The proposal would see a formal "union within a union" created, but would lead to a significant deterioration in Britain's influence in Europe.
David Cameron is drawing up urgent plans to stop Britain being "railroaded" into agreeing to decisions taken by the new eurozone bloc.
France and Germany are understood to want to strengthen the union between eurozone countries with new taxes and legal measures to stop nations borrowing and spending too much in future.
Weaker countries such as Greece could even be barred from the new eurozone, under radical suggestions from some of those involved in discussions over the plan.
It comes amid growing concerns that France could be the next nation to become embroiled in the single currency crisis.
Gordon Brown, the former prime minister, said France was "in danger of being picked off by the markets in the coming weeks and months".
Angela Merkel, the German Chancellor, has warned Mr Cameron that unless he accepts unconditional changes to the Lisbon Treaty a split will take place, leaving Britain isolated and in a voting minority within the EU.
"She explicitly told Cameron that if there was no treaty change at the level of the 27 EU members then others will peel off, which is not what she wants," a senior EU diplomat told The Daily Telegraph. According to diplomatic notes, Mr Cameron is pushing for "concrete and effective mechanisms" to "ensure essential economic interests of non–participating member states are fully protected".
Friday is expected to be another crucial day in the ongoing crisis as Italian politicians vote on plans to cut public spending and delay retirement.
European leaders are hoping the vote will be passed, paving the way for Silvio Berlusconi to be replaced as prime minister.
Greece on Thursday finally installed a new prime minister – Lucas Papademos, a former central banker – and the country is expected to unveil its national unity government today.
EU diplomatic sources indicate that Britain is fighting France and Germany to resurrect the "Ioannina compromise", which would allow a blocking minority of countries to stop the new eurozone vanguard bloc pushing decisions through the EU.
The mechanism, named after a meeting of EU foreign ministers in the Greek city 17 years ago, was abandoned by Tony Blair during negotiations for the Treaty of Nice in 2000.
A Government spokesman said: "Discussions about possible further changes to the EU treaties are at a very early stage. But we are clear that any changes would need to protect the rights of those countries in the EU but outside the eurozone, and ensure that any additional enforcement measures would not apply to the UK as a result of our opt-out from the single currency." Any proposals to change the EU treaties must also be agreed by all member states."
Jean-Claude Piris, a former senior EU official, has come out of retirement to "help the eurozone in the current crisis" by working on a blueprint for the new union and its separate institutions. Mr Piris is the "eminence grise'' of EU legal texts and is credited with the Lisbon Treaty, the failed EU Constitution and their predecessors, the Nice, Amsterdam and Maastricht treaties.
He has argued that it would be “far better” to create “an avant-garde group, probably based on the current 17 members of the euro area” than attempt treaty change.
“Willing euro members would conclude an additional treaty compatible with international and EU law,’’ he wrote in a paper circulated last week. ''This would contain additional obligations for them, as well as a definition of the organs and rules that would govern their supplementary co-operation in the best way possible.”
The emphasis by Mr Piris on “willing” members and ''additional obligations’’ has stoked rumours, denied in Paris, that Nicolas Sarkozy, the French president, is trying build a smaller eurozone without the highly indebted or bailed-out countries of Greece, Ireland, Portugal or Italy.
Speaking yesterday, Mrs Merkel insisted that Germany would not support a smaller eurozone.
“We have a single goal and it is to stabilise the eurozone as it is today, to make it more competitive, to make progress in balancing budgets,” she said.
Michael Meister, the Bundestag finance spokesman for Mrs Merkel’s Christian Democrats, said “such a shrinking process would be deadly for Germany”. He added: “It would be a deadly development for an export country like Germany.’’
Angela Merkel, the German Chancellor, has warned Mr Cameron that unless he accepts unconditional changes to the Lisbon Treaty a split will take place, leaving Britain isolated and in a voting minority within the EU.
"She explicitly told Cameron that if there was no treaty change at the level of the 27 EU members then others will peel off, which is not what she wants," a senior EU diplomat told The Daily Telegraph. According to diplomatic notes, Mr Cameron is pushing for "concrete and effective mechanisms" to "ensure essential economic interests of non–participating member states are fully protected".
Friday is expected to be another crucial day in the ongoing crisis as Italian politicians vote on plans to cut public spending and delay retirement.
European leaders are hoping the vote will be passed, paving the way for Silvio Berlusconi to be replaced as prime minister.
Greece on Thursday finally installed a new prime minister – Lucas Papademos, a former central banker – and the country is expected to unveil its national unity government today.
EU diplomatic sources indicate that Britain is fighting France and Germany to resurrect the "Ioannina compromise", which would allow a blocking minority of countries to stop the new eurozone vanguard bloc pushing decisions through the EU.
The mechanism, named after a meeting of EU foreign ministers in the Greek city 17 years ago, was abandoned by Tony Blair during negotiations for the Treaty of Nice in 2000.
A Government spokesman said: "Discussions about possible further changes to the EU treaties are at a very early stage. But we are clear that any changes would need to protect the rights of those countries in the EU but outside the eurozone, and ensure that any additional enforcement measures would not apply to the UK as a result of our opt-out from the single currency." Any proposals to change the EU treaties must also be agreed by all member states."
Jean-Claude Piris, a former senior EU official, has come out of retirement to "help the eurozone in the current crisis" by working on a blueprint for the new union and its separate institutions. Mr Piris is the "eminence grise'' of EU legal texts and is credited with the Lisbon Treaty, the failed EU Constitution and their predecessors, the Nice, Amsterdam and Maastricht treaties.
He has argued that it would be “far better” to create “an avant-garde group, probably based on the current 17 members of the euro area” than attempt treaty change.
“Willing euro members would conclude an additional treaty compatible with international and EU law,’’ he wrote in a paper circulated last week. ''This would contain additional obligations for them, as well as a definition of the organs and rules that would govern their supplementary co-operation in the best way possible.”
The emphasis by Mr Piris on “willing” members and ''additional obligations’’ has stoked rumours, denied in Paris, that Nicolas Sarkozy, the French president, is trying build a smaller eurozone without the highly indebted or bailed-out countries of Greece, Ireland, Portugal or Italy.
Speaking yesterday, Mrs Merkel insisted that Germany would not support a smaller eurozone.
“We have a single goal and it is to stabilise the eurozone as it is today, to make it more competitive, to make progress in balancing budgets,” she said.
Michael Meister, the Bundestag finance spokesman for Mrs Merkel’s Christian Democrats, said “such a shrinking process would be deadly for Germany”. He added: “It would be a deadly development for an export country like Germany.’’
By Bruno Waterfield taken from http://www.telegraph.co.uk/finance/financialcrisis/8882643/France-plots-eurozone-breakaway-group.html
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