Last updated: January 23, 2013 10:03 pm

PM has set country on difficult path

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David Cameron was typically self-assured on Wednesday as he mapped out his strategy for a British referendum on Europe by the end of 2017.

But his breezy optimism did little to conceal the fact that the UK prime minister has set Britain on a path strewn with diplomatic obstacles and unanswered questions.

“With courage and conviction I believe we can achieve a new settlement in which Britain can be comfortable and all our countries can thrive,” the prime minister said. Lord Heseltine, Mr Cameron’s growth adviser, prefers to call the strategy “a punt”.

Some in the City of London are sceptical about whether Mr Cameron will ever realise his grand European plan.

“The euro hasn’t budged, sterling hasn’t budged,” a senior hedge fund manager said. “Are you really asking me for an opinion about something that may or may not happen in politics in four years’ time?”

Mr Cameron’s first and biggest obstacle is winning the next election; a feat which some Tory MPs privately believe is a distant dream. But even if he is returned to 10 Downing Street in May 2015, his European travails will just be beginning.

The prime minister faces a host of potential diplomatic pitfalls in winning a fresh settlement for Britain in time for a 2017 referendum, since it relies on every other EU state lending him a helping hand.

Mr Cameron’s preferred option is for a repatriation of powers and new safeguards for the single market as part of a wider negotiation on a new treaty to strengthen fiscal and political union in the eurozone.

While Germany sporadically toys with the need for treaty change, such an open-ended, time-consuming and unpredictable renegotiation is fiercely resisted by most member states.

Countdown

2013: David Cameron commits a future Tory government to a straight in-out referendum on Britain’s EU membership by the end of 2017. He promises to put “heart and soul” into the campaign to stay in – if he can first secure a better membership deal.

2014: To add to the possible constitutional upheaval, Scotland will hold a referendum on whether to leave the UK. If Scots vote for independence, they will apply to rejoin the EU, leaving open the prospect that Scotland stays in the EU but England, Wales and Northern Ireland decide to quit.

2015: British general election. Mr Cameron says a referendum “will happen” if he remains prime minister, even in a new coalition with the pro-European Lib Dems. Legislation for referendum in place by the end of the year, negotiations with EU begin on a proposed “new settlement” for Britain.

2016: Moment of truth for Mr Cameron. Will Berlin, Paris and the rest of the EU agree to help him? And will there be a new EU treaty on eurozone integration on to which Mr Cameron can bolt his British demands? If not, he says he will try to launch a unilateral negotiation for a better UK deal. He will need a majority of EU member states to even start the treaty renegotiation and unanimous agreement to finish it.

2017: Mr Cameron has promised a referendum by the end of the year. If Mr Cameron’s “heart and soul” campaign for a Yes vote is rejected by the British people, his government could fall. His successor as prime minister would face the tortuous task of negotiating Britain’s exit from the EU.

Berlin agrees with Mr Cameron that fiscal discipline must eventually be hard-wired into the eurozone through treaty changes. Advocates of eurozone bonds, meanwhile, know that they would require a new pact.

But these are long-term goals with no set timeline: the eurozone is unlikely to accelerate a new treaty to fit in with Mr Cameron’s 2017 deadline. The momentum behind them will depend on the evolution of the sovereign debt crisis.

As tensions have eased of late, Berlin has played down the urgency of rewriting treaties and the focus in Brussels is on what can be done without it.

Without any mega-EU treaty talks, Mr Cameron says he would embark on a unilateral negotiation to secure a British deal, similar to the one pursued by former Labour premier Harold Wilson before the last UK referendum on Europe in 1975.

The first challenge would be to convince others to open a formal renegotiation process – a step that requires a simple majority of at least 14 states.

Given the list of likely UK demands, a full intergovernmental conference may be hard to avoid. That is a process that could trigger a 27-sided haggle over the shape of the union, which could last for years.

“Between the Laeken declaration, which dreamed up the possibility of a constitutional treaty, and the actual entry into force of the Lisbon treaty, which was its ultimate outcome, a full decade elapsed,” wrote Sir Julian Priestley, the former top official at the European Parliament.

Even if Mr Cameron persuades big players such as Germany and France to offer concessions at double-quick time to help him win a referendum in 2017, all member states have to sign up and ratify the final agreement.

Mr Cameron argued on Wednesday that the others would help him, claiming they would be keen to keep “one of Europe’s strongest powers” and an architect of the single market in the fold. “It is hard to argue that the EU would not be greatly diminished by Britain’s departure,” he said.

But the prime minister could not answer the big question – repeatedly posed on Wednesday – of how he would campaign in a 2017 referendum if Angela Merkel, François Hollande and the rest did not let him get his way. Instead of campaigning “heart and soul” to stay in the EU, would he really campaign to leave?

Mr Cameron repeatedly ducked the question, insisting that he would prevail. “I’m an optimist rather than a pessimist,” he said. Given the scale of the task he has embarked on, that is probably just as well.

Additional reporting by Sam Jones

CAMERON’S POSSIBLE SHOPPING LIST

SOCIAL AND EMPLOYMENT LAW

France has always demanded a “social dimension” in Europe to balance the free-market British vision of the single market. David Cameron wants to repatriate laws covering working time or temporary workers, but can expect serious resistance from France’s socialist president François Hollande.

SINGLE MARKET SAFEGUARDS

Mr Cameron fears eurozone countries will start to fix the rules of the single market, for example, limiting access for City banks to markets in the single currency area. Britain recently won safeguards on the issue of banking supervision; Angela Merkel, German chancellor, can see Mr Cameron’s point.

EVER CLOSER UNION

The Lisbon treaty concedes the principle that power should be able to flow back from Brussels to member states, but Mr Cameron says “the promise has never really been fulfilled”. Proving that he is reversing the EU’s founding principle of “ever closer union” would be a symbolic victory.

ENVIRONMENT

Brussels directives have been identified in Downing Street as a blockade to growth, notably laws protecting wildlife habitats. Chancellor George Osborne said they imposed “ridiculous costs” on British business and held up big capital projects; the government’s internal analysis has questioned his claim.

REGIONAL POLICY

Gordon Brown, former Labour prime minister, tried to reform the system where rich countries such as Britain hand money to Brussels, only for some of it to be recycled as aid to poorer regions such as Cornwall or Merseyside. Mr Cameron shares that frustration, but aid to southern and eastern Europe is likely to continue.

FISHERIES

Britain handed control over its rich fishing grounds to Europe when it joined the EEC in 1973 and many Tory MPs want the fish back. They also claim the common fisheries policy does not even protect fish stocks. Expect fierce resistance from Spain, France and others.

JUSTICE AND POLICING

Mr Cameron has already indicated he wants to exercise a Lisbon treaty “block opt out” of 140 pieces of EU justice and policing law, designed to combat cross-border crime and terrorism. Problems may arise when Britain tries to “opt back in” to individual measures, including the European arrest warrant.

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