are credible. Of course, if the changes are credible, then forceful actions will not be needed anyway. In any event, the problem for bailout-hungry investors is that they will be deeply disappointed if they expect Mario Draghi to turn into Ben Bernanke.

--Bonnie Kavoussi

12/12/2011 18:37 GMT

Paul Hockenos: A European German Has Become A German Europe

Author and political analyst Paul Hockenos writes in Foreign Policy that the European debt crisis includes Germany:

Also, there's yet another level of German hypocrisy in its holier-than-thou protestations concerning the poor periphery's debt. All of Europe is highly indebted and while the European-side of the transatlantic crisis opened on the shores of the Mediterranean, it is now an pan-European crisis -- and that includes Germany, one of the first countries to breach the Maastrict debt ceilings. According to I.M.F. numbers, gross government debt in Germany will be nearly 83 percent of gross domestic product by 2012.

Read the full article in Foreign Policy here.

12/12/2011 17:35 GMT

Why Should Teens Care About Euro Crisis?

Over on HuffPost High School blogger Devon Kerr has a good simple explainer on the crisis for teenagers. It's worth a look for anyone trying to figure out what's going on. Read it on HuffPost High School.

12/12/2011 17:30 GMT

U.S. Stocks Plunge

American stocks plunged on Monday as investors became increasingly fearful that the eurozone debt crisis did not reach a resolution at all at last week's summit for the European Union in Brussels. The Dow Jones Industrial Average fell 224.86 points as of 12:21 p.m. ET, and the S&P 500 fell 2.01 percent, according to Google Finance.

The U.S. stock market plunge, following a two-week rally, was due in part to Moody's Investors Service's announcement that it would review the credit ratings of all countries in the European Union, according to Bloomberg News.

"The European stopgap may not be successfully implemented," Stanley Nabi, vice chairman of Silvercrest Asset Management Group, told Bloomberg, referring to the deal reached last week. "In order for this program to be successful, there’s going to have to be a lot of belt tightening. That means that the European economy is not going to do well at all. That would have negative impact on other countries around the globe."

12/12/2011 17:26 GMT

Fitch Ratings Lowers Global Economic Growth Outlook

The credit ratings agency Fitch Ratings said in its global economic outlook report that it expects major advanced economies to grow just 1.2 percent in 2012, less than in 2011.

Fitch said that it expects growth in the eurozone to weaken to 0.4 percent in 2012 because of budget cuts across the continent and tighter credit. Fitch added it expects the economic output of Italy -- the eurozone's third largest economy, which investors fear could default on its debt -- to shrink 0.5 percent in 2012.

--Bonnie Kavoussi

12/12/2011 16:11 GMT

Munchau: Eurozone Faces 'Loss of Confidence'

Wolfgang Munchau, associate editor of The Financial Times, wrote in a column that the summit in Brussels last week was a failure, and that European leaders should have admitted it. He wrote:

The eurozone is facing a generalised loss of confidence. Investors no longer trust its crisis management, the solidarity of its citizens, even the ability to conduct sensible economic policies. The EU is not going to restore confidence through legal gimmickry that will face numerous court challenges....

Remember what everybody said a week ago? To solve the crisis, the eurozone requires, in the long run, a fiscal union with a prospect of a eurozone bond and, in the short run, unlimited sovereign bond market support by the European Central Bank. What we now have is no treaty change, no eurozone bond and no increase either in the rescue fund or in ECB support.

--Bonnie Kavoussi

Suggest a correction