The Independent getting excited but do 100 Tory MPs really want to leave the EU no matter what?

The UK media has an insatiable appetite for ‘Tories split’ stories on Europe – mainly we suspect because it makes for an attention-grabbing headline - and Douglas Carswell’s defection is Christmas come early for many. True, the defection is a big deal which could have even bigger implications so fair enough.

However, off the back of his move, there are now far less credible stories cropping up. As OE Director Mats Persson argued on his Telegraph blog back in January:

 “There's a vicious circle at play here. The UK media never seems to get tired of Tory split stories. It only takes a handful of vocal backbench MPs to create a “Tory rebellion” headline. English being the lingua franca, European politicians and commentators read the UK press, drawing the conclusion that, this is really all about a party talking to itself about itself. The many good reform ideas coming out of the UK are dismissed as a matter of “domestic politics” – an image happily (sometimes dishonestly) conveyed by a whole host of special interests, including those who have invested personal prestige in the EU project and seek to maintain the status quo. Cameron, meanwhile, is seen as an unreliable partner, not in control at home. This perception is then fed back to the UK press, as a sign that Cameron is “isolated”, in turn hardening backbench opinion.” 

A prime example is today’s Independent front-page, celebrating that “Up to 100 MPs will call EU exit regardless of concessions won by PM”. So one third of the Tory Parliamentary Party has already made up its mind on the EU? That’s a big claim. Cameron might as well throw in the towel now. It’s an over-cooked story, of course, as is usually the case, quoting exactly the same Tory MPs who have been quoted in stories like this since Magna Carta. The big headline number comes from “other eurosceptics” (hmmmm) who “predicted” that “between 50 and 100 Conservative MPs would make the same pledge” [out of the EU no matter what]. In other words, the number is plucked straight out of thin air.

There will no doubt be pressure on Tory MPs to clarify their position, but to go for “out no matter what” is a whole matter entirely. Still, this story will make it into embassy press clippings around Europe, and will probably also be re-produced in some foreign papers (100 is an impressive and conveniently round number). And voila, it has taken a life of its own. The Independent prides itself on taking “seriously our responsibility to maintain high editorial standards.” Well, we’re not impressed.

Can journalists please stop referring to Sikorski as "Cameron's ally"?

The leaked conversation in which senior Polish politicians including Foreign Minister Radoslaw Sikorski savage Cameron's EU strategy - exclusively translated into English by Open Europe yesterday - is all over the UK press today.

Many of the stories have headlines refer to Sikorski as a key "ally" for David Cameron, but as we have repeatedly argued, this has long not been the case; in January, we pointed out in the wake of the row over free movement and EU migrants' access to benefits that "It isn't Brussels that David Cameron should worry about in Europe at the moment – but Warsaw".

Despite being a university friend of David Cameron and Boris Johnson's [insert obligatory Bullingdon club reference here], as well as an Anglophile and self confessed Thatcher fan, Sikorski has never been an ally on EU reform. Poland has its own interests in the EU to look after - and in recent years it become more assertive and effective in doing so - it is under no obligation to support the UK (this is after all what playing the EU game is all about). Poland considers its membership of the EU as its best guarantee of security - especially following recent events in Ukraine - and therefore sees any attempts to 'weaken' it as inimical to its interest. However, Sikorski has not only not supported the UK, he has gone out of his way to undermine Cameron's reform agenda, for example by painting it in 2012 as an attempt to "wreck and paralyse the EU".

It is true that more recently his tone and rhetoric has been more constructive - in April he said that Poland would be "perfectly willing to help [the UK] fix some of the problems of the EU”, but even his only specific suggestion was fixing the Working Time Directive. The WTD is certainly a significant issue which needs to be addressed but its hardly the most pressing problem facing the UK within the EU and it misses the point that there is a much wider critique to be made of how the EU currently operates. Indeed Sikorski's wider rhetoric - “Britain is a great victor of the EU" is implicitly dismissive of these concerns and only serves to sustain the perception that of an out of touch, arrogant EU elite.

Despite their differences over the key issue of free movement, Poland and the UK continue to share strategic interests in a number of areas from free trade, better EU regulation, energy policy, rights for non-euro members (it'll be a long time before Poland can join) and Russia/Ukraine. International diplomacy remains above all else a pragmatic business.

However, just because Cameron and Sikorski used to be Oxford drinking buddies, it does not mean they are natural allies on EU reform.

When Ukip's recruitment sergeant number one came to town...

Update 15:00 Nigel Farage himself speaks:

After hearing Commissioner Reding admitting 70% of our laws are made by the EU I am willing to sponsor her doing a UK tour
— Nigel Farage (@Nigel_Farage) February 11, 2014

Update 11:50 - We've come across a video (h/t @hughbs) in which Reding very much stands by the 70%-80% estimate.

Update 11:15 - The Telegraph's man in Brussels, Bruno Waterfield, has gotten in touch to say that he asked Reding specifically about the 70% figure:

@OpenEurope I asked her about the 70% figure, she said EP 'co-decides' on 70% of all EU legislation rather than what she said
— Bruno Waterfield (@BrunoBrussels) February 11, 2014

However, at a similar event in Stockholm last year, she argued that:

"Did you know that 80% of Swedish laws are not Swedish laws? They are European laws that have been translated into Swedish legislation."

We've already examined this claim here, but it seems Reding is at best confused about the extent of EU legislation (worrying for an EU Commissioner) or being purposefully misleading.

UKIP's most effective recruitment sergeant?

Original post:

Where to start with Viviane Reding? She visited London yesterday as part of her so-called 'Citizens’ Dialogue' – which is neither about citizens nor a dialogue – and gave a very impressive performance. Somehow, she managed to offend absolutely everyone.

• The British public by questioning whether they "know what they are going to vote about" in a potential 2017 EU referendum, 
• The British media by suggesting it “completely distorts the truth” over Europe, 
• The British government by rubbishing large parts of its strategy, most notably on the crime and policing opt out and EU free movement, 
• Europhiles by suggesting that “70% of the laws in this country are made, co-decided, by the European parliament" (meaning that the share of EU laws, according to Reding, must be higher since not all EU decisions are made jointly with national parliaments) – a “euro myth” that ivory-tower types in the UK have spent years trying to “dispel”, and ironically, used as Exhibit A in their accusations of “misinformed media” (“6.8% of primary legislation” and all that),
• The Ukrainian protesters by praising their brave, pro-EU stance, and then later saying she has, unlike the UK, "never pushed for further enlargement" instead favouring deeper integration. 

So in short, the British are too ignorant to vote, British media all misinformed and 70% of UK laws are made in Brussels. As one person put it on Twitter, it’s hard to think of better “rocket fuel for those who want to quit the EU”.

Apparently, Reding got her bag stolen from her car while engaging in the “dialogue”. Fortunately, her papers, hopefully including the source for the “70% of all laws” claim, were left untouched.

Business backs Cameron's call for a mandate on Europe

A letter in today's Times from some leading UK business people supporting Cameron's approach:

EU reforms must come before any membership referendum

Business faces ever more burdens from Brussels and the single market in Europe has not yet been fully realised

Sir, As business leaders we are passionate about Britain’s prosperity. We agree with the Prime Minister that Britain’s best chance of success is as part of a reformed Europe. We need a new relationship with the EU, backed by democratic mandate.

Business faces ever more burdens from Brussels and the single market in Europe has not yet been fully realised. The euro crisis has created the circumstances for a new EU settlement. This is the moment to push for a more flexible, competitive EU that would bring jobs and growth for all member states. That means completing the Single Market and quashing the culture of red tape.

Now is our chance to reform the EU from within. The Prime Minister is right. This is a European policy that will be good for business and good for jobs in Britain.

The full list of signatories:

John Ayton, Bremont Watch; Sir Anthony Bamford, JCB; Sir John Beckwith, Pacific Investments; Samir Brikho, AMEC; Sir George Buckley, Arle Capital; William Butler-Adams, Brompton Bicycles; Stephen Catlin, Catlin Group; Ian Cheshire, Kingfisher; Andrew Coppel, De Vere Group; Gerald Corbett, Betfair; Mick Davis, Xstrata; Philip Dilley, Arup; Paul Drechsler, Wates Group; Ralph Findlay, Marston’s; Rupert Gavin, Odeon & UCI Cinemas; Ben Gordon, Britvic; Michael Gutman, Westfield Group; Lord Harris, Carpetright; Aidan Heavey, Tullow Oil; Robert Hiscox, Hiscox; Brent Hoberman, made.com; Sebastian James, Dixons Retail; Luke Johnson, Risk Capital Partners; Andrew Law, Caxton Associates; Lord Leach, Open Europe; Alistair McGeorge, New Look; Jon Moulton, Better Capital; Charlie Mullins, Pimlico Plumbers; Jamie Murray Wells, Glasses Direct; John Nelson, Hammerson; Richard Nichols, College Group; Tim Oliver, Hampden Holdings; David Ord, Bristol Port Company; Alan Parker, Brunswick; Sir John Peace, Burberry; Tony Pidgley, Berkeley Group; Sir John Ritblat, Delancey; Nick Robertson, ASOS; SIr Simon Robertson, Rolls-Royce; Xavier Rolet, London Stock Exchange; Sir Stuart Rose, Ocado; Joanna Shields, Tech City Investment Organisation; Michael Spencer, ICAP; Tim Steiner, Ocado; James Townshend, Velcourt Group; Ted Tuppen, Enterprise Inns; Moni Varma, Veetee; Paul Walsh, Diageo; Robert Walters, Robert Walters; Joseph Wan, Harvey Nichols; Tom Wells, Charles Wells Pub Company; Nick Wheeler, Charles Tyrwhitt Shirts; Bob Wigley, Stonehaven; Charles Wigoder, Utility Warehouse; Lord Wolfson, Next

Of all the reactions from Europe, there is one that is infinitely more important than all others…

Update - 14.10 23/01/13:

Further reactions from Germany. DPA reports that German Chancellor Angela Merkel said Germany will:

"Talk intensively with the United Kingdom about their visions in detail”

German government spokesperson Steffen Seibert added that:

"The EU need the UK and the other way round" and that changes to the UK position will need to be "discussed in Brussels together".

 ************************************************

The good thing about the debate about the UK's role in the EU - and Cameron's fever pitch speech - is that UK journalists are now forced to really read the foreign press. Hence, several of the news outlets are now running "Europe says nein, non, nej, nie" (guess the last two) etc.

The reactions from around Europe have been mixed, with a lot of predictable, and in parts understandable, muttering about "cherry-picking."

Of all the hundreds of reactions (in itself interesting), there's one that stands out. This one. From Angela Merkel (via DPA), who said she's ready to listen to the UK's wishes, if they're "fair":

"Europe also means that one should find fair compromises...Germany and me personally wishes Great Britain to remain an important part and active member of the EU".

German Foreign Minister Guido Westerwelle was slightly less positive but still accommodating saying:

"Not everything has to regulated in Brussels and by Brussels, but a policy of raisin-picking will not work"

Though German MEPs were pretty red-faced, others were more understanding. Germany’s Europe Minister for Hessen, Jörg Uwe Hahn warned against bashing Cameron, saying:

“Cameron doesn’t make this statement out of nothing…he reflects the prevalent sentiment in the UK, but also in many other countries of the European Union...the UK is the conscience that we are a decentral confederation of sovereign states based on subsidiarity, and not central federal state…the demand – that competences should not only shift unilaterally from member states to the union, but if necessary should flow back to the member states – is basically not wrong.”

Chair of Germany’s European affairs committee, Gunther Krichbaum, who has form, wasn't entirely pleased:

“I'm a bit surprised that Great Britain wants to renegotiate the rules. Britain is not a new member state, it did not just join the European Union. It had a say in negotiating all the rules and treaties. If we opened that Pandora's Box, all the pulling and hauling would start again and we would probably end up in the same spot."

Other Triple A countries also put forward interesting reactions. From the Netherlands (a country which the UK hopes will follow its lead):

Dutch MP Mark Verheijen, EU spokesman for governing VVD party highlighted some points of agreement between the UK and the Netherlands:

“We are also in favour of a lower budget and less intervention by Brussels [Cameron's speech] "showed that he wants to tackle this debate with an open attitude". 

MEP Bas Eickhout (GreenLeft) said on Twitter:

“The positive thing about Cameron’s speech: hopefully there will finally be room for Treaty change: is very much needed, only not in Cameron’s way”

And Finnish Europe Minister Alexander Stubb (who has previously warned that the UK was sidelining itself in Europe) said on Twitter:

"Cameron speech more constructive than expected. Like most of the economic principles. Disagree on deepening". Adding later, "Cameron speech clarifies things. At least we know what the Conservatives want. They want to stay in the EU. #thespeech #reluctantbride".

We'll update with reactions from the Mediterranean - which, as you might expect, have been far less receptive. 

A new angle to UK-EU trade?

The WTO and the OECD yesterday announced the release of a new set of trade data. This data tries to pin down the “value added” from trade rather than just the gross figures. Essentially, this means the data tries to track where the final demand for an exported product/service comes from, thereby netting out trade which simply contributes to the production line of the finished good/service.

The data provides an interesting new contribution to the UK-EU debate on trade. Notably the figures highlight that, under the value added approach, US trade looks more important to the UK than European countries. The Guardian questions whether this could aid the calls for the UK to exit the EU.

Superficially it may, but looking at the data more deeply, we think not. As the WTO/OECD note:

“This suggests that UK exports to other EU countries are at least partly intermediate services and inputs that are then further processed and shipped to other countries (in particular to the US).”

So, although the US is the source for the ‘final demand’ we still have to export our products or services to other countries in the EU for them to take advantage of this demand. Being a member of the EU and the single market plays a big role in allowing us to do this. The real question is, would the UK still be able to access this final demand from the US if it left the EU?

Well, it’s almost impossible to say. One thing that seems certain though, is that, since many of these exports are intermediate ones, there is no guarantee that we would still be able to export them outside the EU even if the final demand remains from the US (this point is hinted at by Ian King in the Times).

A final interesting point is that the increase in value added exports to the US seems to occur for most large EU countries. Why this is, is not entirely clear. To us, it seems that it could be motivated by specialisation within the EU, with EU members producing various component goods and services which are then combined into final exports to the US. If this is the case then this seems a positive result to us, as it surely increases the cost competitiveness of exports from the EU (including the UK).

From the perspective of the UK/EU debate this 'value added' data is another interest metric to add, although at the moment it offers little more conclusive evidence than what we currently have. The bigger benefit comes in broader terms, as the FT notes, providing further support for free trade. With protectionist forces flaring up during the eurozone crisis, countries would do well to keep that in mind as well.

Why you cannot define business opinion on Europe in terms of ‘Eurosceptics’ vs ‘Europhiles’

On his Telegraph blog, Mats Persson argues:

Ahead of this week’s EU speech by David Cameron, journalists are searching high and low for businessmen and women to go on record on the vexed question of Britain’s European future. Alas, there’s no simple answer that makes for good radio or TV. Though broadly reflecting sceptic sentiments amongst the public, the business community is split and largely undecided, and as always it depends on the sector, size and position of a given firm. One thing is clear though: there’s absolutely no way the UK debate on Europe – among business or other groups for that matter – can be defined using the binary Eurosceptics-v-Europhiles logic that some in the media still cling on to. It’s far more fluid than any fixed pro or anti campaign.

A poll published yesterday by the British Chambers of Commerce is a case in point. Of BCC members, only 9pc of firms want closer EU integration, 12pc want to leave the EU altogether, 26pc want the status quo, 6pc are unsure. But here’s the interesting part: a full 47pc want "a looser relationship…but with the UK remaining a member of the EU".

Over the last few days, several business leaders have warned against the consequences of the UK leaving the EU, but very few have addressed the sharp end of the actual policy debate. A letter from Roland Rudd of Business for New Europe, for example, called on the UK to “lead” in Europe (surprise, surprise). But though these types of interventions are often written up as “Europhiles” challenging “Eurosceptics”, what they in fact show is how far the centre of gravity has moved (there’s no talk of more EU integration, as in the past, and certainly no talk of joining the euro, which Rudd used to passionately argue for). Also, they tell us very little. Most business people would have no problem agreeing with the “completion” of the single market, more trade deals, securing market access etc. Or, as the Rudd letter put it, “a strong reformed EU with Britain at the heart of it”. But what does this mean exactly? You’d be hard pressed to find a business person calling for “an unreformed EU with Britain at the margins”.

Remember, in policy terms, the UK quitting the EU isn’t actually on the table, as David Cameron has said several times and repeated on the Today programme this morning. Apart from Ukip (with no MPs), no party with national significance argues for it, so a "better off in" business letter misses the point (at least for now). Instead, the key question is: which is a greater threat to the trade benefits currently enjoyed by business in Europe? A new EU-UK deal or the status quo?

Here, Rudd’s lot will say that any “wholesale renegotiation” will be rejected by EU partners (as it means a “lower-cost membership”, etc) and, subsequently EU membership will be rejected by the British electorate in a referendum as expectations have been raised too high.

But there’s another way to look at it: given that around half of the British people favour the UK leaving the EU absent a new deal in Europe, it is, in fact, the “do nothing” option – not renegotiation – that is the biggest threat to the UK’s EU membership. Continue with EU membership despite the will of the British people and there may soon come a day when the electorate throw out the baby – the market access, free movement, mutual recognition, behind-the-border liberalisation etc – with the bathwater (the high non-trade costs around EU membership).

There are two other factors that should make business nervous of the “do nothing” option: First, further eurozone integration – not least via banking union – means that the status quo isn’t an option in Europe anyway. The prospect of a new “club within a club” has clear implications for business. The UK has to negotiate to secure existing rights, at least. Secondly, and most fundamentally, the EU simply needs reform to bring it up to speed with the global business environment: returning labour market laws closer to the shop floor, less EU micromanaging in environmental laws, ending the recycling of regeneration cash in Europe – riddled with opportunity costs for business – ending growth-destroying farm subsidies, and securing safeguards against investment-diverting measures in financial services, would, for example, all genuinely help business in Britain and beyond. That will require a new deal in Europe – not tinkering at the margins. It will also require a debate focussed on policy, not clichés.

This is a very complicated debate, as the interaction between UK domestic politics and eurozone politics continues to produce an exceptionally fluid and emotional debate. To expect business people – who after all have a business to run – to have a firm view of a proposition that has not yet been made, is pretty unrealistic. But please, don’t make the mistake of thinking that this is a debate between two distinct camps. And that largely goes for the debate as a whole.

Who said EU federalists don't get headlines in UK media (but 'associate membership' for Britain is hardly a revolutionary thought)

The Union of European Federalists – an umbrella group of federalist organisations and lobby groups – got a pretty good hit in the UK media on New Year’s eve when the Times (and later other papers) picked up on a forthcoming paper by the group, which is expected to argue that the UK be granted “associate status” in the EU, a few days after Jacques Delors made similar comments.

So EU federalists can make headlines in the eurosceptic UK press after all, although we would hasten to add that an intervention by a few MEPs and retired politicians can’t qualify as a “Brussels plot” – you at least need to have some scheming Commission bureaucrats on-board for that. Apparently, the paper, which will come in the form of a draft “EU Treaty”, will be based on a report by Andrew Duff, the Lib Dem MEP.

According to Duff, the UK would be given “membership based on trade and the single market”, with a UK judge at the ECJ but no Commissioner and no MEPs. The objective is clear: Given that the UK is a perceived as a  “continual impediment” to greater EU integration, associate membership of the EU would be devised “to prevent a British veto of the constitutional evolution needed and desired by its partners”. Curiously, and perhaps testament to the world view of the author, there’s no mention of what would happen to the UK’s voting weight/rights in the Council of Ministers, the forum where national governments are represented. They might want to work that one out before publishing their draft EU treaty.

Either way the idea is for the UK to effectively be given access to the single market but with little say - like Norway but with some twists and without the EEA-wrapping. This is hardly revolutionary stuff and the author, though an interesting guy, isn’t exactly the go-to guy in key national capitals. So don’t expect this to become policy any time soon. To view the UK as an “impediment” - ignoring the moving goal posts created by the eurozone crisis - is also predictably simplistic.

In addition, there are massive obstacles to more EU integration also amongst “EU partners” and European public opinion – from joint and several liabilities in Germany, to Bundesbank-style budget controls in France to banking union in Sweden. But Duff’s contribution is nonetheless welcome as it does remind us of the need to develop a new model for EU integration in light of changing economic, political and economic circumstances – one that is better at reconciling different democratic decisions in member states with EU cooperation. This is a debate that should be in everyone’s interest to have under way.

UK would not be ‘biggest loser’ of EU budget failure

We have a letter in the FT today pointing out that the UK would not be the biggest loser if there is no positive outcome from the talks on the EU's long term budget - a fact we have noted at length in two recent flash analyses. We have also highlighted in recent blogs that the UK is far from alone in threatening a veto.

In an article a couple of days ago the FT suggested that if there was no deal on the long term budget the UK would be the biggest loser since the current budget framework would rollover (increasing for inflation), thereby taking it above the UK government's demands and increasing the UK's contribution.

See below for our full response letter:

Sir,

You say that “if there is no agreement” in on-going talks over the next long-term EU budget, the UK could become the “biggest loser” (“EUbudget: the trillion-euro split”, Analysis, November 21). This is incorrect. It is true that “the 2013 budget ceiling would be repeated – plus inflation – for each successive year” and that this would be higher than the freeze the UK has called for. However, this scenario would be far worse for other countries than for Britain.

First, newer member states would probably lose out on a large share of the cash that is due to be allocated to them in the new budget period. Second, unlike the UK’s rebate, all other correction mechanisms – such as the Swedish or Dutch – expire in 2013 and would need to be renegotiated under unanimity rule. Finally, and most importantly, the UK’s net contribution under a rollover is about €3bn higher than under the current proposal by European Council president Herman Van Rompuy. However, the Van Rompuy proposal also includes a reduction in the UK rebate of between €3.5bn and €7bn, meaning the UK contribution would overall be lower under a rollover.

So what do Lib Dem voters really think about Europe?

Over on Lib Dem Voice's 'Independent View' we've published a guest post looking at the what the party's voters and members really think about the UK and Europe, and how we think the leadership ought to respond:

In the polarised and often exaggerated UK debate on the EU, the Lib Dems have often been caricaturised by much of the press and Tory MPs as being unreservedly in favour of greater EU integration or even an ‘EU super state’. The truth is of course far more nuanced.

That’s why a new YouGov/Cambridge cross-country poll out earlier this week is so interesting. It shows that a majority of UK voters (53%) support either no further EU integration or a looser arrangement. Only 14% said they wanted more integration. These attitudes span the political divide, with 50% of Lib Dem voters saying they wanted either a looser relationship with the EU or outright withdrawal. On the thorny question of whether primary responsibility for specific policy areas should lie with national capitals or Brussels, Lib Dem voters want more national control over areas such as police and crime, employment laws and trade almost as much as the average UK voter, and even more on agriculture.

Source: YouGov-Cambride poll ‘Cross-country attitudes on Europe’, 13 March 2012

Similar trends can be seen in the Voice’s own polling (here and here) suggesting that both Lib Dem members and voters would reject working closer economic and political union in Europe. But while Lib Dem politicians have criticised individual aspects of EU policy, such as the Working Time Directive or the Common Fisheries Policy, on the whole the party leadership has so far not put forward an alternative vision for the EU-UK relationship.

This is worrying for two main reasons: first, as today’s poll show, the gap between what voters and the political party think on Europe is widening – a trend which is seen in party politics acrossEurope. This isn’t healthy in the long-run. Secondly, the eurozone crisis is changing the wayEuropeoperates, pulling those countries that share the single currency closer together, forcing those outside to decide what kind of relationship they want with the core. In short, the status quo is no longer an option. Britain needs a new vision for European cooperation, and so do the Lib Dems.

The principles of localism, which have been overwhelming endorsement by the coalition, and the Lib Dems in particular, could serve as the basis for a new, positive vision of Britain in Europe. In a recent report, entitled “The Case for European Localism”, Open Europe argued that the EU ought to focus more its core competencies of boosting trade and the Single Market, and less on political institution-building. National parliaments would be accorded a more prominent role in EU affairs, something that would increase democratic accountability and transparency. Far more decisions should be made nationally, regionally or locally.

European localism would act as an overarching strategy, within which the UK could chose individual areas where it wanted to maintain a bigger role for the EU, such as environmental policy, but devolve competencies over other areas, such as crime and policing, regional policy, agriculture or social and employment law.

With overwhelming backing from voters, the Lib Dems have a valuable opportunity to capture the centre ground on the EU debate and fashion a new, vibrant and more nuanced narrative that moves beyond the tired in/out debate.

How will the leadership respond?

More IMF contributions? conditionality is king

The rumours were finally confirmed today as the IMF released a statement announcing its plans to increase its funding base by up to $500bn. There’s been a lot of talk in the British media in recent weeks about the potential increased UK contributions to the IMF, and not much of it positive. The coverage has painted any additional UK contributions as tantamount to a eurozone bailout – this is a tempting narrative but ultimately it may be too simplistic. When it comes to the IMF there are a few subtleties which need to be considered, as we outline below.

Firstly, no-one has lost money lending to the IMF…ever. It is always the most senior creditor, meaning it will be the first to be paid back. Therefore the potential risk of this lending is minimal, no matter where it goes. Moreover, as Cameron has pointed out, the contributions do not impact the UK’s debt or deficit, so it is not really a question of giving up other priorities to fund the IMF.

Additionally it seems as if the money will be paid into the IMF general reserve fund and not a specific eurozone fund. It is also likely that other members will contribute, so this moves the point away from being simply about the UK and the eurozone and becomes more about the UK's participation in the global economy. Being a member of the IMF is an important part of the UK’s global role and its foreign policy approach. Unilaterally declining to contribute funds and possibly removing the UK from the IMF would have an impact far beyond the UK’s role in the eurozone crisis.

Furthermore, given the failures of the EU in the eurozone crisis, shifting the balance of power towards the IMF would be no bad thing (in the right circumstances, of course). The IMF has conclusively argued for a large write down of debt in Greece (as we also have) and has the expertise and experience to deal with the challenges of restructuring struggling economies.

That said there are a few conditions which the Government should consider:

- The funds must go into a general fund not a eurozone specific one and must be matched proportionately by all other members of the IMF.
- Larger IMF contributions to the eurozone must be matched by a greater say in the crisis resolution. Generally, it should be made clear by the IMF and its members that the current approach is not working – the focus needs to switch to debt restructuring combined with increased competitiveness and growth.
- The funds must not be seen to impact on Cameron’s decision to veto the recent European treaty. Although IMF funding was mentioned, this is a separate issue since it is coming from a direct IMF request not the EU.

So, it comes down to this: The UK should not hand out further contributions to the IMF without conditions. With these conditions met, the result would not be the same as simply handing more money directly to the eurozone. Alas, in the end, even an extra $500bn at the IMF’s disposal may not make a huge difference the outcome of the crisis.