15 January 2014 Last updated at 06:56 ET
Osborne: Don't force UK choice between euro or EU exit
Chancellor George Osborne: "Getting the economics right is absolutely necessary to persuade people of the merits of the EU"
The UK could be forced to quit the European Union if the organisation does not reform, George Osborne has warned.
The chancellor said it was essential to "protect the collective interests of non-eurozone member states" while the rest of the EU forged stronger links.
Without such reform, the UK might "face a choice between joining the euro or leaving" the EU, he said.
The 28-member group also had to do more to ensure economic competitiveness with rivals like India and China, he added.
Labour said David Cameron's "weakness" regarding his party was preventing reform, while the UK Independence Party said the prime minister had repeatedly "caved in" to Brussels.
Mr Osborne's speech followed the Conservative leadership rejecting a call from 95 of the party's MPs to allow Parliament to block EU laws which damage the national interest
'Simple choice'
Earlier this week Foreign Secretary William Hague said the EU's rules had to be followed by all its members and the MPs' veto plan was unworkable.
But addressing the think tank Open Europe and the Fresh Start group of MPs, set up by Conservatives keen to see reform, Mr Osborne said he understood the need for change, especially given further economic and political integration by EU countries within the eurozone, aimed at preventing a repeat of the recent crisis.
He warned: "If you cannot protect the collective interests of non-eurozone member states, then they will have to choose between joining the eurozone, which the UK will not do, or leave the European Union."
He also said: "I believe it is in no-one's interests for Britain to come to face a choice between joining the euro or leaving the European Union.
"We don't want to join the euro, but also our withdrawal from a Europe which succeeded in reforming would be bad for Britain. And a country of the size and global reach of Britain leaving would be very bad for the European Union."
The Conservative Party has promised an in-out referendum on EU membership - following a renegotiation of powers with Brussels - before the end of 2017, if it wins a majority at the next general election.
Mr Osborne said: "The biggest economic risk facing Europe doesn't come from those who want reform and renegotiation.
"It comes from a failure to reform and renegotiate. It is the status quo which condemns the people of Europe to an ongoing economic crisis and continuing decline."
Mr Osborne argued there was a "simple choice for Europe: reform or decline".
He said: "There are those who throw their hands up and say 'We can't reform Europe'. To them, I would say that we have already proved that wrong.
"Take the EU budget. Last year, the prime minister negotiated the first ever real-terms cut... Far from being a lone voice, we were working with like-minded countries like Germany, the Netherlands and Denmark."
Mr Osborne talked about how the 2008 financial collapse had exacerbated the EU's problems, but argued: "We knew there was a competitiveness problem in Europe before the crisis.
"But the crisis has dramatically accelerated the shifts in the tectonic economic plates that see power moving eastwards and southwards on our planet."
He said too much money was going on benefits across the continent: "Europe accounts for just over 7% of the world's population, 25% of its economy, and 50% of global social welfare spending."
Echoing the Conservatives' 2010 election campaign slogan, he said: "We can't go on like this."
'Utter bunkum'
Senior Conservative MP John Redwood, one of the signatories to the letter to the prime minister, told BBC Radio 4's Today programme it was important to stop the EU "simply grabbing power".
He urged the UK government, in a similar way to Germany, to set up a safeguard against excessive intervention by Brussels, by promoting "the sovereignty of Parliament".
The current state of the EU meant it was "difficult for there to be sufficient reform" and any powers of veto over EU laws would be used only "in extreme cases", Mr Redwood added.
In a question-and-answer session following his speech, Mr Osborne said the Conservatives were "having a grown-up conversation" on Europe, adding: "I would rather be in a party that's addressing these issues for the future than a party that's burying its head in the sand."
But, for Labour, shadow foreign secretary Douglas Alexander said: "The Conservative leadership seems to be spending more time negotiating with their backbenchers than negotiating with Europe to deliver real reform.
"All of us know change in Europe is needed, but the tragedy is that David Cameron's internal party weakness is preventing him from approaching the need for reform in a sensible way."
UK Independence Party leader Nigel Farage called the idea that the UK could lead reform within the UK "utter bunkum".
He added of Mr Cameron: "The EU is not going to suddenly turn around and be dictated to by a man with only 15 months left as prime minister and who has repeatedly caved in to their demands and given away any leverage in the negotiations he may have had by declaring his support for EU membership."
The CBI business group said Mr Osborne had set out a "compelling" case for EU competitiveness, adding: "A growing EU is in the UK's national interest so we must build alliances with other member states to get the reforms we need."BBC
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