Europe

Away from the amateur dramatics in parliament this afternoon, the government is fighting yet another battle with the European Commission over banking reform. European leaders will vote later today on proposals to introduce the rubric of Basel III across European financial institutions. Led by EU Finance Commissioner Michel Barnier and ECB Vice-President Jean-Claude Trichet, these proposals would insist that minimal and maximum capital requirements are imposed on banks. The terms dictate that banks hold 7 per cent of their top-class assets in reserve. Britain opposes the scheme, not because the requirements are too steep: the UK’s Banking Commission has suggested that banks hold 10 per cent of their assets in reserve.

Yesterday’s European Banking Authority (EBA) stress test was supposed to restore confidence in the euro and Europe’s beleaguered financial institutions; it has had the opposite effect. Investors and market analysts are preparing for ‘Black Monday’ after only 8 banks failed the test and must now raise £2.2 billion between them to stave off ruin. A respected estimate by Goldman Sachs expected at least 15 banks to fail, requiring £29 billion to recapitalise. As the Spectator’s business blog reported yesterday, analysts feared that the EBA’s test would not be sufficiently stringent, and so it came to pass.

Britons are becoming increasingly eurosceptic, according to YouGov. I have previously predicted that could leave the union; but there is another option. Following the eventual resolution of the euro crisis, the EU may evolve into a much more asymmetric arrangement, with a small group of European states integrating in some areas, while other states remain outside. On the surface, this does not look like anything new. The EU already has many different levels of integration. The Schengen agreement and the euro are examples of this and the Lisbon Treaty holds out the idea of more such multi-speed arrangements. However, after the euro crisis, these will be different from those that have gone before.

With the European financial crisis rumbling on, anti-EU sentiment in Britain is deepening. Two polls — one by YouGov for PoliticsHome and the other by Angus Reid — show that 50 per cent of the public would vote for Britain to leave the EU if there was a referendum.   Of course, this is nothing new. Brits have long been the most eurosceptic of Europeans, as Fraser noted a couple of months ago. In fact, we're the only country where more people think our membership of the EU is bad than think it's good: The hardening of eurosceptic sentiment does seem to be due to current events: 34 per cent say that the Greek crisis has made them more favourable towards us leaving.

The UK government is becoming increasingly concerned about the situation in the eurozone and the fact that there does not appear to be the political will to address it. One government source complained to me earlier today that "unless they get their act together the eurozone are in danger of fiddling while Rome burns." Tonight, in a major departure from Britain’s previous softly-softly approach to the issue, George Osborne is issuing a statement calling on the eurozone countries to take "decisive action" to "prevent market uncertainty doing real damage to the world economy." The Chancellor calls on eurozone countries to: "...

If you strain your ears, and listen very carefully above the din of the phone hacking scandal, then you may just hear Nick Clegg's voice wafting across the Channel from Paris. Our Deputy Prime Minister is on the Continent today, delivering a speech that, in other circumstances, might have made more of a splash. This is, after all, a speech in which he stands up for the eurozone, and chastises those eurospectics — some of them within the coalition parties — who are eagerly anticipating its collapse. Or as he puts it himself: "A successful eurozone is essential for a prosperous UK. So there is no room for Schadenfreude here, no place for wagging fingers.

We interview David Cameron for today's issue of The Spectator. Here's an extended version of that interview for CoffeeHousers: The most striking thing about David Cameron is how well rested he looks. You wouldn’t guess that he was the father of a ten-month-old baby, let alone Prime Minister. He has no bags under his eyes — unlike his staff. He also seems relaxed. He jovially beckons us in to his Downing Street office and then flops down into one of the two high-backed chairs and urges one of us to take the other: ‘the Chancellor’s chair’, he calls it, with a chuckle. The last time we interviewed him, during the general election campaign, he was a different man, tired and tetchy.

Say what you like about Jose Manuel Barroso, he's a wily old card. The European Commission president makes public demands for Britain to surrender its rebate in European Union membership fees. The government refuses. Then, hey presto! Headlines suggesting that Brussels has been seen off. "Brussels bribe to buy off UK rebate," says the Daily Mail. "Britain's rebate is fully justified and we are not going to give way on it," a Treasury spokesman tells the media. The quotation is true, Barroso did indeed offer £23 billion to tweak the UK funding formula, and a short-termist like Gordon Brown might have accepted. But the battle for Britain's EU spending was lost under Blair. In 2001-02, Britain was a net beneficiary of EU to the tune of £900 million.

Before writing my column for The Spectator this week I asked one of the most clued-up Eurosceptics on the centre right what opt-outs Britain should push for in any negotiation over an EU treaty change. His answer, to my surprise, was "forget that, we should just leave". This answer took me aback because this person had been the embodiment of the view that the European Union could be reformed from within. But people are dropping this view at a rapid rate for reasons that Matthew Parris explained with his typical eloquence in The Times (£) yesterday. I wrote in The Spectator this week that two Cabinet ministers now favour leaving the EU only to learn soon afterwards that the real number is three. Iain Martin writes that half of all Tory MPs now favour leaving.

There has been much talk about what George Osborne told Alistair Darling about the EU bailout mechanism during those days in May between the election and the coalition being formed. But notes of a conversation between Osborne and Darling released today show that Osborne did urge Darling not to commit to anything that would have a lasting effect on the public finances. Osborne also suggested that the UK government might abstain due to the fact that the country was between governments. To which Darling’s reply was that the Cabinet Secretary’s advice was that the government was the government until a new one actually took office. It remains to be seen what Douglas Carswell, the Tory MP who has been pushing for the release of these documents, makes of the issue.

The Foreign Secretary finds himself in the rather unique position today of trying to deal with the consequences of a crisis that he largely predicted. In May 1998, William Hague gave a speech warning that the single currency would lead to social unrest as governments tried to cope with one size fits all interest rates. It is a reminder of how much Hague was swimming against the tide of bien-pensant opinion that Michael Heseltine claimed this prediction was so extreme as to drive the Tories off the centre ground. But what is, perhaps, more interesting than Hague’s vindicated view that the euro, in a crisis, would be the ‘economic equivalent of a burning building with no exits’ is his view on how European governments would resolve the problem.

In 1997 New Labour was not just a domestic programme; it was a foreign policy too. Known as the "Neue Mitte" in Germany, Blair's Third Way soon attracted such converts as the German chancellor, the French prime minister and the Danish leader. In the end, it produced few results for Britain, failing – much as Harold Wilson did in the 1970s – to curry favour for the UK through party political links with other leaders. But for a few years, much as New Labour looked across the Atlantic to the Democratic Party, so Europe's Social Democrats looked across The Channel. International recognition for his deficit reduction plan notwithstanding, David Cameron has no such effect so far. But some have been swayed by his domestic agenda.