Shift in global power leaves Britain struggling to defend her interests

12 April 2012

A new pecking order in world powers is emerging before our eyes as old Europe staggers from crisis to shambles.

President Hu Jintao of China kept summit host Nicolas Sarkozy waiting when he arrived at the French Riviera resort better known for its film festival.

For George Papandreou, summoned for a brief and bruising meeting with Sarkozy and Angela Merkel, there was no welcoming party at all.

Much of the talk is about how much money the growing powers of China, Brazil, Singapore and Russia will pump into the IMF to buoy up struggling states, including members of the eurozone. China's deputy finance minister Zhu Guangyao disclosed that further IMF funding is being seriously discussed in the margins, which means that a call on the British taxpayer, perhaps amounting to several billions of pounds, may be closer than our own government believes.

The historic shift in power leaves David Cameron working hard to be heard. Britain has been co-ordinating its interventions with America in recent weeks, urging the eurozone to stop dithering. The Prime Minister has credibility with the money markets but no spare cash to spray around.

Longer term, Britain's place in the new pecking order is less certain. The same policy that Mr Cameron hopes will save the eurozone - closer fiscal union of its member states - is also the gravest threat to its influence in the wider European Union. As the 17 single currency states (or 16 if Greece is driven out) bind closer together, the danger is clear that they will form a caucus to outvote and dominate the 10 EU states who are not in the euro.

The remorseless logic of monetary union leaves the City of London in danger. The Prime Minister can veto some threats to the City, like a Europe-only financial transaction tax, but other decisions covering regulation can be taken by majority voting where Paris and Frankfurt would hold greater sway thanks to their domination of the potential caucus.

The horrid choice for Mr Cameron was between a Europe in meltdown, which would snuff out Britain's sickly recovery, and a Europe where Britain will have to fight harder to defend its interests. In fact there was no real choice. As President Sarkozy knew as he waited cap in hand for Hu, the economy comes first.

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