* Merkel, Cameron take opposite paths on EU integration
* EU budget row bares tensions but no threat to summit
By Stephen Brown and Andreas Rinke
BERLIN, Oct 22 (Reuters) - Until recently, German officials tended to down play divisions with Britain when pressed about its semi-detached stance on Europe. Not any more. Now they tend to make their irritation plain.
“If someone wants to leave, you can’t stop them,” said one senior German official, summing up a view in Berlin that the door is open if Britain really wants to quit the European Union.
While Angela Merkel has largely overcome Eurosceptic qualms on the fringes of her centre-right coalition, Britain’s David Cameron -- never a committed European in Berlin’s view -- appears to be bowing to the isolationist instincts of the bulk of his Conservative lawmakers.
“There’s certainly a growing feeling among European partners and also in Berlin that Britain is less interested in any new form of cooperation,” said the official, who spoke on condition of anonymity. “That’s a pity, because it is an important partner and we need more integration in the EU.”
The latest cause of tension is Cameron’s refusal to envisage any increase beyond the rate of inflation in the EU’s seven-year budget -- a package worth around 1 trillion euros ($1.2 trillion) -- at a special budget summit due in late November.
Merkel’s spokesman Steffen Seibert denied a British media report on Monday that she had threatened to call off the summit if Cameron persisted. German and British officials have stressed that trade ties are important for both Britain and the EU.
Berlin has long valued London’s free-marketeering influence in the EU as a counterweight to France and other southern states that take a more protectionist line and favour state intervention in industry. But Merkel’s exasperation at British obstruction tactics may now outweigh such considerations.
A spokesman for Cameron said there had been no communication from Germany regarding the budget summit being cancelled and the prime minister was “willing to do a deal ... so long as that is the right deal for British taxpayers”.
But the budget spat risks being a repeat of last year’s row on Merkel’s “fiscal compact” for budget discipline which Britain refused to join, alone among the 27 EU member states except for the Czechs, who faced a veto by their Eurosceptic head of state.
That was a slap in the face for Merkel, who has long blamed Cameron for taking the Conservatives out of the main centre-right bloc in the European Parliament in disagreement with the European People’s Party’s (EPP) objective of a “federal Europe”.
The Tory exit from the EPP was driven by William Hague, who is now foreign secretary and visits Berlin on Tuesday to discuss the future of Europe with his German peer, Guido Westerwelle.
Even though it stayed outside the euro zone, Britain wielded considerable policy influence under former premier Tony Blair, notably over a common European security and defence policy, at least until he fell out with his EU counterparts over Iraq.
“It can’t be in our interest to push the UK into isolation,” said Alexander Alvaro, a member of European Parliament for the Free Democrats (FDP), Merkel’s junior coalition partners in Berlin. Alvaro said he saw room for compromise on the EU budget.
Britain’s list of concerns stretches well beyond how much money it should pay into the EU budget and new proposals for a single budget among the 17 euro zone countries.
Plans to set up a banking union in the euro zone could have implications for London’s vast financial services industry and there are also accelerating plans for a financial transactions tax among 11 euro zone member states which could have a knock-on impact on Britain, which has refused to join either project.
“The British public expects a tough approach,” Cameron said of the budget debate at last Friday’s EU summit, where he rejected talk that Britain was slowly withdrawing from Europe.
But he added: “Am I happy with the status quo in Europe? No I am not, I think there are changes that we need.”
Such salvoes could prove popular with voters but fights over Europe have been politically lethal to a succession of Conservative leaders, ever since the party took Britain into Europe in 1973, and Cameron also has the pro-European Liberal Democrats as coalition partners to keep on board.
The German public expects a tough approach on EU spending too, demanding that Merkel impose fiscal discipline on Berlin’s partners in exchange for integration with Europe, including the painful austerity measures forced upon the Greece, Ireland and Portugal in exchange for their bailouts.
But Cameron’s stance on the fiscal pact and the EU budget, and the announcement last week that he was pulling out of EU cooperation on policing and justice issues, reinforce a view among some EU diplomats that Britain is heading for a “velvet divorce” from the EU.
Finland’s Europe minister, Alex Stubb, told Reuters at last week’s summit that London was voluntarily putting itself at the margins of European policymaking.
“It’s almost as if the boat is pulling away and one of our best friends is somehow saying ‘bye bye’ and there’s not really that much we can do about it,” he said.
Cameron said earlier this month that a referendum on Britain’s ties with the EU would be the best way of agreeing a fresh settlement with the 27-member bloc although he gave no commitment in terms of timing.
“I don’t think this is a sort of British exceptionalism,” David Liddington, Britain’s minister for Europe, said on a visit to Berlin last week, adding that even Germans were talking about holding a plebiscite on Europe.
But in Germany’s case, referendum supporters include people like Finance Minister Wolfgang Schaeuble who want a popular vote to endorse deeper EU integration towards fiscal and political union, rather than justification for further opt-outs.
“We are comfortable with the idea of differentiated integration and variable geometry in Europe,” Liddington told a group of foreign correspondents, adding that “as far ahead as we can see” there would be member states opting out of things like the single currency, not just Britain.
Gunnar Beck, a German expert on European law in London, said he thought Cameron was not planning an exit from Europe, but the withdrawal from 133 policing and justice measures, including the European Arrest Warrant, showed London was heading in the opposite direction to Berlin.
“To be honest, I don’t think Cameron wants to leave but it would be a blessing for him if he could repatriate powers. The present crisis is the ideal opportunity to do so because the euro zone will be preoccupied with its own crisis for years.”