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As the English Channel gets wider so too does the Atlantic. When Barack Obama and David Cameron talked recently about the euro, the US president reprised an argument made by his predecessors. America’s interest, Mr Obama is reported to have said, resided in a strong and cohesive Europe. Britain should be part of it. The US did not want to see the prime minister left on the sidelines when the crisis subsided.

Mr Obama offered a few thoughts on how the single currency could be stabilised. The US backed the idea of eurozone bonds to underpin the creditworthiness of weaker economies. It could see the argument for a European-wide guarantee for bank deposits. Stabilising the financial system would probably require the creation of a banking union. Mr Cameron, he hoped, would play a constructive role.

The president will have been disappointed by the response. The prime minister has said loudly and clearly that Britain will not join debt mutualisation or European-wide depositor protection schemes. While it could support a banking union for the eurozone, Britain would stand aside. What is more, its approval would be conditional on special safeguards for the City of London.

Mr Obama has made no secret of his agitation for an early end to eurozone turmoil. There is a US election on the near horizon. As the US economy has slowed, his poll lead over Mitt Romney has evaporated. Things are getting urgent.


Democratic campaign managers see a worsening employment outlook as the one thing that could deny Mr Obama a second term. The big threat to the US economy comes from the eurozone. So it is pretty obvious why the president does not want Mr Cameron to start waving a British veto if Germany, France, Italy and the rest finally get a grip.

Taking a longer view, such exchanges between US presidents and British prime ministers have been a recurring theme of the so-called special relationship. Washington has long thought that an EU with Britain as an active player makes for a more reliable partner in the transatlantic alliance. By contrast, British prime ministers have often cherished the vain hope that by cuddling up to the US they could afford to keep their distance from Europe.

When the Berlin Wall came down, George H.W. Bush offended
Margaret Thatcher by strongly backing German unification. He also made the none-too-diplomatic observation that Germany would emerge as the leading player in post-communist Europe. But Mr Bush held fast to the policy of encouraging Britain to remain inside the European tent.

Mr Cameron, of course, makes his own choices. It would be more than curious were British politicians to set a course in Europe dictated by America’s national interest. But Mr Obama’s démarche was a reminder, if one were needed, that Britain’s twin relationships with the US and Europe are not discrete alternatives. In this eternal triangle, the closeness of the alliance with Washington rests on the leverage Britain exercises on its own continent.

The exchange also underlines how a resolution of the eurozone crisis would change profoundly the political geography of Europe. Mr Cameron’s government, with the reluctant acquiescence of the Liberal Democrats, the smaller, and notionally pro-European coalition partner, disdains European integration. What is happening now is that eurozone “push” is reinforcing eurosceptic “pull”. As they negotiate new arrangements to pool economic decision-making, other EU leaders, and notably Germany’s Angela Merkel, are growing less tolerant of British exceptionalism.

Mr Cameron says that Britain’s interest would be best served by deeper co-operation in the eurozone. In the short term that is true. It would certainly take some of the pressure off the British economy. Mr Cameron is confronted with a fiscal deficit to match that of Greece and a stalled economy. Britain, like everyone else, badly needs growth.
The strategic consequences of an integrated eurozone are something else. If (and, given the record of the past couple of years, it remains an important “if”) governments create an economic and political union, Britain’s voice will be weakened. Decisions on Europe’s economic policy have already gravitated towards the euro-plus group of present and prospective members of the single currency. This process will be greatly accelerated if financial is added to fiscal integration.

Decisions about the single market, in which Britain has a vital national interest, would inevitably be made within the single currency grouping. Quite plausibly, Britain would find itself alone, or with one or two others, in a second tier. Notionally, it might be assured of an equal say but, de facto, its status would be downgraded to that now enjoyed by Norway, Iceland and Liechtenstein in the European Economic Area.

Some officials with deep experience of the EU and all its works argue that it need not come to this. Whatever their frustrations with Britain, other governments value its instincts and contribution: Germany shares an open economic outlook; France Britain’s global outlook. With some smart diplomacy and a modicum of compromise, Brits and continentals could continue to muddle along together.

This assumes Mr Cameron wants such an outcome. Many in his party see a disengagement as an opportunity. In any event, the new arrangements in the eurozone will change the terms of British participation in the EU. An eventual British referendum to decide the future of the relationship now looks all but inevitable.

One eurosceptic figure in Mr Cameron’s cabinet was heard some time ago to remark that there was no longer any need for Britain to leave Europe, as Europe was leaving Britain. Events may prove him right.