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EU to Britain: We want you in but.

Friday, February 14 14:42:29

Europe's leaders - especially the Irish - are keen Britain remains part of the European Union but see a serious risk of unintended consequences in London's attempts to reshape its relationship with the bloc.

That was a clear message from top policymakers - including an important speech by Michael Noonan - at this week's Reuters euro zone summit.

Prime Minister David Cameron hopes to renegotiate Britain's terms of EU membership before an "In/Out" referendum in 2017, assuming his Conservative party wins an election next year.

His best opportunity to do so would come via a broader renegotiation of the EU treaty which underpins the bloc. That is by no means certain to happen and in any case, EU officials say, he will need to win friends and influence people.

"I believe Britain will remain a member of the European Union. But of course when you engage in these sort of processes there are always some risks that I cannot prejudge," European Commission President Jose Manuel Barroso said.

French President Francois Hollande told Cameron last month that treaty change was no longer a priority, although other EU leaders think it will be required to bind the euro zone more closely together.

German Finance Minister Wolfgang Schaeuble said Berlin would push for changes that it argues are necessary for closer integration. He predicted progress in 2015.

One question for Cameron, who wants Britain to stay in the EU, is whether such amendments come quickly enough to fit his timetable. Treaty change can take two years or more and will require ratification or referendum votes in all 28 states.

More difficult still is the substance of what London wants changed.

Barroso voiced surprise that Britain, long a "champion" of the EU's internal free market, was now trying to impose restrictions. Cameron has called for curbs on free movement of people and stoked concerns about migrants from poor EU members Romania and Bulgaria heading to Britain.

"You cannot have an internal market without freedom of movement," Barroso said.

If Cameron fails to meet his 2017 referendum deadline and/or cannot repatriate significant powers from the EU to London, eurosceptics within his own party, not to mention the anti-EU UK Independence Party, are likely to put him under searing pressure to quit the union altogether.

Without a collective move to revise treaties, however, for Britain to negotiate unilaterally would be even tougher. All 27 other EU members would have to agree to British demands despite the fact it could put them at a competitive disadvantage.

Conservative member of parliament Andrea Leadsom, a Cameron adviser, said, however, that there would be treaty change because the euro zone itself required it.

She launched a broadside at Brussels: "Instead of taking seriously the legitimate concerns of taxpayers they just insult them," she said.

"David Cameron is committed to trying to ensure that the EU is reformed to be an institution that we want to be a part of.

"But if he fails in his attempt to do that the British people will judge that. Nobody can say we're bluffing. We're going to have a referendum."

For Nigel Farage, leader of UKIP and a member of the European Parliament, the government has no successful strategy.

"They haven't got one," he said. "I don't see that they can get a treaty renegotiation on anything substantial.

"If, after the European elections, he starts to state what his renegotiation aims are, they will just be shot down" by the rest of the EU, Farage said, referring to European Parliament elections coming up in May.

The once upstart UKIP beat the Conservatives into third place in a by-election for a parliamentary seat on Thursday.

It is now challenging Labour for top place in the May EU ballot and aims to press the main opposition party to match Cameron's offer of a referendum - a move that could make such a vote close to certain after the 2015 general election.

Farage put the chances of Britain exiting the EU within five years at between a third and a half and growing.

British business is nervous about becoming detached from its biggest market.

Terry Scuoler, head of the EEF which represents over 6,000 British engineering, manufacturing and technology firms, said the government should ditch plans for a referendum.

"It's a big gamble," he said.

TheCityUK lobby group said a British exit from the EU would torpedo London's position as a world financial capital by pushing money and talent to the United States and Asia.

Foreign policymakers at the Reuters summit unanimously expressed hope that Britain could be kept in the bloc.

"I hope that the situation in Britain doesn't go too far that then there is no way back," Finnish Prime Minister Jyrki Katainen said.

But he said repatriation of powers by a member state would violate the single market and he was doubtful about the merits of another treaty renegotiation across the bloc: "Instead of repatriation of competences we should concentrate on better regulation," he said.

EU officials say they are surprised that London, by means of its stance on immigration, has alienated formerly Communist countries in central and eastern Europe that have traditionally supported its free market attitude.

Barroso said Britain's traditional position of advocating a free market and free trade, economic reform and eastward enlargement made it an important EU member.

"I hope this same spirit is now kept and that there are not disappointments given by Britain to new member states which have always looked to it as one of their biggest supporters," he said.

Ireland, its economy returning to a sound footing after exiting an EU/IMF bailout, would be particularly vulnerable if its neighbour and largest trading partner left the EU.

Just as important for Irish Finance Minister Michael Noonan was the counterweight Britain provides to the dominant German economy within the bloc.

"There is a kind of internal balance in Europe that requires the UK, in my view. Germany's economy is a third of Europe now, and if the UK were semi-detached, the sheer weight of the German economy would imbalance Europe," Noonan told the Reuters summit.

But the Irish Government can only bend so far, since it is obliged to hold a referendum on any EU treaty change - votes that it has struggled to win in the past.

"If the issues are of consequence, we would be willing to go to the people," Noonan said. "But we wouldn't want to go to the people on what we consider trivial issues."