David Cameron's first battle with the EU

The relationships between the new Conservative/LibDem government and the EU were always going to be tricky as the range of views is so wide. I was not pleased when David Cameron did not make Mark Francois his Europe Minister instead promoting David Lidington.

Almost immediately there are two issues that will test this government. First France and Germany are trying to push through plans to regulate hedge funds and private equity firms, a vote will be held in Brussels next week under qualified majority voting so the UK could be isolated. Of course one issue here is that London is the centre of Europe's private equity activity and the City & Mayfair are home to around 80% of all European hedge funds; Frankfurt and Paris are jealous. The second issue is that Herman Van Rompuy, the EU President, has set up a task force to arrange the setting up of a "gouvernement économique" to cover all 27 member states of the Union. This project has the strong support of France and Germany and is just another move to 'ever greater union'. This economic government is due to be discussed next week and will include all countries having to have their Budgets approved by this EU body before being put to the House of Commons. Jose Manual Barroso, the Commission President, said

"What we are suggesting is for there to be an assessment of draft budgets and see if this fits in well with what goes on elsewhere in Europe because national measures have an effect on others"

Be under no illusions that the move to ever closer union is accelerating, the failure of the UK to elect a majority Conservative government gives the EU-fanatics a window of opportunity and they are determined to push ahead as fast as possible.

The question is, is David Cameron willing to take on the EU and risk his coalition with the LibDems breaking down in its first month or will he back down and risk alienating his EU-sceptic backbenchers and supporters? It will be a tough decision and not an easy one.