MARSEILLE, FRANCE // Britain's future in the European Union is again under scrutiny as the debt-ridden euro zone cautiously welcomes a glimmer of hope that its financial crisis can be overcome and the single currency saved.
Markets have given broad approval to the deal reached when Germany, the zone's most powerful economy, made significant concessions in last week's EU summit in Brussels.
One key measure, on which Spain and Italy insisted as borrowing costs soared out of control, will allow troubled banks to be helped directly from the main European bailout fund.
But amid further downbeat news on jobs and French public debt, analysts warn that serious dangers for the zone persist.
Mr Cameron, whose country is outside the euro zone and suspicious of its declared policy of proceeding towards "genuine" economic and monetary union, does not rule out a referendum on relations with the EU.
The latest senior colleague to call British membership of the union into renewed question was Mr Cameron's former defence secretary, Liam Fox, who said yesterday that a future outside the EU held "no terror".
Mr Fox told a political meeting in London: "I do not believe that Britain's national interest is served by its current relationship with the EU. "This becomes even more so with the shifting dynamic unfolding before us. It is not we in Britain who have brought about the fundamental change in the nature of the EU - we stayed outside a single currency project whose flaws have turned out to be exactly as we envisaged. But such is the new reality in which we find ourselves that to either ignore or deny this would continue the policy of half-truths and deception which has gone on for far too long."
He appeared to endorse Mr Cameron's caution, saying a simple "in/out" referendum now would be a "huge error with enormous tactical risks" with pro-EU elements basing a scare campaign based on "false fears of political and economic isolation". But if attempts at renegotiation failed, there would be no alternative to asking the public to support departure from the union, he said.
The deal reached in Brussels last week was acknowledged as a compromise by the German chancellor, Angela Merkel, who had gone into the summit vowing to resist any plan to pool debts.
But after initial speculation that Germany was the loser to France, Italy and Spain, German analysts appear to have shifted their stance. Influential commentators say it now seems Mrs Merkel's gains outweighed her chief concession to enable banks to be bailed out without the need, as in the past, for money to be channelled through central governments.
In return, she secured a commitment from François Hollande, the French president, to seek early parliamentary approval of the euro zone fiscal pact, spearheaded by the chancellor and Mr Hollande's predecessor, Nicolas Sarkozy, requiring rigorous discipline among the 17-member states.
Furthermore, the European Central Bank will create a central banking supervisory body, strongly advocated by Mrs Merkel.
Germany's uneasy relations with France since the presidential elections in May confirmed Mr Hollande as the first socialist head of state since the mid-1990s were based on the fear, or as the BBC put it yesterday, that he was "lukewarm on austerity". But the Brussels meeting leaves him committed to balancing France's books.
The scale of that task was highlighted yesterday in a report on the state of public finances from France's court of auditors. This suggested civil service jobs would be cut, with at least temporary rises in the value-added tax on purchases and social security levies, as part of a programme to find €39 to €43 billion (Dh180 to Dh199bn) in new revenue if France is to meet its pledge to cut the national deficit to three per cent of gross domestic product in 2013.
No one is suggesting that the euro zone, with its mixture of economies weak and strong, is close to overcoming the debt crisis that has been afflicting the area since 2010.
Further job losses in France, Spain and Austria contributed to a rise to a new record for unemployment in the zone in May, with more than 17 million people - or 11.1 per cent - out of work, according to the EU's statistical office, Eurostat. The dismal figures, released as the zone's latest bailout applicant, Cyprus, began its turn with the rotating EU presidency, reflects business cutbacks, weak demand and the effect on government spending of the austerity measures driven by Germany.
The euro zone's lingering storm clouds - and the unrelated UK crisis that led yesterday to resignation of Marcus Agius as chairman of Barclays, at the centre of an interest-fixing scandal - made it all the more remarkable that the summit deal should have inspired even modest market confidence.
Markus Huber, an analyst with ETX Capital, told Agence-France Presse that the general impression remained positive though some profit-taking was inevitable given worries about feeble growth and the poor health of Spanish and Italian banks.
* With additional reporting by Reuters