"A burning building... with an exit"

Denis Cooper emailed me his letter to The Telegraph with permission to reproduce. To cut a long story, the EFSF has no legal base in the EU treaties anyway, and its proposed permanent successor the ESM cannot be set up until the EU Treaty is amended (which requires UK consent).

Our MPs could stop the ESM coming into force by blocking the forthcoming Bill to approve the amendment (as proposed by Decision 2011/199/EU). With that EU treaty change killed off, it couldn't be used for any other purposes, including agreeing to a Tobin tax in the eurozone (or imposing it on UK banks, for that matter).

Here's his letter in full:

Sir

If European Commission president Jose Manuel Barroso wished to introduce a financial transactions tax just in the eurozone (editorial, today), then he could probably do that without needing any further EU treaty change beyond that already [provisionally] agreed [but not yet ratified] on March 25th.

Such a tax could easily be represented as one component of a "stability mechanism" to "safeguard the stability of the euro area", and would therefore fall within the scope of the new paragraph which would be inserted into the EU treaties through European Council Decision 2011/199/EU "amending Article 136 of the Treaty on the Functioning of the European Union with regard to a stability mechanism for Member States whose currency is the euro".

Therefore under that EU treaty amendment the eurozone governments could agree among themselves to impose the tax just within the eurozone, and as the UK would not be a party to that intra-eurozone treaty or agreement it would have no say over its contents and would have no veto to exercise.

I wonder whether the government will now reconsider the wisdom of so readily assenting to European Council Decision 2011/199/EU back in March, and decide that it will not proceed with the Act of Parliament which is necessary before it can be finally ratified by the UK.

Yours etc

NB. European Council Decision 2011/199/EU is here. It would insert this paragraph into the EU treaties: "The Member States whose currency is the euro may establish a stability mechanism [the ESM] to be activated if indispensable to safeguard the stability of the euro area as a whole. The granting of any required financial assistance under the mechanism will be made subject to strict conditionality." which could easily be interpreted as giving the eurozone state governments the right to agree to a financial transactions tax just within the eurozone.