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Brussels on edge ahead of Cameron's EU speech

Britain's Prime Minister, David Cameron, listens to Deputy Prime Minister, Nick Clegg (UNSEEN), at a news conference in 10 Downing Street in
Britain's Prime Minister, David Cameron, listens to Deputy Prime Minister, Nick Clegg (UNSEEN), at a news conference in 10 Downing Street in

By Luke Baker

BRUSSELS (Reuters) - It's been called a tightrope walk, an attempt to thread a needle in the dark and like sailing between Scylla and Charybdis. The classical allusion may be a stretch, but one way or the other, Britain's David Cameron faces a tough ask on Europe.

When he stands up to speak at 10 a.m. on Friday, the prime minister will confront a highly expectant audience, not just in the room before him in Amsterdam, but on TV across Europe and particularly on the other side of the Channel at home.

In Brussels, diplomats confess to a mixture of apprehension and hopefulness - they don't expect Cameron to turn his back on Europe, but how firmly will he make the case for British involvement in the EU? And how much criticism will he have to heap on Brussels to placate a deeply skeptical electorate?

Herman Van Rompuy, the president of the European Council, has said Cameron cannot "cherry-pick" the parts of EU policy he wants to sign up to, and Irish, French and other officials have warned Cameron that the EU is not an "a la carte menu".

But it is far from clear precisely what the prime minister wants and how he sees Britain's ties to the continent changing in the years ahead after 40 years in the European club.

"Cameron really will have to navigate his way through Scylla and Charybdis and may well find a brick wall on the other side," said one EU diplomat concerned about how successfully he can walk the line in a speech that has been in the works for weeks.

"Britain's Europe policy has been confusing for a long time. He's going to have to sort out a lot of misunderstandings before he can convince people of what he's doing," said the official, underlining that uncertainty would not go away overnight.

"The risk remains of an exit by mistake. It shouldn't happen, but other things that shouldn't have happened did."

TREATY CHANGE?

When asked how he wants to change Britain's ties to the EU, Cameron has spoken about a "new settlement" with the 27-country bloc, with powers repatriated from Brussels to London and Britain having less stringent links to the EU machinery.

He has said his aim is to renegotiate elements of Britain's relationship, particularly on justice, labor and policing issues, next time EU member states reopen the EU treaty for amendments, a process only likely in 2015 at the earliest.

After that, Cameron has said, the outcome will be put to the British public in a referendum, with voters deciding whether they accept the terms of the new EU relationship.

But there are a few problems with the scenario Cameron envisages, not least that the majority of his partners in Europe have no appetite at this stage for treaty change, a cumbersome and painstaking process that can take years to complete.

Irish Prime Minister Enda Kenny, European Commission President Jose Manuel Barroso and Van Rompuy all made the point during appearances in Ireland last week that there was little prospect of a reopening of the treaty anytime soon.

And even if there were, the likelihood of countries such as France, Germany, Poland or Italy agreeing to sweeping treaty amendments largely to accommodate Britain is slim at best.

As a result, there are already signs that Britain is adjusting its message ahead of Cameron's speech.

FORTY YEARS OF EUROPE

Asked what the aim of the speech was this week, one official spoke of Cameron's desire, shared by many northern European countries, to make the EU more competitive, and to ensure that the bloc becomes more democratic and accountable to voters.

That is a very different line to the more confrontational one that Cameron and senior members of his Conservative party have been pushing at home in recent weeks.

"There's a chance that Cameron is going to make a speech that at one level casts him as a good European who cares about making the EU strong and competitive," said a senior British official working in one of the EU institutions.

"From the Brussels point-of-view, we would be very happy if that turns out to be the case. But it's not going to wash with the Daily Mail or most of the British electorate, and in that respect, Cameron's in a serious fix," he said, referring to an often vociferously anti-Europe mass-market British newspaper.

Analysts at JP Morgan, who are paying close attention to the speech because of the potential for an impact on financial markets if Cameron comes out swinging, expect him to be far more emollient than commentators in Britain are predicting.

"We expect him to reiterate his view that the UK's economic future lies in Europe, and to express optimism about the prospect of doing a deal that reflects British concerns," JP Morgan economist Alex White said in a note this week.

"In doing so, he will risk a backlash from the eurosceptics in his own party."

Overall, the likelihood is that Cameron will walk a narrow line, not fully satisfying Europe and not fully satisfying eurosceptic voters. The definitive picture of Britain's relationship with the EU will not be drawn in one speech.

The Dutch may be relieved by that. It was the Netherlands that pushed hard in the late 1960s and early 70s for Britain to become a member of the European Economic Community, the forerunner to the EU, despite rigid opposition from France.

Britain eventually prevailed and became a member in 1973. It would strike a sour note if Cameron chose the Netherlands as the location to make a speech that signals a departure from Europe.

(Writing by Luke Baker; Editing by Peter Graff)

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