Originally published Thursday, December 8, 2011 at 8:02 AM

Cameron's nightmare: Euro crisis could sideline UK

Britain, once the world's sole imperial power, faces being sidelined at a European summit intended to save the euro and stave off economic collapse.

Associated Press

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Britain, once the world's sole imperial power, faces being sidelined at a European summit intended to save the euro and stave off economic collapse.

Prime Minister David Cameron, facing perhaps his most difficult test, has little room to maneuver. He is hemmed in by divisions within his Conservative Party over how close Britain should tie itself to Europe - divisions that brought down Prime Minister Margaret Thatcher and bedeviled her successor, John Major.

The political straitjacket leaves Cameron with few attractive options: Does he play the British bulldog and block a euro deal, risking an economic firestorm that would certainly scald his own country? Or does he acquiesce with plans drafted by France and Germany, and brace for a Conservative Party backlash that might cost him his job?

Howard Wheeldon, senior strategist at BGC Brokers in London, said Thursday that Britain could come out of the summit more isolated within the EU and less relevant on the world stage.

"The next two days really could be a turning point for Britain's future membership of the EU," Wheeldon said. "There may be no way for Britain to go but back."

All 27 European Union heads of government are at a summit in Brussels designed to save the euro. France and Germany are pressing to rewrite EU treaties so that at least the eurozone - and maybe even the entire EU - has more closely linked fiscal policies.

Britain is a member of the EU but not of the 17-country eurozone; it uses the pound. But Cameron has argued that solving the euro crisis is a national priority for Britain, because of the economic damage failure would bring. Some Conservatives back that stance.

"The disorderly collapse of the euro would do enormous damage to the British economy," Treasury chief George Osborne warned Thursday.

Some Conservatives, however, believe the urgency represents a rare opportunity to extract concessions from European partners and reclaim powers they believe Britain should never have given up. They are adamant that Britain cede no more powers to EU headquarters and are calling for a referendum on any new deal with the EU.

Lawmaker Bernard Jenkin urged the prime minister on Thursday to grab a "win-win-win" opportunity to call a nationwide vote.

"He'd have the Conservatives behind him, the British people want a referendum, the British people want a different relationship with Europe, and he would have a much stronger hand to negotiate," Jenkin said.

Others in the party, and in the country as a whole, simply want out of the European Union. They rankle that Britain won World War II but seems to be losing the peace to Germany, the dominant power in the European Union.

Cameron's less combative approach drew support Thursday from the previous Conservative Party leader, Michael Howard.

"I would like to see a rebalancing of powers between Britain and Brussels, and I hope that at some point we can return to that agenda," Howard told BBC radio. "What is pressing at the moment is the need to help the eurozone overcome its crisis, because the world economy is in a very fragile state and a disorderly break up of the eurozone could bring about an economic catastrophe on a global scale."

Cameron told the House of Commons on Wednesday that a referendum would be needed only if a new European Union treaty took more powers away from London, but that would probably not be the case if the outcome is a deal among only the 17 nations that use the euro.

Conservative legislator David Davis disagreed that a potentially divisive referendum could be avoided. A eurozone deal, he argued, would have "huge implications for Britain, whether or not we are actually directly involved."

It is a ticklish position for the prime minister, leader of a coalition government that includes the Liberal Democrats, whose leaders generally favor closer ties to Europe and don't rule out eventually adopting the euro.

"The prime minister's stand on the single currency is in the national interest," wrote Peter Oborne, a columnist for The Daily Telegraph, "but not necessarily his own."

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