An increasingly Eurosceptic Tory Party is struggling to agree on a strategy to change Britain's relationship with Brussels

By Tim Montgomerie
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I use my Sunday Telegraph column to explore whether George Osborne has much support inside the Conservative Party for his idea that the solution to the Eurozone is fiscal union. Truth be told I couldn't find much...

"Right from the start, sceptical Tories argued that single currencies can only work if richer parts of the union are content to subsidise poorer ones. Within England, the South subsidises the North; for decades, northern Italy sent endless lire to the uncompetitive Mezzogiorno. But while the people of London can put up with supporting their compatriots in Newcastle, there isn’t the same solidarity between, say, Germans and Greeks. The former don’t understand why they should pay extra taxes for bail-outs so that Athenian civil servants can retire at 55; the latter object to orders from Berlin about how to run their country (protesters have been waving EU flags with the stars turned into swastikas). It’s a non-starter to think that Danish, Dutch, Finnish or Irish voters – already suspicious of the opaque but relatively modest reforms of the Lisbon Treaty – will vote for the transparently ambitious project of full tax union."

In other words the barriers to fiscal union are political rather than economic. Fiscal union is a nice idea on paper but without a dramatic deterioration in the European economies (not an outlandish prospect) it isn't going to happen. Most Tories seem to accept that some breakup of the Eurozone is necessary. That might, privately, be the Chancellor's view but for the reasons outlined by Paul Goodman he doesn't want to be the person who turns a chronic economic problem into an acute economic emergency.

I also use the column to counsel against any early prospect of renegotiation. If markets will let them, Merkel and Sarkozy will avoid any big redrawing of the European Union until after French elections next year and German elections in 2013. This should suit Conservative Eurosceptics. We shouldn't want a renegotiation now. Firstly the Lib Dems would veto any substantial repatriation and, secondly, we are not ready. The Eurosceptic movement doesn't know what it wants in any Treaty change process.

George Eustice, Chris Heaton-Harris and Andrea Leadsom are the three Tory MPs said to be leading a new movement within the Conservative Party to reverse the process of political union. George Eustice recently wrote that "it should become a key objective of British foreign policy to break the power of centralised European institutions like the European Court of Justice".

Efforts to bring organisation and clarity to Tory Euroscepticism take a step forward today with confirmation that 71 (at the time of writing) Tory MPs have signed up to a new parliamentary grouping that has the explicit task of reversing the process of political union. Marc Glendenning of the People's Pledge campaign is suspicious of this development and has argued that "re-negotiation is not an option, and banging on about it risks splitting the right-left coalition for an EU referendum".

In The Sunday Times (£) Tory MP Dominic Raab warns against the 'Outers' thinking that surging opposition to the EU will hold up in the heat of a referendum campaign:

"Eurosceptics may even get the referendum on membership that they yearn for. They may also lose it. While polling last month for YouGov suggested 50% of Britons would vote to leave the EU (with 33% against), voters tend to be risk averse when faced with economic uncertainty. During an “in/out” referendum, pragmatic responses would be reinforced by business. No big group — the Confederation of British Industry, British Chambers of Commerce, Federation of Small Businesses or Institute of Directors — supports withdrawal."

The think tank Open Europe will be crucial to supporting a more strategic Tory position on Europe. Writing for The Guardian yesterday, OE's Mats Persson welcomed last week's Franco-German summit, arguing that it heralded a model of greater intergovernmentalism and not the Brussels-centred policy-making favoured by integrationists.