Cameron pushes for deal to avoid 'Brexit' on eve of EU summit

British Prime Minister David Cameron attending a meeting with members of the European Parliament in Brussels, Belgium.
British Prime Minister David Cameron attending a meeting with members of the European Parliament in Brussels, Belgium.PHOTO: REUTERS

LONDON (BLOOMBERG) - Prime Minister David Cameron edged closer to securing an overhaul of the terms of Britain's membership of the European Union as fellow leaders signaled they were ready to help him get a deal at this week's EU summit.

EU President Donald Tusk will send final proposed legal texts on the UK's renegotiation to the bloc's capitals late on Wednesday (Feb 17), an EU official told reporters. Incorporation of the deal in EU treaties, how to pull a so-called emergency brake on migration and the duration of a social-benefit safeguard are among the outstanding issues, the official said.

With Cameron due back in Brussels on Thursday for the second time in 48 hours, he won the backing of Chancellor Angela Merkel of Germany, the 28-nation bloc's largest economy, who told Christian Democrat lawmakers in Berlin Tuesday that she'll do everything possible to keep the UK in the EU, according to a party official who attended the closed-doors meeting.

The British premier made a last-minute round of calls to leaders including Dutch Prime Minister Mark Rutte, holder of the EU's rotating presidency, who agreed that "there was a good basis for a deal" at the two-day summit, albeit with "important detail" still to be settled, Cameron's office said in a statement.

"It's important for all parties, politically and economically, for the UK to remain in the EU," Rutte said in a statement after his call with Cameron. "If we get this right, we can strengthen European cooperation."

Uncertainty over the UK's future status is already rippling through markets and unsettling businesses in the countdown to Thursday's summit, which will determine the timing of the government's referendum on EU membership. Investor concern over the prospect of the UK leaving the EU, a so-called Brexit, helped drive down the pound Tuesday to approach the more-than-one-year low against the euro reached last week.

"Equity markets hate uncertainty and if Brexit did take place, the uncertainty about the implications for the economy and companies will certainly not be insignificant," said William Low, Edinburgh-based head of equities at Nikko Asset Management Europe Ltd.

The Confederation of British Industry, Germany's BDI industry lobby and 20 counterparts in other EU countries added to the calls to keep Britain in the bloc with an open letter released Wednesday urging Britain to remain a member.

"European business strongly supports continued British membership of a European Union that takes the necessary reforms to be competitive, outward-looking and continue delivering growth, jobs, peace, security and prosperity for all," business chiefs from Ireland to Poland and Finland to Malta said in the letter.

Industry backing followed an unexpectedly warm reception for Cameron Tuesday in a series of meetings in Brussels with senior European Parliament members who will be pivotal in driving some of the changes he's demanding through the bloc's legislature.

Convincing France of the case to award Britain further exemptions from euro-area integration that would allow the UK to shield the financial industry in the City of London has emerged as one of the key obstacles to a deal this week. Also among the outstanding issues is the language of the UK's safeguard on ever-closer union, the EU official said.

Some eastern EU countries remain unconvinced by Cameron's demands to curb benefits for non-British citizens. The number of people from other EU countries employed in the UK rose to 2.04 million in the last quarter of 2015, according to data released Wednesday by the Office for National Statistics in London. That was up from 2.03 million in the previous three months and compared with 1.23 million five years earlier.

Merkel told her caucus that the proposals Tusk agreed on with Cameron were fair and a reasonable basis for negotiations, according to the German party official, who asked not to be named as her briefing was private. She singled out his attempt to secure an exemption for the financial industry from euro-area regulation as difficult. At the same time, she said it should be possible with some caveats for the euro area, the official said.

"I have no doubt that there's an extra mile we have to walk to reach an agreement on Thursday," Tusk said in Prague on Tuesday with Czech Prime Minister Bohuslav Sobotka.