“An inept negotiating strategy placed in the hands of an inexperienced prime minister” – behind the scenes of Cameron’s ‘veto’

“An avoidable disaster”: that is the verdict of the Financial Times’s Philip Stephens in a must-read article examining what went on behind the scenes of the Coalition’s strategy for approaching last week’s failed European summit. And his verdict on the Prime Minister and his advisers could scarcely be more scathing:

There was no great plan for a rupture. What some Tories now see as Mr Cameron’s Churchillian moment was rather the result of an inept negotiating strategy placed in the hands of an inexperienced prime minister.

So what did happen? On last night’s Newsnight former Lib Dem leader Lord Ashdown set out a summary of events… The Lib Dems and Conservatives agreed a joint negotiating position ahead of the summit, with Nick Clegg extensively involved in the preparations and reaching out to potential British allies in Europe. However, the responsibility for undertaking the negotiations themselves lay with Mr Cameron and his team of advisers, and their inability to make a deal stick led to the agreed Coalition position unravelling.

Mr Stephens’ account takes us further into the detail:

Sir Jon Cunliffe, Mr Cameron’s Treasury adviser, is being blamed. He decreed that the Foreign Office be locked out of summit preparations. This precluded any serious diplomatic groundwork in other European capitals. Sir Jon insisted that the eurozone could be “bounced” at the 11th hour into accepting a British protocol to protect the City. This was a negotiating tactic he picked up while working for Gordon Brown. The possibility that the other leaders might simply say No was discounted. The Treasury, as one of its own once memorably remarked, has never really understood “foreigners”.

As things turned out, Mr Cameron had misread Angela Merkel’s intentions following a meeting in Berlin; and Nicolas Sarkozy had a score to settle after George Osborne recently compared France’s predicament with that of Greece.

Mr Clegg was as surprised as everyone else in Downing Street with the outcome. He had been assured that the Treasury paper was an opening gambit, but in the event it was presented as an ultimatum; and presented at an hour when European leaders wanted only to retire to their hotel beds. There was no plan B. All in all, as negotiating fiascos go, this one was at the top of the A-list.

Such an account explains much, including Nick Clegg’s initially neutral public response.

If you re-read what Nick Clegg said on Friday in the wake of the Prime Minister’s veto of a European treaty what is clear is that the position he defended is the agreed Coalition negotiating position: “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. There were no demands of repatriation of powers from the EU to Britain and no demands for a unilateral carve-out of UK financial services. 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.” Every word of that statement relates to the agreed Coalition position; Nick does not once touch on the conduct of the negotiations.

What Nick Clegg may not have known (probably could not have known) on Friday morning was how the Prime Minister had played the hand they had jointly agreed. When he did — and realised that Cameron’s position was the result of poor negotiating rather than deliberate strategy — he was not afraid to make clear his dismay at the outcome for the UK.

Almost always in politics when the choice comes to believing cock-up or conspiracy, I’ll opt to believe the cock-up theory. That appears to be the truth of what really happened behind the scenes of Mr Cameron’s decision to use the UK’s veto.

However, there is one (suspicious) part of me that wonders about the involvement of the Treasury, and in particular George Osborne and his tactics-first, ultra-euroscepticism: might he have been secretly pleased that the Prime Minister’s failed attempts at brinkmanship have resulted in driving a wedge between the UK and the rest of the Europe?

In the short-term at least Mr Cameron’s failure is an undoubted success, with polls showing majority backing for his hardline stance, and right-wing papers that just a week ago portrayed the Prime Minister as a vacillating John Major Mark II figure now hailing him as Churchillian. But political success can have a remarkably short shelf-life (as the last political leader to be compared to Churchill must sometimes reflect), and Mr Stephens points out the longer-term reality of the Prime Minister’s strategy:

Mr Cameron’s coalition is now in a lose-lose position. If the eurozone fails in the effort to rescue the single currency, Britain will be caught in the ensuing economic tsunami. If the euro is eventually saved by the creation of a fiscal union, Britain will find itself marginalised in European Union decision-making in areas pivotal to its own prosperity.

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38 Comments

  • What about an inept, ill thought through conspiricy!

  • The “useless diplomat” scenario is one I’ve seen mentioned elsewhere.

    http://www.kosmopolito.org/2011/12/10/camerons-diplomatic-failure/

  • Here’s a quote from the above article.. sorry for double post, pressed the wrong button.

    It seems to me that Cameron is a bad negotiator. He does not seem to get the nature of EU negotiations. Merkel and Sarkozy (and others) often propose things before a summit just to use it as a bargaining chip. Cameron never does it – and never understands it when others do it. He also seems to have no interest in developing a compromise. Cameron goes to Brussels to defend Britain – not to negotiate a compromise that Britain can support and is in the interest of Britain. A crucial difference.

  • David Pollard 13th Dec '11 - 9:36am

    Its all very disappointing. Nick Clegg should have gone to the Commons yesterday and taken his medicine. With regard to the veto, I’ve come to the conclusion that it’s not a bad thing. European countries have still not realised that the financial problems are real and have to be dealt with now. Its OK going on about a stronger pact in the future to stop the same thing happening again, but it’s the here and now that needs tackling else ‘the markets’ will continue to feed on the dying body of the euro. And as Paddy Ashdown said “Its what we do from now on that matters.”

  • Paul McKeown 13th Dec '11 - 11:06am

    @judy

    Sorry, old girl. I expect my Prime Ministers to actually work on behalf of the country, even if it means arguing the toss with elected French and German representatives until dawn breaks. The man lost, pure and simple, the first British PM to lose in Europe since Macmillan.

  • “That is what I want him to do.”

    So you’d rather he defends Britain, than act in it’s best interests? That was the distinction being made. Brainlessly defending your ground, instead of intelligently giving some ground to get to a better position is the hallmark of a losing general. If you must stand your ground, then damn well make sure you gain something from it. If you think making a couple of euro-sceptics happy then I suppose that’s a victory of sorts. The fact that it endangers millions of jobs, makes most business leaders and even the city unhappy and is damaging chances of getting actual concessions from the EU instead of phantom ones, suggests it’s very much pyrrhic, at best.

    Negotiation is a game, yes. You go to buy a car and you offer a price much lower than you’re prepared to pay, then you negotiate and end up at a comprise that all are able to accept. If you keep walking away when your first offer is refused you’ll never have a car. If you hold a gun to the head of the dealer and insist he sells it at the price you want… the next time you try to go to any dealer they’ll slam the door in your face, or shoot first.

  • Paul McKeown 13th Dec '11 - 12:21pm

    Britain’s Europhobes see French plots against the British interest everywhere they look, a more nuanced formulation being French plots in the French interest. Sometimes they are clearly right, perhaps even as often as not. The terrible thing, though, is that their prescription is invariably to vacate the field, resigning themselves to inevitable loss, rather than standing their corner, fighting for the national interest. I listened to the debate yesterday with interest. If one thing should have given the Conservatives pause for thought, surely it was Denis Skinner’s intervention, with unlikely praise for Thatcher and Major and their battles in Europe, a high standard that Cameron failed to attain.

  • “Our demands were “reasonable” and “very reasonable””

    That’s one view. And even if they were, a lot has to do with how they are presented and how you prepare. Cameron is inept. He didn’t prepare, and judging from what the other 26 participants say he didn’t even negotiate, he just put his demands on the table and told a room full of his peers (some would argue betters) to do what he told them.

    Not even Thatcher did that! SHe was a menace in Europe, but at least she was respected, even feared, and was always at the top table looking out after Britain. Cameron The Inept failed on every count. He lost credibility, he lost respect, he gained nothing and he threw away his biggest threat (the veto) for nothing!

    European Council President Herman Van Rompuy offered a compromise that was a treaty change but all the changes would have applied only to Euro members.

    Cameron could have taken the deal, helped his EU partners, protected the city and generated a lot of good will. He wouldn’t even need a referendum here, because as the UK isn’t in the Euro it wouldn’t be giving up an sovereignty. That would have been a definite win for Britain.

    His ineptitude at negotiation also explains his problems in his party.

  • “What are the consequences of this desire to be at the heart of europe; are you willing to turn to the British public and admit the price, the loss of sovereignty, involved in joining France and Germany at the helm of europe?”

    Yes!

    The problem is that the UK press spends more time making up horror stories about the EU than it actually does reporting facts. The UK population really just doesn’t have the information, and in truth, the EU is not so high on their list of priorities that they care to make the effort to actually find out.

    Read Sikorsky’s speech in Berlin. If Cameron had done his research and read that speed, he might have found an ally there. Most of what the UK wants is there… a long with a way forward for Europe.

    http://www.msz.gov.pl/files/docs/komunikaty/20111128BERLIN/radoslaw_sikorski_poland_and_the_future_of_the_eu.pdf

  • Paul McKeown 13th Dec '11 - 3:21pm

    @judy beatrix

    So your position is approximately this: “Yes, I don’t give a flying picket what happens to my country, its reputation, its businesses, its economy, its people, so long as I can blame Jonny Foreigner for everything that has ever gone wrong with it. I don’t care if that involves cutting of my nose to spite my face. I want to leave the European Union and I want to have the same status as Norway, even if that means paying five times the EU’s per capita contribution merely for access to the Single Market. Never trust the French or the Germans.”

    In answer to your question. No, I have no desire for the UK to join the Euro in the forseeable future. Nothing I have ever said here should have given you that idea, but then Europhobia is a not rational philosophy.

    For reference, I would join Schengen. EU citizens have the automatic right of abode and work, so staying outside Schengen is of no effect, mere electoral voodoo.

  • Paul McKeown 13th Dec '11 - 3:26pm

    As for loss of sovereignity, that’s such a foolish argument, it makes me laugh. Leaving the European Union would involve a genuine loss of sovereignty, as we would be bound by the rules of the Customs Union, the Single Market and we would pay cold hard cash for access to them, without any chance to amend them to suit our needs. Membership of the EU, by contrast, enlarges our sovereignty. It allows us to determine the laws pertinent to trade in from Finland to Spain, from Sweden to Cyprus.

  • @Martin
    “European Council President Herman Van Rompuy offered a compromise that was a treaty change but all the changes would have applied only to Euro members.

    Cameron could have taken the deal, helped his EU partners, protected the city and generated a lot of good will. He wouldn’t even need a referendum here, because as the UK isn’t in the Euro it wouldn’t be giving up an sovereignty. That would have been a definite win for Britain.

    Yes, but it wasn’t actually on the table though, to quote Der Speigel:

    “Instead, Van Rompuy made the case for tightening budgetary oversight with the help of a protocol attached to the Lisbon Treaty, thereby avoiding risky referendums in the individual countries. But Merkel brusquely rejected the idea, permanently damaging the relationship between the two politicians. Van Rompuy said he was “very disappointed” by Merkel, on both a human and political level.”

  • Which way would the vote go if the Opposition decided to table a motion of no confidence on this matter?

  • “It doesn’t matter what the press say”

    that is nonsense. It matters a lot what the press say. If all the press ever reports on (as they do) about straight banana regulations and banning chocolate or whatever other bullshit they make up then that’s how voters will see the EU.

    There is a reason we’re having the Leveson inquiry. It’s because the politicians know this, and hence why they suck up to the papers. There is some truth in the idea that the PM is whoever the Sun supports.

  • Daniel Henry 13th Dec '11 - 4:51pm

    Is Jedi really called Judi or are people just being a bit cheeky here!

  • If the eurozone fails in the effort to rescue the single currency, Britain will be caught in the ensuing economic tsunami. If the euro is eventually saved by the creation of a fiscal union, Britain will find itself marginalised in European Union decision-making in areas pivotal to its own prosperity.

    That is true, but it was just as true on Thursday as on Saturday. Nothing that happened on Friday made it any more true.

  • Leaders in the European Union will not take the measures towards fiscal union that would save their ailing economies.

    You wouldn’t believe it to listen to the fulminating indignation directed at the UK from across the Channel, but David Cameron did the eurozone’s political leaders a favour last weekend. By refusing to sign up, he managed to create a convenient Aunt Sally for Europeans to throw stones at, and divert attention from the summit’s failure to come up with anything remotely credible to address either the single currency’s existential crisis or the gathering economic slump.

  • Paul McKeown 14th Dec '11 - 11:09pm

    @figurewizard

    I think you are attacking strawmen; I certainly have never suggested unconditionally shackling anyone to anything.

    Actually you haven’t even mentioned what it was that Cameron vetoed. He vetoed QMV in financial services; strangely enough, Margaret Thatcher understood that the Single Market could never work with unanimity for reasons of perceived short term national interest, which is why she pushed hard for QMV. Of course, Cameron couldn’t actually veto what was (and has been for many years) already law, so QMV in financial services remains. What a victory (not). Then he vetoed the so-called Tobin Tax. Co-ordination of taxation in the EU is subject to unanimity, so naturally the idea of a veto can apply. However, no one had made the slightest suggestion of removing unanimity, so, again he didn’t veto anything. The same applies to a whole load of other stuff.

    Cameron didn’t veto anything at all. What he did what simply trail his coat, then he went for a bit of international grandstanding. In the process he managed to wind up many international leaders whose support he might actually need some day, when the British interest is actually threatened.

    Simply a stunt for the press and for his internal party consumption, nothing tangible gained whatsoever and friends lost in the process.

    As for raving about the Euro, I don’t recall anyone in the UK recently suggesting shackling Britain’s fate to it; if you know of them, you might like to name them. As for your braying for the disintegration of the EU, just cobblers, no actual intellectual effort behind a statement of wishful thinking. Even if certain states should ultimately have to leave the Euro (not certain), a core currency will certainly remain. And the European Union itself will survive and the UK will play a key role in it, strangely enough in many areas where the shrieking Europhobes deny that it has any legitimacy, such as the CFDP.

    You might like to consider the ultimate fate of the US dollar. Ask yourself questions about the levels of public indebtedness, business indebtedness and private indebtedness in the USA and questions about its trade balance, its structural deficit and its international competitiveness. Ask yourself about the political will to address US sovereign debt. Ask yourself about the ability of US banking institutions to cover their losses should calls be made on any part of that colossal pile of debt.

    You might to consider the ultimate fate of the Pound Sterling. If I recall correctly, private indebtedness is 500-600% of GDP, on top of sovereign debt of >100% of GDP and a large deficit, with a wide trade gap and low levels of international competitiveness. Basically all that is keeping the UK solvent are interest rates and bond yields at historical lows and an Exchequer that the markets have decided for the interim to prevent debt rising dramatically higher.

    On top of this, you seem to believe that the collapse of the Euro would be a positive development, rather than the straw that broke the camel’s back in international finance. Happily, governments around the world aren’t smoking the same green tobacco that you apparently have been. Even after the current Euro crisis is resolved, there will be a further decade of deleveraging Western debt, and the world economy will struggle for growth during that period. The alternative is financial ruin for all.

    Calling for the destruction of one fiat currency, because that’s what the Waily Fail thinks it wants, is merely calling for the destruction all fiat currencies. There is no refuge for trust if trust fails in one global fiat currency, they would all fall like dominoes. Including Sterling.

  • Alec Dauncey 15th Dec '11 - 12:15am

    Finding the Churchill references interesting. Who knows what he would have thought in current conditions, and I’m not sure of his position in the late 50′s when the EEC was founded, but this from 1950 looks like a message to Cameron:

    “France and Britain, both sorely distressed, can combine together and, thus joined, have the superior power to raise Germany, even more shattered, to an equal rank and to lasting association with them. Then these three countries, helping each other, conscious of their future united greatness, forgetting ancient feuds and the horrible deeds and tragedies of the past, can make the core or the nucleus upon which all the other civilised democracies of Europe, bond or free, can one day rally and combine.

    Woe be it to anyone in the free world, who, by lack of understanding, or by lack of goodwill, or by lack of world hope, or any more flagrant fault or blunder, obstructs or delays this essential combination.”

  • I watched Panorama ‘Preparing for the Meltdown’ last night. It’s clear we need to focus on the emerging markets of the BRIC countries of Brazil, Russia, India & China total population aprox 3 billion. That’s where the future lies. Europhiles are far too preoccupied with Europe’s market of a mere 400 million.
    Besides we can trade perfectly well with Europe without all the Brussel redtape. The EU is a confidence trick by those that profit from it by gaining power & influence or a nice cushy ‘job for life’ in Brussels.

  • Paul McKeown 15th Dec '11 - 4:17pm

    @figureweasel

    Old chap, I read your post clearly enough.

    It is abundantly clear that the fiscal constraints required for entry to and membership of the Euro, as you say, have consistently been broken. And that is, as you also say, now coming home to roost.

    Of course, you don’t tell us how you envisage Greece (for instance) leaving the Euro without its people starving – who will want to buy these new drachmae that polemicists in the Telegraph propose – and who will accept them as repayment for Euro/Dollar/Sterling/Swiss Franc/Yen denominated debt?

    Nor do you tell us how you propose to disengage Sterling and the British economy from the effects of the collapse of the Euro that you apparently believe inevitable and desirable. British financial institutions have tens of billions of outstanding loans to governments in the Eurozone, to other financial institutions, businesses and private individuals. Undoubtedly they have at least that much exposure again (if not many multiples thereof) in financial derivatives insuring/underwriting/otherwise covering Euro debts (e.g. the CDS instruments that received notorious exposure at the time of the Lehman collapse). You don’t explain how writing downs those debts would not lead to liquidity problems in British banks, or indeed to credit runs against them. You don’t explain how the estimated immediate 15-20% fall in the Euro economy, should the Euro collapse, would not lead to a dramatic fall in the sales of British exporters. You don’t explain how this would not expose British financial institutions to a dramatically increased credit risk against Sterling denominated loans. You don’t explain how the British government would manage to continue to reduce the structural deficit with the sudden fall in tax revenue that would result, nor do you explain how you imagine the markets would keep bond yields at historic lows under those circumstances, about the only thing allowing our government to finance current levels of sovereign debt, without slashing huge amounts of government expenditure. Neither do you explain how you envisage investors being prepared to buy any fiat currency at all should the world’s second largest fiat currency actually collapse. If the Euro collapsed, why would anyone buy Sterling? The British economy has much higher levels of indebtedness, a larger budget deficit and a vastly larger financial sector relative to the real economy than any in the Eurozone?

    So, all in all, I feel justified in suggesting that a collapse of the Euro, might be very bad indeed for the British economy, and that the idea is, indeed, cobblers.

    The solution requires tight fiscal discipline and cuts to government spending in the Eurozone economies – the current proposals provide for that. Naturally, people proposing increased spending as an oxymoronic means to reduce debt disagree. Much more is necessary, however. In this you are absolutely correct. The Eurozone economies need to create a multi-trillion Euro insurance mechanism to mop up the inevitable losses; this is a step which has not been adequately addressed at all yet. Undoubtedly it will have to done over the dead bodies of German bankers and politicians, but that’s only fair, as the fiscal measures have been agreed despite the public anger throughout southern Europe.

    That this has to be done in some form is certain.

    Belief that collapse of the Euro can provide a workable alternative is simply ridiculous.

  • Paul McKeown 15th Dec '11 - 6:57pm

    “Belief that an orderly default by a few peripheral members is not however.”

    If that is seriously what people want, then they have to provide a means for the governments of those peripheral members to continue feeding their people. That means writing down 40-80% of sovereign debt to those countries, as otherwise their re-established national currencies would simply collapse before you managed even to utter the words “National Hellenic Bank”. It might also mean writing off huge wodges of private debt, too, in those countries, as bankrupted companies and citizens pay no taxes into national treasuries. And writing down all that debt means indemnifying some investors in other countries and allowing some other investors to go to the wall, otherwise its back to playing dominoes with banks.

    As you say, it is certainly possible to peel off the “weaker” members from the Euro, but it is a step which requires careful planning, carries considerable costs and would provoke a strongly negative reaction from those “weaker” members, each of whom could be expected to use a “genuine” veto.

  • Conan D'Arcy 16th Dec '11 - 11:02am

    I would refer you to my article on the same subject – http://www.libdemvoice.org/opinion-camerons-veto-an-act-of-ruthless-selfinterest-26231.html – which illustrates the crucial fact that the demands themselves were not reasonable, not just the way they were negotiated so I do not find the confusion and incompetence theory adequate. Cameron or at least some of his advisers must have known this and they went in with a deliberately obstructive negotiating position to avoid a referendum and shore up support within the Tories. The fact that events unfolded so quickly and left the UK without any any-treaty allies does indeed suggest some degree of incompetence, especially given the unpopularity of some of the German proposals for fiscal discipline) .

    Interesting to note that John Cunliffe will take over as the UK’s permanent representative to the EU in the new year. Whether you buy the pre-meditated or incompetence line, this is not the most auspicious start to his European career.

  • Old Codger Chris 17th Dec '11 - 9:06am

    Since there’s a widespread view that the matters proposed to save the Euro won’t actually work, perhaps Cameron’s grandstanding won’t matter very much. Others are also guilty – Sarkozy being the obvious example.

    The Euro can surely only be saved by moves towards federalism. Rightly or wrongly, the British people won’t go along with this – luckily for us there are many in other countries who feel the same. Two speed Europe will be a reality.

    Domestically I think we need to differentiate between those Eurosceptics who want a single market and nothing more and those who belong in UKIP.

  • Old Codger Chris 17th Dec '11 - 3:37pm

    Where the Eurosceptics have a point is that federalists – in all member countries – are reluctant to ask voters whether they want federalism or not. The logic of the Euro was always to move towards federalism – why else would you put 17 countries, each with their own economies, into the strait jacket of a single currency?

    Admittedly it doesn’t say much for the UK’s economic management that our currency has been steadily, sometimes suddenly, devalued since 1945 – with intermittent upward blips which spell trouble for industry.

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