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Britain complicates Brussels plan to contain Europe's debt crisis

BERLIN — Plans by France and Germany to save the euro through closer European unity faced a serious challenge Tuesday from Britain, as deep divisions emerged between the 17 EU nations that use the euro and the 10 others that don't.

Threatened by fears their joint currency may not survive, German Chancellor Angela Merkel and French President Nicolas Sarkozy had forcefully demanded changes to European Union treaties to tighten controls over spending and borrowing for all who use the embattled euro.

Their comments reinforced market expectations that EU leaders at a Friday summit would finally contain, through tighter financial rules, the 2-year-old debt crisis that has engulfed the continent and threatens the entire global economy.

Enter Prime Minister David Cameron of Britain, a European nation that does not use the euro, who said he would be heading to the Brussels summit "to defend and promote British interests."

"Eurozone countries do need to come together, do need to do more things together. If they choose to use the European treaty to do that, Britain will be insisting on some safeguards too," he said Tuesday. "As long as we get those, then that treaty can go ahead. If we can't get those, it won't."

Cameron is the leader of Britain's Conservative Party, which resists transferring more powers to EU institutions in Brussels.

However, Cameron is wary of losing power with the 27-nation bloc if France and Germany create a tighter club of eurozone nations with tough rules for national budgets and automatic sanctions for those who stray.

The safeguards cited by Cameron included the importance of keeping a single EU market of about 500 million consumers and making sure that any eurozone moves don't threaten London's status as a global financial center.

Adding to the pressure, Standard & Poor's warned that it could downgrade 15 eurozone nations as well as Europe's bailout fund if European leaders don't act. And U.S. Treasury Secretary Timothy Geithner began a three-day European tour Tuesday to prod eurozone nations into action.

If the bailout fund, which has already rescued Ireland, Portugal and Greece, is downgraded, it could have to charge higher rates to lend to other countries in the future, making it tougher for them to recover. The bailout fund depends on the top Triple-A credit ratings of Germany and France.

Many have already dismissed the bailout fund as too small to rescue a country like Italy, the eurozone's third-largest economy. Help from abroad also seemed unlikely — Geithner said the Federal Reserve has no plans to give money to the International Monetary Fund to bolster Europe's bailout fund.

Greece approves plan

Greek lawmakers have approved next year's austerity budget, extending tough spending cuts that have sparked a series of often violent protests. The 2012 budget passed early today foresees a fourth year of recession, but also projects a modest primary surplus — a surplus excluding interest payments on debt — for the first time in years.

Britain complicates Brussels plan to contain Europe's debt crisis 12/06/11 [Last modified: Tuesday, December 6, 2011 9:01pm]
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