David Cameron and Nick Clegg clash amid euro crisis

David Cameron (left) and Nick Clegg clashed over Europe today (PA)

David Cameron and Nick Clegg clashed over Europe today as the continent struggles to deal with the eurozone crisis.

After the Prime Minister urged "fundamental reform" of EU institutions, his Liberal Democrat deputy delivered a dire warning that renegotiating treaties would cause paralysis.

Only "populists, chauvinists and demagogues" would benefit if mainstream politicians became locked into "arcane" discussions rather than focusing on economic recovery, Mr Clegg insisted.

In his annual foreign policy speech to the Lord Mayor of London's banquet last night, Mr Cameron dismissed talk of "grand plans and Utopian visions" and called for a looser EU with "the flexibility of a network, not the rigidity of a bloc".

Mr Cameron - who pointedly described himself as among the "sceptics" on Europe - acknowledged that the immediate priority for the EU was restoring growth and tackling the debt crisis.

However, he said the current crisis also offered an opportunity to undertake fundamental reform and address long-standing problems afflicting the EU.

Mr Cameron said that while he wanted to see powers to "ebb back" to Britain, for the EU as a whole it was a chance to ask: "What kind of Europe do we actually want?"

He added: "For too long, the European Union has tried to make reality fit its institutions. But you can only succeed in the long run if the institutions fit the reality."

German Chancellor Angela Merkel told her Christian Democratic Union party conference in Leipzig last night that the EU's treaties would have to be overhauled to create a tighter political union.

But in sharp contrast to Mr Cameron, she suggested that process would result in "more Europe" rather than less.

"We must develop the European Union's structure further," she said. "That does not mean less Europe, but more. That means creating a Europe that ensures that the euro has a future."

At a press conference this morning, Mr Clegg admitted he "thought differently" from Mr Cameron on Europe.

"Clearly the Conservative Party and the Liberal Democrats, and David Cameron and myself, think differently on European issues.

"But where we agree is ... what do we do to push economic reform and push the liberalisation needed to create jobs and prosperity in the EU?"

Speaking alongside Dutch Prime Minister Mark Rutte in Westminster, Mr Clegg went on: "I don't think anyone is talking about unilateral repatriation of powers. It's not possible, and Europe doesn't work like that.

"I am not going to provide a running commentary on the Prime Minister's speech or indeed the speech, much reported this morning, by the German Chancellor.

"But the danger always is that the debate becomes very quickly polarised between one side which says this is the moment to rush headlong towards further integration, new treaties, new intergovernmental conferences, new arcane debates about EU powers, and another side that says this is the moment to unravel the whole thing.

"I don't think either side have got their priorities right.

"The priority now is jobs and growth, jobs and growth.

"Is the whole political establishment now going to disappear into a windowless room in Brussels, discussing things that no one can understand? It means absolutely nothing to millions of people across the EU who are worried about economic security. They are worried about prospects for their children.

"The only people who will benefit will be populists, chauvinists and demagogues, who will exploit that lack of political leadership."

Responding to Mr Clegg's comments, Mr Cameron's official spokesman said: "He was making the same point as the Prime Minister was making last night, which is that Europe needs to focus on the issues that matter.

"It needs to focus on reforming the economy and generating prosperity and in the immediate future it needs to focus on dealing with the European debt crisis.

"That means a credible plan to address that and credible fiscal plans in European countries."

The spokesman said the Government "remains concerned about the economic situation and prospects because uncertainty will act as a brake on the investment we need to support growth".

Chancellor George Osborne briefed this morning's weekly meeting of Cabinet on the economic figures from France and Germany, which he said were broadly in line with the UK's position in the third quarter.

A senior member of Mrs Merkel's Christian Democrat party (CDU) suggested today that the German Chancellor would not let the UK "get away with" its opposition to a Europe-wide Financial Transaction Tax, which Mr Osborne yesterday described as "a bullet aimed at the heart of London".

Speaking to the CDU's annual congress in Leipzig, the conservative leader in parliament Volker Kauder said: "I can understand that the British don't want that when they generate almost 30% of their gross domestic product from financial market business in the City of London.

"But Britain also carries responsibility for making Europe a success. Only being after their own benefit and refusing to contribute is not the message we're letting the British get away with."

Mr Cameron's spokesman said: "The Chancellor was clear on our position on an FTT when he attended the Ecofin (meeting of EU finance ministers) last week.

"There is clearly going to be a debate about Europe and the shape of Europe over the coming weeks, months and years.

"What we would say is that the crisis means that we should focus on the economics. It is very clear that countries need credible plans to deal with their debts and deficits and we shouldn't be deflected from dealing with the structural problems in European countries."

PA