Britain flirting with the edge of three-tier Europe

BRUSSELS Mon Feb 4, 2013 9:58pm IST

he flags of the European Union and Germany hang in the rain outside Germany's federal bank, Deutsche Bundesbank in Frankfurt, February 4, 2013. REUTERS/Kai Pfaffenbach

he flags of the European Union and Germany hang in the rain outside Germany's federal bank, Deutsche Bundesbank in Frankfurt, February 4, 2013.

Credit: Reuters/Kai Pfaffenbach

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BRUSSELS (Reuters) - The European Union is becoming a three-tiered club and Britain risks being left on the outer margins of it, Finland's Europe minister, who was among the first to warn about Britain drifting away from Europe, will say in a speech on Tuesday.

Alex Stubb, who last October compared Britain to a boat pulling away from the rest of the continent, praised Prime Minister David Cameron for being bold in his Europe speech last month, but said he had chosen a risky strategy that makes a referendum on EU membership almost unavoidable.

In his speech, Cameron promised voters he would hold a referendum on Britain's 40-year membership of the European Union by 2017, after he has renegotiated Britain's ties to the bloc and as long as he is reelected in 2015.

"I know better than to start giving advice on party politics in other member states," Stubb, who studied at the London School of Economics and is married to a British lawyer, will say in a speech to the College of Europe in Warsaw.

"The paradox with Britain is that it has the right instincts with many essential European policies, but its very nature seems to draw it to the margins of Europe.

"A referendum on Europe has its risk, but on the whole it seems unavoidable and can actually clear the air on where Britain stands... I only hope that the end result is a Britain that is at peace with its membership."

The last three years of economic turmoil in the euro zone have pushed the single currency to the brink and forced all 27 EU member states, plus Croatia which will join in July, to reassess what sort of relationship they want with the bloc.

While existential questions are no longer being asked about the euro - which has strengthened sharply against the dollar, the British pound and the yen in recent weeks - there are serious doubts hanging over the shape of the European Union.

Stubb describes a three-ring structure, with the 17 members of the euro zone in the centre, a second concentric circle consisting of member states planning to join the single currency, and an outer ring of those countries that have no intention of ever adopting the euro.

In the coming years, he says in the speech, the three groups will become two: the euro-ins and the euro-outs. With at least three countries set to join the euro - Latvia, Lithuania and Poland - the euro-ins should increase to 20.

Among the eight euro-outs, most will be legally obliged to join the euro in time. But Britain, which with Denmark has a legal opt-out on adopting the currency, will be on the outer margin.

"So what we will have on our hands is not a Europe divided into north and south, but a union divided into euro-ins and euro-outs," Stubb says in the speech.

"This is an undeniable division. But at the same time we must be very careful in managing the relationship between the ins and the outs.

"The Cameron speech has its elements of upstairs and downstairs, but I fear that by opting out, Britain will end up downstairs, not upstairs." (Writing by Luke Baker; editing by Rex Merrifield)

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