Britain's Finance Minister to EU: Reform or lose us as member

LONDON (REUTERS) - British finance minister George Osborne will warn the European Union on Wednesday it must reform if it wants Britain to remain a member, and say it faces decline if it resists change, said an official familiar with the contents of his speech.

Addressing a conference on reform of the 28-nation bloc, Mr Osborne, a close ally of Prime Minister David Cameron, will say his ruling Conservative party is determined, if re-elected in 2015, to keep its promise to renegotiate Britain's EU ties before offering Britons an in/out membership referendum.

"Our determination is clear: to deliver the reform and then let the people decide," Mr Osborne will say, according to advance extracts of the speech released by his office.

"It is the status quo which condemns the people of Europe to an ongoing economic crisis and continuing decline. And so there is a simple choice for Europe: reform or decline."

According to the official, Mr Osborne will make it clear he wants Britain to stay in the EU, but say meaningful reform is vital for it to remain a member of a club it joined in 1973.

"The Chancellor will warn that the European Union reform and renegotiation is necessary both for Britain's continuing membership and to avoid ongoing economic crisis and decline," the official said.

Mr Osborne's rare foray into Britain's emotive Europe debate is likely to irk EU officials and some European politicians who will resent his gloomy assessment of the bloc's economy and some of the blunt language he will deploy to make his case.

It is also likely to be seen as an attempt to shore up his party's fragile position ahead of European Parliament elections in May, where it faces a threat from the anti-EU UK Independence Party, and to calm a fractious anti-EU element in Mr Osborne's own party before a national election in 2015.

Divisions over Europe have torn the Conservative party apart in the past and undid the last two Conservative prime ministers, Mr John Major and Mrs Margaret Thatcher.

Mr Cameron thought his promise last year of a renegotiation and of a referendum had united the party, but eurosceptic lawmakers have shown signs of becoming restless over the issue again.

Almost 100 of Mr Cameron's 303 Conservative lawmakers in the lower house of the British parliament wrote to him at the weekend saying they wanted the chamber to have the ability to block new EU legislation and to repeal existing measures which threatened "national interests".

Government ministers said the request was "unrealistic".

Many polls have shown a slim majority of Britons - disenchanted with the EU's red tape and what they view as its overbearing intervention in their everyday lives - would vote to leave the EU if given the chance.

Other polls have been less equivocal. But both pro and anti-EU groups agree any referendum would be close.

The Conservatives have not yet disclosed all the areas they want to reform, but the general thrust of their demand is that they want Britain and other member states to repatriate powers in policy areas such as immigration and social security.

Mr Osborne, who is presiding over a strong economic recovery in Britain, will say the European economy has stalled and is being shown up by economies like China and India.

"We knew there was a competitiveness problem in Europe before the crisis," he will say.

"But the crisis has dramatically accelerated the shifts in the tectonic economic plates that see power moving eastwards and southwards on our planet."

He will single out Europe's decreasing share of world patent applications, its high unemployment rates, and its welfare spending as areas that reflect its decline.

"As Angela Merkel has pointed out, Europe accounts for just over seven per cent of the world's population, 25 per cent of its economy, and 50 per cent of global social welfare spending. We can't go on like this."