Work with us or be left behind - Merkel

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Merkel, CameronHow does a new EU super-state unelected quango sound? The stuff of nightmares or real politic? It's what the Germans are backing in their attempt to overhaul the EU - and the Germans are planning to block any UK referendum towards it.

A leaked Berlin memo has set out a blueprint for a super-sized EU quango that could handle the running of EU bailed-out nations.


No referendum?

Today in Berlin, Merkel will tell David Cameron that such treaty changes don't require a British referendum. There are plenty of other gaping rifts on the table. The simmering row about the role of the European Central Bank, and whether it should start to bail out some eurozone nations, despite fears of runaway Weimar-style inflation.

And to top it off, the Tobin Tax. What a mess; what a meeting. Some accommodation will have to be made, though at this point it's difficult to know where: protection from the Tobin Tax in exchange for stronger fiscal union looks likely.

And no to ECB

Greater fiscal integration looks inevitable anyway with a two-speed Europe - France Germany and other AAA-rated eurozone members - with Denmark and the UK on the outside. But how far outside? Cameron wants an agreement that the UK's position in the single market must be protected if moves towards greater fiscal integration are made.

Earlier this morning Mario Draghi, the chief of the European Central Bank, confirmed he is standing against pressure to rescue the eurozone - that's very bad news for Cameron. But Draghi is right; printing more money will not solve anything; Germany, note, already supplies 30% of all ECB funding.

To be a fly on the wall in Berlin later...

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