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Last updated: December 12, 2011 2:59 pm
Nick Clegg has warned David Cameron to show no signs of triumphalism when the prime minister reports back to MPs on Monday on his decision to veto a European Union treaty change, as the row escalated into the most serious threat yet to the stability of the coalition.
Mr Cameron will defend his decision as right for Britain and being in the interests of the City and is expected to receive a hero’s welcome from Conservative MPs in the Commons.
But Mr Clegg warned on Sunday that the rift in Brussels could leave Britain “isolated and marginalised”.
Faced with a furious backlash from Liberal Democrat ministers and grandees, Mr Clegg attempted to distance himself from the use of the veto and has urged Mr Cameron to use his Commons statement to start rebuilding bridges in Europe.
“I hear this talk about ‘bulldog spirit’,” Mr Clegg said. “There’s nothing bulldog about Britain hovering somewhere in the mid-Atlantic, not standing tall in Europe, not being taken seriously in Washington.”
The deputy prime minister has warned Mr Cameron not to try to block the use of European institutions such as the European Court of Justice from giving teeth to a new eurozone fiscal compact, approved by up to 26 member states but not Britain.
Shadow chancellor Ed Balls has attacked a “catastrophic failure of leadership” by David Cameron and other European leaders at last week’s EU summit, warning that a debate about Britain’s isolation should not obscure the ongoing danger to the euro.Plus more UK pollitical and business reaction
“I think there is now a real danger that over time the United Kingdom will be isolated and marginalised within the European Union. I don’t think that’s good for jobs, in the City or elsewhere,” Mr Clegg told the BBC’s Andrew Marr programme. This was echoed by Ed Balls, shadow chancellor, who told the Financial Times in an interview: “The fear is that we will see a draining away of influence on financial services matters.”
Mr Clegg approved Mr Cameron’s negotiating strategy in Brussels and admitted it was “reasonable” for Britain to demand safeguards for the City of London in exchange for approving changes to the EU treaty.
But recriminations are flying now in Liberal Democrat circles about why – as Mr Clegg put it – Mr Cameron’s position “unravelled spectacularly” in the early hours of last Friday in Brussels.
Mr Clegg says he only heard that Mr Cameron had used the veto at 4am after it had been deployed, although Tory officials point out that the Lib Dem leader was not initially overtly critical of the handling of the negotiations.
Senior Lib Dems blame Mr Cameron for failing to tame his party’s euroscepticism and for “isolating” himself by pulling the Tories out of the centre-right European grouping that includes the parties of German chancellor Angela Merkel and French president Nicolas Sarkozy.
Vince Cable, Lib Dem business secretary, denied rumours he might quit, but he warned last week it was wrong for Britain to risk isolation in defence of City interests. The Lib Dems now plan to present themselves as the supporters of wider business interests, rather than those of finance.
Meanwhile senior officials at the Foreign Office are blaming the Treasury and Downing St for cutting them out of the loop and failing to lay the diplomatic groundwork for securing a deal.
Treasury officials say key European figures were briefed on the plan ahead of the summit, but José Manuel Barroso, European Commission president and a key potential ally, only learned the details on the morning of the summit, according to Brussels officials.
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