Merkel and Sarkozy give Cameron and Hague an opportunity to deliver on their renegotiation promises

By Tim Montgomerie

Before ToryDiary devotes itself single-mindedly to the CSR (ConHome's coverage continues this morning with an expert panel's previews and this from Mark Field) let us note one other important development in the wider news. I'm not talking about Wayne Rooney but the Deauville agreement between Angela Merkel and Nicolas Sarkozy. Yet again the French-German axis has come together to propose next steps for the European project. The German Chancellor and French President want a new Treaty that would give the EU new powers to manage the €urozone. These powers would include carrots to help over-borrowed nations get back on their feet and sticks with which to punish future Greeces, Spains and Portugals. Eurosceptics always said monetary union would require fiscal union and, sure enough, Merkel now realises that controls on €urozone states' fiscal freedoms are, indeed, essential.

As Mats Persson argues on Coffee House the UK should not throw up its hands in horror at all this. Britain should react positively to Merkel and Sarkozy for two big reasons:

1. We have an interest in an orderly default procedure for the €urozone - one of Merkel's ambitions for the new Treaty. "A chaotic default by a eurozone member, following a bailout," he writes, "would be the worst of all worlds, including for Britain".
2. Our second interest in a new Treaty is the opportunity for some bargaining. Britain will give Merkel what she wants but in return Britain should be able to repatriate some key powers. "This package," says Mats Persson, "could then, possibly, be put to a public vote, and be turned into a genuine referendum on EU reform."

Liberal Democrats won't like the idea of (2) but as 'good Europeans' do they really want to oppose the need to improve the €urozone's workings? In the constant horse-trading between the Coalition partners (yesterday's delay of Trident being the hardest-to-swallow concession to Nick Clegg's party) Mr Clegg needs to be convinced of the importance of EU reform to the Conservatives. As long as the process is subject to popular vote how can the Liberal Democrats object?

On CentreRight yesterday evening Melanchthon issued a call to arms. We must, he blogged, see the Deauville Agreement as the firing of a starting gun. We must not wait until France and Germany have drafted a Treaty and presented it to us for some light editing. We must begin now to draft the list of provisions we want the new Treaty to contain. Lisbon showed that passage of a new Treaty will be tough. There are just so many member states that the whole process is vulnerable to one objector. We must not, however, waste this opportunity to try. After he reluctantly accepted Lisbon's passage David Cameron promised to renegotiate Britain's relationship with the EU. He now has an opportunity to deliver.