IN DECEMBER 1991, after a European Union summit in Maastricht that laid the foundations for a single currency, Britain's prime minister, John Major, returned home saying he had won “game, set and match for Britain” by securing an opt-out. Two decades on (almost to the day), with the euro close to collapse, another Tory prime minister, David Cameron, returned from an all-night summit to be hailed as a conquering hero by his supporters. Mr Cameron had stood alone against 26 leaders in vetoing a revision of the European Union treaties, on the ground that it failed to offer safeguards for Britain's vital financial-services industry.

For all the praise showered on Mr Cameron for his “British bulldog” spirit, the leader who could most boast of winning this time round was Nicolas Sarkozy, the French president. He advanced his quest for an “economic government” for the euro zone—code for the creation of an inner core run mainly by leaders rather than supranational institutions like the European Commission. The summit, Mr Sarkozy said, showed that “a new Europe is being born”. It was split into two camps: “one that wants more solidarity and regulation among its members; the other that follows only the logic of the single market.” By implication the second, British, camp was a loser.

Mr Cameron's veto has isolated Britain politically and could yet redefine its tortured relationship with Europe. It has severely strained his coalition with the pro-European Liberal Democrats (see article). Yet it was popular at home, winning the Conservatives a swift poll boost. For Eurosceptics, in particular, it was a moment of catharsis after decades of suspicion and resentment. “Excellent statesmanship,” declared a prominent sceptic, John Redwood. “Europe knows that it is dealing with a prime minister who will say no.”

But no to what, exactly? It is hard to see what Britain has gained. Indeed, the damage to its interests could be severe. Unlike previous treaty changes, this one envisaged no loss of sovereignty for Britain. The strictures of budgetary control—“instruments of torture”, one British official calls them—apply only to the euro zone. And Mr Cameron's veto blocked precisely nothing. It was sidestepped by a deal to draw up an inter-governmental agreement outside the EU treaties (messier in legal terms, but not impossible). To Mr Cameron's surprise, all of the other 26, including several erstwhile allies, declared their wish to sign up (though some later expressed doubts, and several may find it hard to secure approval from national parliaments or in referendums). Worse, the British veto did nothing to protect the City of London from tiresome EU regulations, and may even have made them likelier, as loss of clout in Brussels makes it harder to fend off new rules.

Protecting financiers was always going to be tricky. Even in Britain, bankers are blamed for the financial crisis. To the others it seemed that Mr Cameron was threatening to block a deal in the euro zone's darkest hour. Euro wonks will be further affronted that the British sought a veto on specific financial regulations, two decades after the unanimity rule was booted out of the single market by none other than Margaret Thatcher. At the summit, Mr Sarkozy reportedly asked Mr Cameron: “David, why should we pay you to save the euro?”

The full effect of these tactics is yet to be seen. The markets' nervous reaction suggests this was yet another make-or-break summit that had done too little. As for Britain, “it feels like the day after a declaration of war,” says a senior Eurocrat. “Everything has changed, but the daily routine remains the same.” Critics say Mr Cameron has abandoned a centuries-old British tradition of balancing powers on the continent. It is easy to see the marginalisation of Britain in the EU, a progressive breakdown of relations and, ultimately perhaps, Britain's departure (see Bagehot).

But equally, there could be a reconciliation. Britain's friends are trying to patch things up, or at least to stop them getting worse. Mr Cameron has sounded conciliatory, insisting it is in Britain's interest to stay in the EU and toning down earlier threats to stop the rest using its institutions. Perhaps the British, some hope, can be invited to the treaty talks as “observers”; perhaps, once passions have abated, the new text could become a full EU treaty at 27 (though this is surely fanciful).

Mr Cameron's timing and tactics may have failed, but there was an inevitability about a bust-up between Britain and its EU partners. A relationship built on distrust was bound to fracture in hard times. The financial crisis has exposed the defects of Maastricht. British Eurosceptics and European federalists alike feel vindicated in predicting that monetary union would not work without a political and economic union. With the euro zone seeking tighter integration to save itself, many British Tories think the time has come to loosen or even sever Britain's bonds with the EU.

For almost all EU countries, European integration is an article of faith. Some are too small to go it alone. Others (ie, Germany) are too big to stand alone without frightening their neighbours. For France, Europe offers a means of managing German power and projecting Gallic influence. In countries where national authorities enjoy little trust, Europe has the appeal of rules, modernity and rigour.

L'exception britannique

But Britain, which joined the club in 1973, sees Europe as only one of several sources of national influence and advantage. Permanent membership of the UN Security Council, G8 membership, strong (if diminishing) armed forces and close ties with America and the English-speaking world all offer alternatives. If Europe is a matter of destiny for most, for Britain it is a matter for colder cost-benefit analysis.

For better or worse, in short, Britain is different. The British public is more sceptical than any other in the EU, with 43% telling the latest YouGov survey that in a referendum they would vote to leave, against 36% who would stay. Because “European construction” is an ever-advancing project, the British are uniquely suspicious of deals where the details are not pinned down. And Britain is often an outlier. It is more individualist, warier of state intervention and regulation and also home to by far the biggest financial centre in Europe. As such, Britain has reason to fear majority voting, stoked by memories of past ambushes. An opt-out from social and employment rules also won by Mr Major was circumvented when many were imposed by majority vote in the guise of “health and safety”.

The British can only sigh when the EU is spoken of as a project based on selfless solidarity, believing that rivals, such as France, just conceal their selfishness more skilfully. Those calling most for majority voting assume they will be on the winning side. So it might come as a surprise to Britons to see how far their country has held sway in Brussels. Ever more EU business is conducted in English. Enlargement to Scandinavia and eastern Europe has brought Britain new friends. The once-reviled European Commission is for the most part a force for economic liberalism. It is the French who feel like strangers in the institutions they built. This may explain Mr Sarkozy's desire for a smaller core.

So what changed for Britain? One factor is that, in the crash, financial regulation has suddenly become a priority. That inevitably creates confrontation with Britain. That this should happen under a French single-market commissioner, Michel Barnier, has intensified the perceived threat, even though the former French foreign minister sees himself as an anglophile and his director-general is British. With Mr Barnier churning out almost 30 separate regulations, Britain worries deeply about being outvoted.

That said, Britain has not so far been outvoted on any new financial regulations (though it has often had to fight an intense rearguard action). In some areas, such as the regulation of markets, Britain finds the EU too interventionist. On capital rules for banks, Britain wants to be tougher than the others. Britain has called plans for a European financial-transaction tax “a bullet aimed at the heart of London” (tax is still a subject for unanimity, although some countries would like a transaction tax in the euro zone alone). So it was little surprise that, when Mr Cameron went to Brussels, he wanted special protection for financial services. It was more of a surprise that his diplomacy in seeking to secure it was so inept.

Anatomy of a diplomatic failure

The arguments were brought to a head by the German chancellor, Angela Merkel, who insisted, against the wishes of almost everyone else, on a revision to the treaty to toughen fiscal discipline. She had already pushed EU members to create a permanent treaty-based rescue fund, the European Stability Mechanism (ESM), to replace the temporary European Financial Stability Facility (EFSF). Mr Cameron accepted the ESM earlier this year (though it still needs British parliamentary approval).

But in October he suffered an alarming parliamentary rebellion by Eurosceptics. With the prospect of a second, bigger treaty change, Mr Cameron decided on tougher bargaining. In part, he was worried that a more tightly integrated euro zone would gang up on “outs” on issues related to the single market, particularly financial services. A Franco-German letter on the eve of the summit said as much in bald terms. But Mr Cameron also knew that, without some concessions, he could not get a treaty ratified by his party.

Mr Cameron's campaign was ill-prepared. His office seems to have ignored the advice of seasoned diplomats. There was little attempt to secure the support of allies. Throughout the preparatory period, Sir Jon Cunliffe, Mr Cameron' adviser on European and global issues, offered only a vague outline of Britain's position. The defence of the City was only one of three possible demands. When asked for details, the British said they would not circulate a paper for fear that it would leak, even though Germany and France were none too shy about their aims.

Britain did not spell out its full proposal until a meeting of senior officials on the eve of the summit. It centred on a demand to restore unanimity on four points of financial regulation, to be inserted as a protocol to a new treaty. The British may have been emboldened by an oral opinion from the legal adviser of the EU's Council of Ministers, an aptly named Frenchman, Hubert Legal. He declared that the changes pushed by France and Germany had to be done through a treaty of all 27 EU countries, including Britain. This seemed to neutralise the Franco-German threat of going down the route of a separate treaty at 17-plus if the British proved obstructive.

In the discussion paper drawn up by Herman Van Rompuy, president of the European Council, there was no mention of an inter-governmental treaty. Instead he set out two options. One involved changing a treaty protocol, number 12. This could be approved quickly by a unanimous vote of the leaders, without lengthy and risky national ratification. Many liked this nifty solution, which seemed to give Germany much of what it wanted. But the Germans demurred: they wanted the new fiscal rules enshrined in a proper treaty. So Mr Van Rompuy also set out a plan for a bigger treaty change. This was too ambitious for Germany, since it included a road map for joint Eurobonds, and for the ESM to borrow from the European Central Bank. Both ideas are anathema to Berlin.

Officials say that on the long night of the summit, Mrs Merkel was more or less isolated in her demand for a full treaty change. But the tables were turned when, at around 2am, Mr Van Rompuy asked Mr Cameron whether he would lower his price for a change to protocol 12. Mr Cameron said he would not. That gave Mr Sarkozy the opening to demand an inter-governmental treaty instead. Mr Cameron said those involved could not make use of the European Commission and the European Court of Justice, knowing that Mrs Merkel wanted them involved. The killer blow then came when Mr Legal announced after all that a separate treaty, despite its difficulties, could be reconciled with the EU's existing legislation.

The other surprise for Mr Cameron was the speed with which non-euro countries announced that they would join the project. Nobody, apart from Britain, wanted to be an “out” forever. The summit broke up at 5am with Mr Cameron isolated. He had overplayed his hand. Later he would insist that he had taken “a tough decision but the right one”. Yet he admitted that there were real risks in his strategy.

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Mr Sarkozy accused Mr Cameron of trying to “create an offshore zone in the heart of Europe”. In private, Elysée officials talked of giving Britain “a slap in the face”. Yet the broader reaction was a lot more muted. “Europe of 27 is over” lamented Le Monde. Moreover, the French opposition sees the deal not as a victory for France but as an unhappy triumph for German-style austerity. François Hollande, the Socialist presidential candidate and poll favourite for next spring's election, declared—with heroic belief in his own powers—that he would “renegotiate” any treaty. The Socialists' hostility makes it nigh-impossible for Mr Sarkozy to put in place a central element of the deal: writing a balanced-budget “golden rule” needs a three-fifths parliamentary majority.

Across the Rhine, Germany's opposition Social Democrats criticised the deal as a victory for France, not the “breakthrough to a stability union” that Mrs Merkel claimed. The Germans are less inclined than the French to gloat over Mr Cameron's discomfiture. The British may be awkward, but they have been a check on French ambitions to turn Europe towards dirigisme and protection. Mrs Merkel sets much store by a Europe of 27. She told the Bundestag that Britain would remain a reliable partner in many fields, mentioning its role in climate-change policy.

Many question the wisdom of Mrs Merkel's treaty campaign. Fiscal rules have already been tightened, and central monitoring has been enhanced, under existing rules. With a new treaty, it may become easier to put countries into “excessive deficit” procedures, with the threat of sanctions, but most are there already. Even before the summit, Mrs Merkel had given up her main demand: the power to take rule-breakers to the European Court of Justice. Instead, the court will be involved only indirectly, in assessing whether domestic debt-brakes that countries will have to introduce comply with European demands. And she is having problems with her Free Democrat coalition partners over ratifying the ESM.

And what of the euro?

The uproar over British naysaying, the precise form of euro-zone governance and the choice of legal instruments have distracted attention from a far more important question: is the euro zone any closer to salvaging its currency after the summit? At best, it has made only marginal gains, adding a bit more cash via extra contributions to the IMF, so as to give the euro rescue funds more ammunition (though this IMF deal may already be unravelling). At worst, it has wasted time and ducked the main problem, which is that the German rescue plan is fatally unbalanced towards austerity and adjustment by deficit countries instead of growth and adjustment by surplus countries.

The continuing emphasis on pro-cyclical fiscal austerity at a time of recession looks unwise. Even where discipline is necessary, the real sanction against profligate countries is not more rules, but market pressure on bond yields. And the markets' adverse reaction, pushing up Italian and other bond yields, suggests that the crisis is a long way from being over (see article). Only stronger action by the promise to mutualise some debt through a form of Eurobond are likely to assuage them. Unless the euro is rescued soon, Mr Cameron's veto of a treaty at 27 may become a footnote in a far bigger story: the collapse of the entire European project.