Britain's EU wish list - be careful what you wish for

By Paul Taylor BRUSSELS (Reuters) - Sometime this week, Britain's prime minister will send a wish list to European Union partners, launching a formal negotiation that could lead to the UK's exit from the 28-nation bloc or subtly change the nature of the union if it stays. David Cameron hopes Britons will vote in a referendum to stay if he secures concessions that make the country's membership even more semi-detached than it already is. While eager to keep London in, other EU leaders have to choose how far they are willing to risk an unraveling of their troubled union to satisfy Britain, Europe's second economy, free trade champion and one of its two main military powers. They too should be careful what they wish for. Cameron's list, likely to be vaguely worded, has been honed in exploratory talks to set achievable demands he can sell to voters as giving Britain "the best of both worlds", while taking credit for reforms already in the works to make Europe's energy, digital and capital markets more competitive. If he gets his way, the United Kingdom will be released from the EU goal of "ever closer union" and safeguarded from any move by the 19 countries that share the euro currency to impose rules by majority vote on London's financial services sector. He is also seeking ways to bar migrants from other EU states from receiving British welfare or in-work benefits for up to four years after they settle there, and to empower groups of national parliaments to block or reverse EU legislation. EU officials and diplomats can accommodate many of Britain's requests with clever drafting and promises of amendments when the bloc's governing treaty is eventually revised to permit closer integration of the euro zone. But the wish list contains some potential landmines. "EVER CLOSER UNION" European officials tend to shrug off Britain's demand to be exempted from the clause incorporated in the founding 1957 Treaty of Rome and every EU treaty since declaring the goal of "an ever closer union among the peoples of Europe". After all, it has no binding operational force and does not commit signatories to any particular common policy or institution. It's what the southern French call "verbal words": a symbolic statement. Cameron wants the change to convince Britons they are not on a conveyor belt to a European "superstate". But what if other countries with Eurosceptic electorates demand the same exception? If Britain can opt out of "ever closer union", why not Poland, which has just elected a nationalist government, or the Netherlands, a founder member that rejected a proposed EU constitution in a 2005 referendum? That would go beyond symbolism and cast doubt on whether EU founders and newer members still support integration. "MULTI-CURRENCY UNION" The same concern applies to Britain's expected request for the EU to declare itself a "multi-currency union", instead of the current treaty formulation that "the currency of the union shall be the euro". On the surface, this is just an acknowledgment of fact, since two countries -- Britain and Denmark -- have permanent derogations from joining European monetary union. Yet more is at stake. All 13 mostly central European states that have joined the EU since 2004 are legally bound by their accession treaties to join the euro once they meet the criteria. Seven have already done so -- Cyprus, Malta, Slovenia, Slovakia, Estonia, Latvia and Lithuania. But Poland, Hungary, the Czech Republic, Romania, Bulgaria and Croatia have yet to join, and some are openly reluctant -- Poland's Law and Justice party, which will form the new government, has said it will not adopt the euro in the next four years. International Monetary Fund economists say non-members benefited from their currency flexibility during the financial crisis. Once Poland, central Europe's largest economy, joined the euro, the others would be likely to follow suit, leaving only Britain, Sweden and Denmark outside -- and Copenhagen pegs its currency to the euro anyway. Britain, on the other hand, is keen to surround itself with a sizeable group of non-euro states to increase its bargaining power with the euro zone and avoid being relegated to an outer circle in relative isolation. Some EU officials are concerned that nationalists in Warsaw could jump on any declaration of a "multi-currency union" to try to avoid the treaty obligation to join the euro, pulling Prague, Budapest and perhaps others in its wake. RED CARD Britain's proposal for a majority of national parliaments to gain the right to veto a legislative proposal by the European Commission and perhaps to scrap existing EU laws after a periodic review also contains pitfalls. It sounds like common sense, since if most national legislatures oppose a law, their governments presumably wouldn't vote for it in the EU council. The risk is that giving national parliaments a collective "red card" would create a cottage industry of politicians combing the EU rulebook for directives to scrap, and building cross-border coalitions to tie the Commission's hands. Brussels officials say the complex EU institutions contain enough checks and balances already. RECIPROCAL DEMANDS British ministers say the referendum will lay the EU membership issue to rest for good, or at least for a generation. History suggests otherwise, especially if the vote is close. This is the third renegotiation since Britain joined in 1973 and the second referendum on membership. Asked what assurances he could give partners that London would not come back for more concessions in the future, British Europe Minister David Lidington told Reuters: "I don't think we should be afraid of renegotiations ... The EU is a constant process of renegotiation." Cameron is also telling EU partners that once it gets its guarantees, Britain will not stand in the way of closer euro zone integration. For now, those are just "verbal words" too. EU leaders would do well to seek binding commitments from London that if it gets the desired assurances, Britain won't stand in the way of a more federal euro zone, or come back for more. (Editing by Catherine Evans)