Cameron's EU veto stirs discontent (VIDEO)

British Prime Minister David Cameron today defended his veto of greater EU fiscal integration as a protection against London's financial sector.

In this video image from the Parliamentary Recording Unit, Britain's Prime Minister David Cameron speaks in the House of Commons, London, Monday. Cameron was the only leader among the 27 members of the European Union to refuse to support a plan last week which would see nations submit their budgets for central review and limit the deficits they can run.

Prime Minister David Cameron was hailed a hero by fellow Conservatives today for vetoing a European Union move toward greater fiscal integration, despite the fact that it now threatens to undermine his coalition government.

Mr. Cameron was alone among the leaders of 27 European countries at a Dec. 9 summit who chose not to endorse changes to the Lisbon Treaty, which outlines the legal framework for the EU. The changes were designed to strengthen the crisis-hit euro currency, but in a defense before Parliament today Cameron said they would threaten London's financial sector, which is one of the most robust sectors of the UK economy.

The veto decision has sparked a wide-ranging debate about the United Kingdom's commitment to the EU, with some questioning whether the country should remain in it at a time when eurozone finance ministers are struggling to keep the currency afloat. While the UK has retained the pound as its currency and is not a member of the 17-nation eurozone, it is subject to EU legislation that affects many aspects of British society, including its crucial banking sector.

Weekend polls suggested that Cameron enjoys the support of a comfortable majority of Britons, but the vote has drawn strong criticism among his coalition partners. In particular, Deputy Prime Minster Nick Clegg of the Liberal Democrats warned that the UK was in danger of becoming an isolated, "pygmy" nation on the world stage. He was noticeably absent on the government benches today when Cameron explained Friday’s maneuverings.

Today Cameron said his decision to wield the veto was made in "good faith" and was "right for the country," sparking fierce criticism from the opposition Labour benches.

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Unnecessary veto?

In the end, Cameron's veto – for which he has risked such discord at home – may have been unnecessary to thwart the Lisbon changes, since they must still be ratified by the 17 eurozone countries.

“I don’t think last Friday will have too much of a bearing because I don’t think the eurozone countries will ratify the agreement," says Simon Tilford, chief economist at the pro-Europe Centre for European Reform. “There was no need for David Cameron to veto the deal, because it won’t affect the UK because we’re not in the euro – and if anything, [the veto] will make things worse. Admittedly the whole euro crisis has not been dealt with well, which has played into the hands of euro-skeptics, but I think the veto issue will become irrelevant if the euro falls apart.”

But, he adds, it's important for the UK to signal that it remains engaged with the negotiations over Europe's financial crisis.

"There are too many parliaments involved and there’s a need for urgency which isn’t there, so I’m not optimistic the euro will survive in its current form," he adds. “If that happens, the EU will become a very different body and the UK will need to be involved in the negotiations and not seen as isolated.”

UK's first step toward the exit? Not clear.

As for Cameron's standing at home, Tim Knox, director at the right-leaning Centre for Policy Studies, says the prime minister's veto will put more pressure on the Liberal Democrats than his own Conservatives.

“This could break up the coalition but equally it could break up the Lib Dems. They don’t seem to have made their mind up whether the use of the veto was a good or bad thing,” says Mr. Knox, who adds he is unsure whether it means the UK will eventually leave the EU.

“It’s the beginning of something but I’m not sure yet if it’s the beginning of the end of our membership," he says. "I think Friday was more about moving [around] the constitutional furniture and less about solving the problems with the euro – they still need to raise hundreds of billions of pounds of bonds to shore up the currency and this agreement has done absolutely nothing to deal with that.”

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