The Euro dilemma

I agree with Peter Mandelson (December) that Britain’s interests in what increasingly looks like a two-tier Europe are more likely to be preserved if the European Commission is in charge of policing any new eurozone governance regime. This seems to be the direction of travel, as Angela Merkel, the German chancellor, appears to have won that argument over France’s President Nicolas Sarkozy. It raises issues of democratic accountability, but at least there are visible institutions and mechanisms that Britain can continue to influence.

Whether treaty changes are required or not, what the euro needs to survive this crisis is greater financial discipline, in order to justify the ECB standing behind sovereign debt. I think we will see this happen—but this is a long way short of a fiscal union.

Whatever arrangements emerge should not be seen as distorting Britain’s ability to trade freely with the rest of