The EU told David Cameron to get in line, and Cameron walked out. The problem is he may have accidentally walked out of the EU. There has been a lot of back and forth about this, as the Lib Dems have used this to attack their partners in the coalition. I want to be clear that I think Cameron lost this fight before it even began, but nonetheless we should talk about why.
Over the last couple days it has become increasingly clear that the conflicts between the Euro core and countries like Britain are not really about any particular euro-problem, but rather about the EU itself. The "reforms" that Cameron was asked to sign on to were neither necessary, nor very good ideas. Handing over control over such an important sector for Britain as the financial industry was never going happen. And that's exactly why it was brought up.
What's going on is not a debate about the balance of power between the EU and national governments, but rather the balance of political power within the EU As the membership of the EU has increased, and as France has suffered a prolonged period of relatively dismal growth, it has seen it's influence within the EU decrease. It's share of the GDP within the European Union is less than 16%, of population it is half that. This will only get worse as Europe continues to expand, and as Eastern European countries continue to close the gap between them and the more developed countries to the west. And yet, France still expects to wield a wildly disproportionate amount of power with the EU.
The membership of Britain doesn't help. Not only is the UK the largest economy in Europe after Germany and France (until recently it was larger than France, but it had a really nasty great recession), but it is the most important member of the liberal bloc that generally is in opposition to France. It is also the only country large enough to be a partner with Germany, who holds all the cards right now. Removing Britain from the equation improves the political math considerably.
And so, Sarkozy decided to get into a tiff on very favorable ground. He chose to bring up the financial industry not for any constructive reason, but because its just such damn good politics. There's no easier way to cast the other guy as the villain as putting them on the same side as the banks. Sarkozy also knows that the British would never be willing to compromise when it comes to the financial industry, it's just too important a part of their economy.
The trick here is to get Germany to take your side, because they hold the whole balance of power between the liberals and the integrationists. And that's exactly what's happened. Cameron has come away looking petulant and childish, even complaining that the other members shouldn't get to use EU facilities if they don't invite him. Sarkozy, meanwhile, has set himself up as the very embodiment of European unity and togetherness, when actually he's taking advantage of the financial crisis for crass political gain.
The consequences of Britain retreating from a position of influence would be dire. It would deprive Germany of any partner within the EU except France; it would mean that there would be no large player around which the smaller EU countries could gather; and it would not result in a EU that would sign up for a free trade pact with Britain, but rather would turn the EU into a protected market for French products.
Poland, on the other hand, has demonstrated it has an understanding of the politics of the crisis. Without actually conceding anything, Tusk cozied up with Germany to avoid being thrown out into the cold by France. This is the right time for Cameron to buy Angela Merkel some flowers and start soliloquizing her beauty. Just close your eyes.
