David Cameron has spent the last year antagonizing his European Union partners with repeated demands they resolve the euro zone crisis while refusing to offer any support. Early on Friday morning, he antagonized them further, vetoing a proposal to incorporate new euro zone fiscal discipline procedures into the European treaties after failing to achieve certain "safeguards" for the City of London. The result leaves the euro zone facing further damaging uncertainty - and may yet end up harming the City.
None of the proposed treaty changes posed a big threat to UK national interests. But under domestic pressure, Mr. Cameron made a number of demands related to financial services regulation as the price of his support. Instead euro zone leaders decided a crisis summit was not the place to make decisions on the fine print of future legislation including maximum harmonization of bank capital ratios and how much power to allow national bank supervisors. So the leaders called Mr. Cameron's bluff, who promptly called their bluff, daring them to follow through on a threat to negotiate a separate treaty.
Far from protecting the City, London may find itself without allies just when it needs them over the new financial services directives. Ironically, Britain has led demands for stricter E.U. regulation and a level playing field. Historically, the U.K. has a good track record of defending the City in Brussels, despite the hostility from some countries; it has never been outvoted on a financial services directive. That may now change. Meanwhile, the U.K may find itself increasingly side-lined in wider E.U. debates, setting in train a process that could yet lead to its eventual withdrawal. This is not the position Mr. Cameron wanted to be in.
For more: Euro Summit Leaves U.K. Camarooned - WSJ.com
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