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Angela Merkel and Nicolas Sarkozy
David Cameron will signal a newly co-operative stance on the EU when he visits Nicolas Sarkozy and Angela Merkel this week. Photograph: Michel Euler/AP
David Cameron will signal a newly co-operative stance on the EU when he visits Nicolas Sarkozy and Angela Merkel this week. Photograph: Michel Euler/AP

David Cameron signals new approach on Europe with visits to Paris and Berlin

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Prime minister goes to European capitals armed with 'constructive approach'

David Cameron will visit Nicolas Sarkozy and Angela Merkel in Paris and Berlin later this week, as the government reaches out to EU leaders who have criticised the Tories' Euroscepticism in recent years.

In his first overseas trip as prime minister, Cameron will have dinner with Sarkozy at the Élysée palace on Thursday night before flying to Berlin for talks with Merkel, who showed her dismay at Cameron's approach to the EU by snubbing him on a recent visit to London.

The French president and German chancellor, who have criticised Cameron's decision last year to abandon the main centre-right grouping in the European parliament, last week invited the prime minister to visit their respective capitals.

The newly co-operative Tory approach to the EU was on displaytoday when George Osborne, the chancellor, attended his first meeting of EU finance ministers (Ecofin) in Brussels. Osborne said the government would adopt a "new constructive, engaged approach".

The chancellor, who was applauded by his 26 fellow EU finance ministers at the start of the session, faced a difficult meeting because the main item was a draft directive requiring greater transparency from hedge funds and private equity groups. As home to 80% of Europe's hedge funds, Britain sees this as hostile to the City. Osborne has decided it is too late to stage a fight because he believes he has been given a "hospital pass" by Labour on the directive.

Gordon Brown arranged, with the socialist Spanish government, which holds the EU's rotating presidency, to delay the matter until after the general election. But the chancellor hopes that a key British demand – that hedge fund managers should be free to work across the EU's single market without having to seek the approval of the authorities in all 27 member states – would be considered. The European parliament voted in favour of this today.

The hedge fund draft directive will now enter a "trilogue" involving the EU's three main institutions – the council of ministers, the European parliament and the European commission. The Treasury hopes that during these negotiations the single market proposal will be agreed. Britain has no veto because the draft directive is decided in the council of ministers by qualified majority voting.

Osborne said: "I arrived [in Brussels] with a challenging position bequeathed to me by the previous government, where there was not much support or recognition of British concerns.

"I am very pleased that the minutes [of the meeting] reflect my concerns. We now take the process forward. There is still much to play for."

The chancellor made clear, however, that Britain would oppose a proposal from the European commission to increase the EU budget by 6% next year, a move that would mean a £600m increase in the size of Britain's gross contribution to the EU.

"We had a lively discussion on the proposal for the 2011 EU budget, for which the European commission has proposed a 6% increase, including a 4.5% increase in administration costs" said Osborne.

"I was not alone in saying that this is unacceptable. Many countries are accepting public spending restraints and administration cuts. I am glad that has been noted at this early stage."

He insisted he had not "banged the table" on the EU budget or anything else:

"It was very important for me to show that the Conservative government in coalition with the Liberal Democrats is going to be positively engaged in issues that the EU is looking at, while being very clear about British national interests. I was able to do that today." Osborne also made clear his unease about plans to give the commission greater scrutiny of national budgets before they have been approved by parliament, a proposal mainly aimed at Eurobond countries. "I am happy to discuss the details [of the UK budget] with the commission once they have been delivered to parliament," said Osborne. "We are not in the Eurobond, which has its own issues, and I made clear that when it comes to national budgets, the first port of call is not the commission but national parliaments."

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