Cameron hopeful that deepening relationship with Italy, Poland and Spain can accelerate EU economic reform

By Tim Montgomerie
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Britain is not so isolated in the EU as some would like to suggest. The Prime Minister has today issued a letter pressing for deeper and faster economic reform across the EU. It has been signed by 11 other heads of government. Interestingly it's not just Britain's usual and most prominent allies - the Czech Republic, Netherlands and Sweden. Italy, Spain and Poland have also signed. The new Spanish conservative PM is having lunch at Number 10 today and the FCO sees Mr Rajoy as an important new ally. Mr Cameron has also struck up a good relationship with Italy's Monti. One FCO source told me "there is natural warmth between the two men, unlike with Sarko." The Coalition is also working intensively with Poland's Tusk. The free market government in Warsaw has been disappointed at the way Berlin and Paris have continued to try and treat EU leadership as a duopoly. Tusk, although an EU-integrationist, is also genuinely free market. The letter started as a UK-Dutch initiative and Ed Davey, when at BiS (Steve Hilton's favourite Lib Dem), has helped build the bridges that led to the letter's possibility. The twelve signatories are:

1. Mark Rutte, Netherlands
2. Mario Monti, Italy
3. Andrus Ansip, Estonia
4. Valdis Dombrovskis, Latvia
5. Jyrki Katainen, Finland
6. Enda Kenny, Ireland
7. Petr Nečas, Czech Republic
8. Iveta Radičová, Slovakia
9. Mariano Rajoy, Spain
10. Fredrik Reinfeldt, Sweden
11. Donald Tusk, Poland
12. David Cameron, United Kingdom

The letter sets out eight areas for economic reform:

1. First, we must bring the single market to its next stage of development, by reinforcing governance and raising standards of implementation - starting with the services sector which account for almost four fifths of the EU economy;
2. Second, we must step up our efforts to create a truly digital single market by 2015;
3. Third, we must deliver on our commitment to establish a genuine, efficient and effective internal market in energy by 2014;
4. Fourth, we must redouble our commitment to innovation by establishing the European Research Area;
5. Fifth, we should conclude free trade agreements with India, Canada, countries of the Eastern neighbourhood and a number of ASEAN partners... Fresh impetus should be given to trade negotiations with strategic partners such as Mercosur and Japan;
6. Sixth, we need to sustain and make more ambitious our programme to reduce the burden of EU regulation... We also ask the Commission to publish an annual statement identifying and explaining the total net cost to business of regulatory proposals issued in the preceding year;
7. Seventh, we must act nationally and, respecting national competences, collectively to promote well functioning labour markets;
8. Finally, we must take steps to build a robust, dynamic and competitive financial services sector.

The headline descriptions of the eight objectives may seem a bit motherhood-and-apple-pie but if you examine the full text of the letter you'll find lots of very specific examples of reforms. You might have expected the centre right governments in France and Germany to sign the letter too. My understanding is that Germany is always reluctant to do anything European without France and the populist Sarkozy is not inclined to sign anything endorsing free trade - especially in the run up to a French presidential election. Furthermore Germany is not enthusiastic about the Basle capital accords and about freedom of trade in services - both specified in the letter. EU Commissioner Michel Barnier has already had to warn Germany about foot-dragging on existing directives covering services.

The big question, of course, is will the letter lead to any action? Sources in the Foreign Office suggest that the EU's grave economic condition means there should be more openness to action than in normal times. Mario Monti's involvement is also crucial. He, apparently, is 100% behind the letter and as an EU insider may be able to hurry the system towards some action. We shall see...