Time for a new approach to the EU

All eyes are on the spending review, but yesterday another potentially huge challenge landed in the Coalition’s in-tray: the prospect of a new EU treaty.
 
In the small town of Deauville in Lower Normandy, French President Nicolas Sarkozy and German Chancellor Angela Merkel struck another of those ‘Franco-German compromises’ that tend to set the EU agenda, and have too often left the UK on the back foot. Yesterday’s compromise will see Sarkozy backing German calls for a new EU Treaty to introduce new a mechanism that would enable countries within the euro area, such as Greece, to default.
 
And Merkel means business. Under the current eurozone bail-out packages, German taxpayers are potentially liable for €120 billion in loans to foreign governments over which Germany has very little power. This is a huge amount, which tops the Coalition’s entire spending review.
 
Leaving the technical details aside, an ‘orderly default procedure’ for the eurozone would not only transfer