Syed Kamall MEP: Britain and Europe are at a fork in the road - and our withdrawal may soon be in the offing

Syed Kamall is a Conservative MEP for London and sits on the Economic and Monetary Affairs Committee of the European Parliament. Follow Syed on Twitter.

This week, Brussels has been asking for the power to rewrite national budgets if they do not comply with deficit and debt rules. With this power, Eurocrats would have the ability to scrap budgets written by democratically elected governments throughout the eurozone. It would be like the American Revolution in reverse: “no taxation without representation” replaced by “more taxation, less representation”. We have already seen in recent years the replacement of democratically elected governments with temporary technocratic appointments, nodded through by compliant parliaments. However, fiscal union poses a more permanent threat to Europe’s democracies.

For several months the eurozone has been stalled at a fork in the road. It either turns left and goes for full fiscal and political union, with sovereignty and national debts pooled, or it turns right and allows the eurozone to shrink by letting the weaker member states leave in an orderly fashion. Letting Greece leave the eurozone is still too big a psychological blow for the political elites who see the euro as an essential building block towards a federal republic of Europe. They also worry that it would set a precedent for other countries to leave, potentially leading to an unravelling of the eurozone.

That's why eurozone leaders are continuing to to forge an 'ever closer union'. Yet resolving the crisis seems as far away as ever because there is little appetite amongst the richer member states to accept what needs to be done. A sustainable monetary union requires fiscal transfers from the richer to the poorer or less productive areas. We need only look to the USA, where the richer states fund, via the federal government, the poorer states. This works because Americans regard themselves as American and they see their country as essentially democratically structured. Sterling as a currency union appears to work as London and the South East subsidise less productive areas of the UK, even though there is growing English resentment at being seen to subsidise parts of Scotland. But in Europe, despite the proclamations of many of my fellow MEPs, there is not a strong European identity. Having transformed their economy by going through painful economic reform, my German friends tell me they resent subsidising what they see as the less productive Greeks.

We are now seeing an ongoing tussle between Angela Merkel on the one hand and other EU political leaders on the other. Francois Hollande, Mario Monti and Mariano Rajoy are attempting to push Mrs Merkel into accepting that Germany must underwrite European debt, that German banks must accept European oversight and that German deficit rules must be complemented by measures to enhance growth. Even though she may eventually give in, Mrs Merkel does not want to be seen to do anything that would undermine her electoral chances next year. The German people are rightly wary of spending their taxes on subsidising a currency that was never as solid as the D-Mark.

Where does this leave Britain and other EU member states that don't use the euro? In Britain, we still believe that we did not sign up to a political union, but to a giant market or customs union composed of tens of millions of businesses and hundreds of millions of consumers. Unfortunately we are almost alone in seeing the EU in this way. Most European politicians see membership of the euro and the single market as the same project – not as distinct frameworks. I was recently challenged by a Dutch banker who was angry that Britain had not joined the euro, despite its current problems. She saw both the single market and the euro as economic building blocks in a much bigger political project. I have even heard MEPs from eurozone countries criticise Britain for "excluding ourselves from the single market" by not joining the euro! For them, the euro is the natural consequence of single market membership, where eventually there would be no room for competing currencies or competing tax regimes.

The political implications of this difference of perception are stark. The EU is not merely a geographic area but a political "process" evolving in fits and starts towards full political union. If the eurozone members really want this process to continue and to save the euro, they have to sort out the mess and to go for further integration with fiscal transfers. If other EU countries insist on a banking union for all EU member states, the British Government should make it clear that we will not join it.

We should not be afraid to use our veto, as David Cameron did last year, to underline the point that we do not want to be a member of anything more than a single market. We are only bound by the Treaties to which we are signed up.

If David Cameron cannot persuade his EU counterparts to accept that the single market is a separate project to the euro and banking union, then we may ultimately have to reconsider our membership of the EU. The day of reckoning is approaching.