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In Response to Emma Reynolds and the 'Phantom Veto'

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On Monday, Labour's impressive Shadow Europe Minister, Emma Reynolds, used this blog, to accuse the prime minister of exercising a 'phantom veto' over the Fiscal Compact. Yet, the only phantom is the ghostly apparition of a howling opposition bereft of substance.

A shadow Europe minister should know what an EU Treaty is. Maastricht, Amsterdam, Nice and Lisbon were all EU Treaties. The Fiscal Compact is not. It certainly is an international agreement. But the prime minister's veto means that agreement does not have the force of EU law for us, for the EU institutions, or the countries that signed it. If the government had caved in and signed this agreement into EU law without any safeguards, the weight given by it to the interests of the eurozone would have meant that EU law and EU institutions would no longer have put the interests of all EU countries in the Single Market first, but would have instead favoured the eurozone.

Blocking that damaging outcome for Britain was the protection we secured with our veto in December. And that protection remains. Bear in mind that the joint Sarkozy-Merkel letter to Council President Van Rompuy just days before the summit set out their ambition for harmonised corporation tax rates and a financial transaction tax. Those proposals are now off the table - with Sarkozy left trying to cobble together a coalition of the willing daft enough to introduce Tobin taxes at a national level.

Ms Reynolds says David Cameron "flounced out". No, Mr Van Rompuy ended the negotiations because agreement could not be reached that night. The PM stayed until the end. Then there is the claim of a U-turn on use of institutions. In truth, the PM told the Commons straight after the veto: "The UK is very supportive of the role the institutions - and the commission in particular - play in safeguarding the Single Market. So we will look constructively at any proposals with an open mind."

Britain's position on the use of EU institutions is a tough call. I think the Financial Compact is pretty hopeless - mainly because it is woefully inadequate to stave off the eurozone's debt crisis. But, if we stand in the way of enforcement of the new fiscal rules, we feed the instinct of eurozone leaders for blaming Britain for their own lack of leadership.

So, the government reserved its position. Not giving the 25 legal permission to use the institutions - but not preventing them unless they abuse them - doesn't weaken Britain's position. As evidence before the House of Commons European Scrutiny Committee this week shows, including from constitutional experts like Professor Paul Craig, the legal flaws in the Fiscal Compact are serious. The PM is right about this. Far from going away, the issue is likely to grow as the practical implications dawn. The looming threat of legal action should strengthen the UK's leverage, without positioning us as the scapegoat for the eurozone's failings. As Open Europe's Mats Persson commented, "Cameron can credibly tell Merkel: we want you to get on with the business of saving the euro... but stick to the rules, or it's game over."

For all the carping - and we're now two months since the veto - Labour still can't answer the basic exam question: would you have exercised the veto? In fact, it's near impossible to get a straight answer from Labour under Ed Miliband. It's bad enough the opposition ducking the moral responsibility of the rioters last August, side-stepping the recklessness of the strikes this autumn and vacillating on the necessity for a credible deficit reduction plan. But, the crisis in the eurozone has brought home to British taxpayers, consumers and businesses the raw relevance of the European question. The PM showed leadership in exercising the veto. Labour dithered. Maybe that's the luxury of opposition. But it comes at the price of credibility. This is no time for a fence-sitting, flip-flopping foreign policy.

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