EU referendum: Cameron to impose three-line whip

David Cameron Image copyright (C) British Broadcasting Corporation
Image caption Conservatives could challenge Cameron's three-line whip

A leading Tory backbencher says his party's high command is in "complete panic" over next week's Commons vote on an EU referendum.

David Cameron has imposed a three-line whip to vote it down and brought forward the debate from Thursday to Monday so he and the Foreign Secretary can be there (they will be abroad on Thursday).

Many Tory MPs don't understand why the PM has decided to make the vote a show of strength.

After all, they say, the debate will be about a referendum which doesn't just offer a choice of in or out of the EU but a third choice involving staying in but with a substantial repatriation of powers back to Westminster, which is the policy on which the Tories fought the last election.

But Mr Cameron is making a show of strength and there are plenty on the Tory backbenchers willing to challenge it.

Vital national interest

Almost 50 have signed a motion backed a three-way choice referendum, including such luminaries as David Davis, Graham Brady (the backbenchers' shop steward) and Zac Goldsmith.

Mr Brady says many Tories are in such despair about the EU that they want to get out and that "radical reform" is now "a vital national interest". Clearly the Tory whips are in for a tough weekend.

There is mounting eurosceptic sentiment on the Tory backbenchers, particularly among the new intake of 2010.

The PM will likely offer some compromising words - restating his support for repatriation of powers and hinting at a referendum on a new relationship with the EU in the next Parliament. But that is unlikely to sway the rebels.

They think there's never been a better time for a referendum than now.

They are encouraged in that by the government's own policy towards the EU, which is to urge the eurozone to meet its current crisis with a deeper and broader fiscal union.

Absolutely crazy

The eurosceptics argue that if the 17 members of the eurozone follow this advice and form a united bloc then the whole dynamic of the EU would change: the 17 members would largely vote together - and always have enough votes to out-vote Britain.

Hence the growing clamour on the Tory backbenchers for repatriation to accompany any solidifying of the Eurozone bloc. Boris Johnson has already called the Cameron/Osborne policy of greater Eurozone fiscal integration as "absolutely crazy" because it would weaken Britain's position within the EU.

Monday's vote will probably come to not very much but the issue will not go away.

The continuing eurozone sovereign debt crisis is fuelling euroscepticism on the Labour and the Tory backbenchers.

The Tory mood is already being described as "bloody mutinous" and if eurozone leaders cannot come up with convincing solutions at the EU summit this weekend so that a comprehensive plan is in place for the G20 in Cannes on 3/4 November (see my previous blog on this crucial countdown) then calls for a fundamental reappraisal of Britain's relationship with the EU will only get louder.

Image copyright Getty Images
Image caption MPs will vote on Monday about a UK referendum on the EU

Signs of an agreement are not encouraging. President Sarkozy had to fly to Berlin for more talks last night, even as his baby daughter was being born.

I'm told there is still no agreement on how to increase the clout of the eurozone bail out fund, the EFSF, which has 440bn euros at its disposal (much of it already committed to Portugal, Ireland and Greece) but is generally thought to need closer to 2 trillion euros to convince the bond markets that it's serious.

There isn't agreement either on how those banks vulnerable to sovereign debt defaults should be recapitalised or how big a default Greece and others should be forced to undergo.

The Germans are already warning not to expect anything very dramatic or comprehensive from this weekend's EU summit - in which case the G20 will be staring failure in the face, a prospect that will infuriate President Obama as well as our own PM.

But if eurozone leaders cannot convince the markets that they have a credible plan then the markets are likely to take matters into their own hand - specifically the wholesale money markets (where banks lend to each other) could freeze because of fears about the solvency of financial institutions (why lend to one if you think it might be broke) which would provoke a banking crisis and a financial meltdown potentially bigger than the one in autumn 2008.

The stakes couldn't be higher, which is why all eyes will be on Brussels this weekend.

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