Westminster Blog

So Britain has isolated itself in Europe by refusing to sign up to a deal to save the eurozone because other countries refused to give the UK specific safeguards to protect the single market and the City of London. Tory backbenchers are delighted, but what does the pro-European Lib Dem half of the coalition make of it?

Anyone expecting a massive bust up at the heart of the coalition will have been dismayed to read Nick Clegg’s statement this morning. The deputy prime minister said:

The demands Britain made for safeguards, on which the Coalition Government was united, were modest and reasonable. They were safeguards for the single market, not just the UK.

What we sought to ensure was to maintain a level playing field in financial services and the single market as a whole. This would have retained the UK’s ability to take tougher, not looser, regulatory action to sort out our banking system.

City regulation

The Lib Dem leader’s argument is intriguing: we refused to back this treaty not to protect the City, but to make sure we could regulate it even more heavily.  Party officials are briefing that the European deal could even have stopped the UK implementing the Vickers banking reforms.

But if Clegg is going to win this argument, he (or perhaps Vince Cable) may have to come up with some new proposals on banking reform soon and show that this position was indeed about heavier, not lighter regulation.

Back in Westminster, his MPs are backing him, repeating the Clegg lines so closely it’s not worth quoting what most of them said. (Actually, they are not in Westminster: being a Friday most are in their constituencies, which is possibly why they are being supportive. It’s difficult to drum up rebellious sentiment if potential rebels are not in the same place.)

Vince Cable, who can often be relied on to speak for the heart and the soul of the party, is also toeing the line – just about. Without saying whether he thought it was a good thing that the UK had decided not to sign up to the agreement, the business secretary told Sky News:

We have a critical interest in keeping the single market – that’s what the argument is about.

Discontent in Brussels

Instead, the discontent is coming from the party’s MEPs, some of whom are spitting blood. Chris Davies, the Lib Dem chief whip in Europe, has written a scathing response. Here is just some of it:

In a world in which the influence of the old powers is diminishing by the day, Britain’s prime minister has attacked his closest partners and left our country weaker and more isolated.

David Cameron has today relegated Britain to the second division of Europe. He has guaranteed that we will lose our influence at the top decision-making table over issues that are bound to affect us.

Imagine the scene in the soulless Council of Ministers building, in Brussels. Around the table, amid the detritus of a dinner that had gone on far too long, were 26 leaders working to protect Europe’s economy – plus one, who seems to have been interested mainly in keeping Tory Europhobic knives out of his back.

Privately, many Lib Dems back in London will agree. But most of them are keeping their powder dry, waiting to see the full outcome of the negotiations and what the fallout will be when Cameron returns.

‘Nervous’ Lib Dems

But it is important to note that one of the key reasons they are not speaking out at the moment is because unlike on some issues, they trust Clegg completely when it comes to Europe. As a former MEP who received his political education at Bruges’ College of Europe, he has impeccable pro-European credentials. Quite simply, most MPs think, “If Nick agrees, that’s good enough for me.”

But the truce is uneasy. Mark Pack, a former party official who now blogs on the Lib Dems, told me the mood in the party was “nervous”.

That unease will not be helped by the Clegg himself keeping a low profile today. I’m told he will not be making a statement other than the written one he has already provided (see below). While this might make sense in terms of giving Cameron leeway to negotiate in Brussels, it won’t help provide the leadership that a lot of his party want to see right now.

What Lib Dems are really waiting for however, is to see what happens when parliament returns on Monday. Will events in Brussels placate Tory eurosceptics or simply embolden them further in calling for an in/out referendum? If the latter, the junior coalition members will feel they have achieved very little by standing alone in Europe.

UPDATE – Clegg appears to have changed his mind and done a televised statement, beefing up his language a bit as a riposte to the Tory right. Here’s the most interesting bit:

I think any eurosceptic who might be rubbing their hands in glee about the outcome of the summit last night should be careful for what they wish for, because clearly there is potentially an increased risk of a two-speed Europe in which Britain’s position becomes more marginalised, and in the long-run that would be bad for growth and jobs in this country.