Prime minister warned that some elements of eurozone integration could be imposed on Britain
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Diplomatic grandees fear that David Cameron may be powerless to stop some new rules for the eurozone applying to Britain. Photograph: Stefan Rousseau/PA
David Cameron was unequivocal when he arrived in a sweltering Brussels for Thursday's EU summit.
The prime minister will be seeking "safeguards", which can be enforced by use of the national veto, if he is unhappy with plans to introduce greater fiscal co-ordination in the eurozone.
Britain is broadly supportive of a eurozone fiscal union on the simple grounds that it is in Britain's interests to shore up the single currency. Many of the eurozone plans, such as co-ordination of fiscal policy, will not apply to Britain.
But ministers fear that some plans, such as a banking union, could change the rules of the single market through the back door. Cameron believes he can block distasteful proposals by wielding the British veto. That is what he did in December when he blocked a German-led attempt to embed the eurozone's fiscal compact in EU treaties. After the British veto the 17 eurozone members persuaded a total of 25 of the EU's 27 member states to sign a non-EU treaty.
Some British diplomatic grandees are, however, starting to challenge Cameron's view that he could block further measures. They agree that he could wield a veto but they fear this may be meaningless.
This thinking is explained by a new joke doing the rounds among the grandees: Cameron followed his empty chair in December with an empty threat in the New Year, making Britain largely irrelevant.
The prime minister tried to limit the impact of last December's treaty by threatening to block eurozone leaders from using EU institutions, such as the European Commission and the European Court of Justice, to enforce its measures. But this was dropped after pressure from Nick Clegg.
The grandees are saying that giving the EU's institutions a free rein has meant that the fiscal compact is effectively embedding itself within the architecture of the EU.
The key text doing the rounds among the grandees is a speech by Lord Kerr of Kinlochard, Britain's former permanent representative in Brussels, who famously crouched under the table during the Maastricht treaty negotiations to advise John Major. Kerr told peers in February that Cameron's veto backfired because it established a precedent unheard of in the history of the EU – the removal of the national veto in treaty negotiations. This is because the fiscal compact treaty only needed the approval of twelve of its 25 signatories to enter into force.
Kerr told peers:
I am not sure that those who share his [foreign office minister Lord Howell's] views on European integration have been firing at quite the right targets. I do not believe that this would have happened...if this had been an EU treaty. In other words, this provision [ending of the veto] is here as a consequence of the position we took. Careful reflection is needed on whether that is a good thing or a bad thing.
Since Kerr's speech it has become clear that Britain will raise no objection to the use of any EU institutions in enforcing the eurone fiscal compact. One grandee said:
The prime minister looks very confident and is boasting that events of the past six months have shown how right he was in December. But it is looking like Britain will be powerless to stop some elements of greater eurozone integration applying to the EU as a whole. An empty chair + an empty threat = irrelevance.
Cameron will have a ready answer if any of the new rules apply to Britain. A referendum would be triggered if there is a transfer of sovereignty from the UK to the EU. Grandees say December's precedent shows that new rules introduced by a non-EU treaty could be imposed regardless of what Britain thinks.