George Osborne demands EU safeguards for non-euro businesses

George Osborne will set out the government’s demands for a renegotiated settlement with the European Union on Tuesday by demanding legally embedded principles that will prevent discrimination against British businesses operating in the eurozone.

In his strongest remarks yet on Britain’s role in Europe, the chancellor will say: “Remain or leave, is the question our democracy has demanded we put because, quite frankly, the British people do not want to be part of an ever-closer union.”

Osborne will tell a business conference in Germany that the EU must accept that the single market has more than one currency and that it “should not discriminate against any business on the basis of the currency of the country in which they reside.

“What we seek are principles embedded in EU law and binding on EU institutions that safeguard the operation of the union for all 28 member states. The principles must support the integrity of the European single market.”

He will add that the new principles “must ensure that as the eurozone chooses to integrate it does so in a way that does not damage the interests of non-euro members”.

The issue is critical to protecting the interests of the City of London and is probably among the most difficult items on Britain’s renegotiation agenda. Osborne knows that as more countries currently outside the euro join the bloc, Britain will risk become increasingly marginalised when critical decisions are taken by the rest of the EU. It is also likely that economic integration within the eurozone will intensify, and decisions will be taken that will have an impact on the UK economy.

Britain has long worried that the current 19 euro countries can form a caucus within the wider EU and could act as a bloc in deciding single market laws, as those countries have a qualified majority to push through changes under Lisbon treaty voting rules that recently came into force. Britain fears that Germany may want to use these rules to set up Frankfurt as a significant rival to London.

Osborne will also stress that Britain must retain a right to participate in aspects of financial integration with the EU, even though Britain will remain outside the euro. He will say: “There will be cases where non-euro members want to participate in developments like the banking union. But that participation must be voluntary, and never compulsory. We must never let taxpayers in countries that are not in the euro bear the cost for supporting countries in the eurozone.‎”

Britain has already vetoed plans for Britain to foot part of the bill for the Greek bailout, in what was a test case of the eurozone imposing financial burdens on the UK even though the UK had no direct involvement in decisions about the bailout. One solution already used for the European banking union is for a double majority in which non-euro countries could veto decisions being taken by those inside the eurozone.

The Centre for European Reform thinktank has suggested a new treaty article which would include new procedures to ensure greater transparency in discussions of the euro group so that non-euro countries know what is going on, and the creation of an “emergency brake”, so that any non-euro country which believes that an EU law harms the market may ask the European council to review the matter, possibly for a period of up to a year.

On Monday evening Osborne met the German finance minister, Wolfgang Schäuble, and the vice-chancellor, Sigmar Gabriel. Schauble is broadly sympathetic to Osborne’s position. Osborne, aware that his own political future depends on a successful renegotiation following a referendum on whether Britain stays in the European Union, will also try to put the British demands in a wider political context, partly by making it clear the goals of the EU need to change.

“‎We want Britain to remain in a reformed European Union, but it needs to be a European Union that works better for all the citizens of Europe – and works better for Britain too. It needs to be a Europe where we are not part of that ever closer union you are more comfortable with,” Osborne will say.

“In the UK, where this is widely interpreted as a commitment to ever closer political integration, that concept is now supported by a tiny proportion of voters. I believe it is this that is the cause of some of the strains between Britain and our European partners. Ever closer union is not right for us any longer.”