Germany has drawn up secret plans to prevent a British referendum on the overhaul of the European Union amid concerns it could derail the eurozone rescue package, leaked documents obtained by The Daily Telegraph disclose.
By Bruno Waterfield, in Brussels
Angela Merkel, the German chancellor, is today expected to tell David Cameron that Britain does not need a referendum on EU treaty changes, despite demands from senior Conservatives for more powers to be repatriated to Britain.
The leaked memo, written by the German foreign office, discloses radical plans for an intrusive new European body that will be able to take over the economies of beleaguered eurozone countries.
It discloses that the EU’s largest economy is also preparing for other European countries, which are too large to be bailed out, to default on their debts — effectively going bankrupt. It will prompt fears that German plans to deal with the eurozone crisis involve an erosion of national sovereignty that could pave the way for a European “super state” with its own tax and spending plans set in Brussels.
Britain would be relegated to a new outer group of EU members who are not in the single currency. Mr Cameron will today travel to Brussels and Berlin for tense negotiations with Mrs Merkel amid growing disagreement between the leaders over how to deal with the eurozone.
The Prime Minister is increasingly exasperated that Germany refuses to provide more financial help for Italy and other struggling countries amid concerns that the crisis is having a “chilling effect” on the British economy. Mrs Merkel yesterday said she expected Mr Cameron to “examine a stronger involvement with other countries” once the eurozone crisis had been resolved.
She said: “We’ve seen a sovereign debt crisis evolve in some states and particularly those in the eurozone find themselves in the international focus.
“It was right of David Cameron to concern himself with the UK’s debt issues when he became Prime Minister — that’s my firm conviction, and once the negative focus has moved away from Europe, he will examine a stronger involvement with other countries.”
The eurozone contagion is threatening to spread to Spain and France. Yesterday, the price of Spanish government borrowing reached the “brink” of crisis point.
The Spanish government sold 10-year bonds at a 6.975 per cent yield — just below the seven per cent level which has triggered international assistance elsewhere.
Amid protests in Milan and Turin, Mario Monti, Italy’s unelected “technocrat” prime minister unveiled sweeping austerity reforms. Mr Monti warned that a break-up of the single currency would take eurozone economies “back to the 1950s” in terms of wealth.
The six-page German foreign ministry paper sets out plans for the creation of a European Monetary Fund with a transfer of sovereignty away from member states.
The fund will have the power to take ailing countries into receivership and run their economies. Even more controversially, the document, entitled The future of the EU: required integration policy improvements for the creation of a Stability Union, declares that the treaty changes are a first stage “in which the EU will develop into a political union”. “The debate on the way towards a political union must begin as soon as the course toward stability union is charted,” it concludes.
The negotiating document also explicitly examines ways to limit treaty changes to speed up the reforms. It indicates that Mrs Merkel will tell Mr Cameron to rule out a popular EU vote in Britain.
“Limiting the effect of the treaty changes to the eurozone states would make ratification easier, which would nevertheless be required by all EU member states (thereby less referenda could be necessary, which could also affect the UK),” read the paper.
Senior government officials confirmed that they had dropped a previous demand that EU powers should be “repatriated” to Britain in return for the treaty changes requested by Germany, a move that will anger Conservative MPs.
“I don’t think that anyone is seriously proposing going down that route,” a senior government source said.
Open Europe, a think tank, last night called for Mr Cameron to demand something in return from Mrs Merkel for her “far-reaching plan”, which requires the unanimous consent of all 27 EU countries, giving Britain a veto.
“It would be the first step towards a vision of ‘political union’ that would have major consequences for the future of the entire EU, and therefore the UK’s place within it,” said Stephen Booth, the think tank’s research director.
“Merkel is daring Cameron to call her bluff, but if the UK is serious about taking a leadership role in shaping the EU, Cameron will have to take a stand sooner rather than later.”
Bill Cash, chairman of the Commons European scrutiny committee, accused the Coalition of standing by in “no–man’s land” while Germany shaped the EU to suit its own interests.
“We are going to get nothing significant in return for agreeing to this,” he said.
Mr Cameron is today also expected to pressurise Mrs Merkel into lifting German opposition to the use of the European Central Bank to rescue the euro.
However, last night, Mrs Merkel said: “If politicians think the ECB can resolve the problem of the euro’s weaknesses, then I think they are persuading themselves of something that won’t happen.