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UK Was Right to Say No to Treaty: Analysts


The UK had no choice but to opt out of further treaty changes and did the right thing by exercising its veto, analysts told CNBC Friday.

David Cameron
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Open Europe, an independent think tank, argued that the UK had no choice but to assert a tougher line to protect the UK's interests.

Mats Persson, director at Open Europe, told CNBC: "Cameron did not have a lot of choice in that and he was in a difficult position.

The idea to have safeguards in place to make sure that decisions on the single market, decisions on financial services were made in a way that did not negatively impact on Britain and that was a reasonable demand," he said.

He added that in many respects there was already a two-speed Europe in existence.

"The euro itself is an example of a policy in which some countries take part we have the Schengen agreement regarding open borders," Persson added.

Earlier Friday UK Prime Minister David Cameron made a statement outlining his reasons for using the veto to not sign up for any treaty changes. Controversially, he also stated that Britain would “never join the euro”.

Bill Blain, senior director of special situations group at Newedge, agreed that Cameron had done the right thing and added that the financial transaction tax had been used to make Britain a scapegoat for not getting a full treaty change through.

"The whole concept of a financial transaction tax is a non-starter, it's not going to happen.

It's a great way to blame Britain for the failure of 17 other Europeans agreeing anything, let's not worry about it," he said.

He added that the agreement from Thursday evening did nothing to address the core issue of a lack of growth in the euro zone and political tensions were likely to increase as a result of not solving the fundamental problems.

Chris Watling, CEO Longview Economics told CNBC that despite the necessity of Britain's position there were no winners from yesterday's agreement.

"It was a necessary decision given his (David Cameron's) party's position so perhaps it's not surprising. I don't think anyone is a winner. Britain doesn't win if the euro falls apart, we're not immune," Watling said.

He added that without the ECB backstopping the whole process the agreement remains troubling.

Gemma Godfrey, head of research at Credo Capital added that Cameron was unlikely to regret his decision because he was protecting the UK's interests.

"Cameron seems to be protecting the UK's interests. It is a very conflicted situation and although small steps have been made a lot of uncertainty remains. Why would he sign up to something that is still quite vague at the moment? He's right to take a step back," she said.

Godfrey added that it was questionable whether this new treaty would have any real clout in resolving the debt crisis once and for all.

"How much authority will this treaty have? It's a treaty within a treaty so it can't use the power of larger institutions such as the European Court of Justice," she added.

She said the much talked about sticking point between Cameron and the other EU leaders, the financial transaction tax would indeed hurt the UK economy and it was a misnomer to suggest that it was a 'Robin Hood' tax that would help the poor.

"It will poison the poor. It won't be the banks that pay, it will be pension funds and savers because banks will pass the cost on. We saw in Sweden that it actually causes tax revenues to fall and increases job losses," Godfrey said.