Britain Suffers as a Bystander to Europe’s Crisis

LONDON — No matter what happens at the European summit meeting on the euro in Brussels that begins Thursday, Britain is sure to lose. There is looming recognition at 10 Downing Street that if the euro falls, Britain will sink along with everyone else. But if Europe manages to pull itself together by forging closer unity among the 17 countries that use the euro, then Britain faces being ever more marginalized in decisions on the Continent.

Many Europeans have been irritated by British Conservatives’ quiet satisfaction throughout the crisis with the decision not to join the euro (the United Kingdom ostentatiously kept its currency, the pound), particularly when juxtaposed with the panic over Britain’s inability to have any significant impact on Europe’s biggest crisis since the end of the cold war.

“Germany is the unquestioned leader of Europe,” said Charles Grant, director of the Center for European Reform. “France is definitely subordinate to Germany, and Britain has less influence than at any time I can recall.”

Of particular concern here is the health of Britain’s financial industry, a vital economic engine at a time of slowing growth and deep cuts in government spending, which is seen to be vulnerable to new European regulations that could hurt British competitiveness in global markets.

Despite all that is at stake, Prime Minister David Cameron’s coalition government looks doomed to be cast in the role of impotent bystander, torn between anti-Europe forces and European leaders’ moves toward greater fiscal integration on the Continent — with or without Britain.

On Wednesday, Mr. Cameron told a fractious Parliament that his main goal in Brussels was to “seek safeguards for Britain” and “protect our own national interest” by resisting measures like a proposed financial transaction tax. But such Britain-centric rhetoric has annoyed the brokers of Europe’s future, Chancellor Angela Merkel of Germany and President Nicolas Sarkozy of France, who are trying to find a way to save the euro while imposing legally binding fiscal discipline on the Continent’s floundering southern economies.

They have not been shy about expressing their frustration. Just six weeks ago, after Mr. Cameron tried to inject himself into talks about the euro, Mr. Sarkozy said bluntly, “You have lost a good opportunity to shut up.” He later added: “We are sick of you criticizing us and telling us what to do. You say you hate the euro and now you want to interfere in our meetings.” Steven Fielding, director of the Center for British Politics at the University of Nottingham, said: “Cameron might sound off to look good to his backbenchers, but in Europe, he hasn’t got much to negotiate with. It’s been made clear that France and Germany can do whatever the hell they like and Britain can say yes or no, but it doesn’t matter, since they’ll do it anyway.”

The paradox of this is that plans for tighter integration among the 17 euro zone countries are at the same time destined to create greater divisions within Europe — divisions between countries that use the euro and those that do not, and divisions within the euro zone itself, depending on the health and importance of the various economies. A two-, three-, four- and even five-tier Europe could possibly emerge.

“The markets have defined who are the good guys and who are the bad guys, and their interest rates are in many ways the manifestation of this,” said Alexander Stubb, Finland’s minister for European affairs. “When we look at future E.U. rules, it is the triple-A countries that are running the show.”

The political price of Britain’s self-proclaimed exceptionalism was made clear with a vengeance to Mr. Cameron on Wednesday, when he was pounded from all sides in a raucous session in the House of Commons. Fractious Europe-hating Conservative backbenchers called for him to stand firm on Europe, to “show bulldog spirit,” in a “resolute and uncompromising defense of British national interests,” as one legislator, Andrew Rosindell, put it.

Trying to placate them, the prime minister pledged not to sign anything that did not contain “British safeguards.”

Meanwhile, should the Europeans in the euro zone “go ahead with a separate treaty” that leaves out the noneuro countries, Mr. Cameron explained, “then clearly that is not a treaty that Britain would be signing or would be amending.” However, he said, he would still retain “some leverage” over the process.

“The more the euro zone countries ask for, the more we will ask for in return,” he said. But France and Germany have already made it abundantly clear that they will go ahead with their plans for the euro zone without regard to the needs or interests of Britain.

The explosive debate in Britain, while never welcome, comes at an unusually inopportune time for Mr. Cameron. The so-called special relationship with the United States is not looking all that special right now, and enormous cuts in defense spending are making it hard for the British military to maintain its status as America’s right hand.

The austerity budget is fraying at the edges, amid strikes and protests over layoffs and rising fees. Growth has been slowing, despite Mr. Cameron’s insistence that businesses would pick up the pace when it became clear that the government’s finances were sound. And now Britain looks to be in an unusually poor position to defend its interests in Europe.

Members of the Labour opposition lost no time exploiting what they saw as Mr. Cameron’s weakness on the issue.

“Six weeks ago, he was promising his backbenchers a handbagging for Europe, and now he’s just reduced to hand-wringing,” the Labour leader, Ed Miliband, told Parliament, as his party members whooped their approval. “The problem for Britain is that at that most important European summit for a generation, that matters hugely for businesses up and down the country, the prime minister is simply left on the sidelines.”

Even more worryingly for the government, several prominent Conservatives, including the cabinet minister in charge of Northern Ireland, Owen Paterson, broke ranks with the party line and said flatly that Mr. Cameron should make good on what they called his promise to hold a national referendum on any proposed European treaty changes. With much of Britain in the anti-Europe camp, the no side would surely prevail in such a vote.

Mrs. Merkel has said that she would like any treaty changes to be approved by the entire European Union, so in theory Britain could exercise a veto. But Germany and France have also said they will make changes in the way the euro zone alone operates, if that is the only way to defend the common currency.

Most dangerous to Mr. Cameron was the unwelcome intervention of the mayor of London, Boris Johnson, a potential wild-card rival for the Conservative leadership. Mr. Johnson, who is perhaps Britain’s most popular politician, enjoys injecting himself into questions of foreign policy when the spirit moves him.

If Britain was asked to sign a treaty creating “a very dominant economic government” across Europe, he told BBC radio, then Mr. Cameron should veto it. “And if we felt unable to veto it, I certainly think that it should be put to a referendum,” he said. He added that in rescuing the euro, there was a danger of “saving the cancer, not the patient.”

Mr. Cameron says he has pledged to call a referendum on any treaty that would transfer more power from Britain to Europe. None of the current possibilities features such a treaty, he said, so there is no cause for a referendum.

The other political pressure on Mr. Cameron, of course, comes from the unique challenge of a coalition government with partners who disagree on many issues, including Europe. This puts him and his deputy prime minister, Nick Clegg, a Liberal Democrat, in tough spots for equal but opposing reasons.

“Nick Clegg has party activists who don’t like the idea of the coalition and don’t like many of the things it has done, and they’re the most Europhile of the three main parties,” Mr. Fielding of the Center for British Politics said. “And David Cameron has on his back benches people who don’t like the idea of the coalition and don’t like many of the things it has done, and they’re the most Euroskeptic. It’s a tricky position for them all to be in.” Sarah Lyall reported from London, and Stephen Castle from Brussels.

© 2011 The New York Times Company