What the UK wanted

Frances Coppola links to this document, which the Telegraph tells us is the "UK protocol demand to the EU".  I reproduce here the demands, which in the document are interspersed with what look like briefing notes:

1. Unanimity on:-
  i) Transfer of powers from national level to EU agencies
  ii) Maximum harmonisation provisions that prevent member states imposing addditional requirements
  iii) Fiscal interests of member states and imposition of taxes, levies etc.
  iv) The location of the European Supervisory Authorities
2) General provisions for:-
  i) Requirement for executive powers of ESAs to be clearly set out and not replace the exercise of discretion by member states' competent authorities
  ii) Ensuring that 3rd country financial institutions that operate only in one member state are authorised and supervised in that member state if they do not want a passport
  iii) No discrimination within the single market for financial services on the grounds of the member states within which an institution is established.

[The most relevant ESAs here are the European Banking Authority, based in London, and the European Securities and Markets Authority, based in Paris.]

The note on 1iii) explains that "...measures which entail very sizeable levies on the financial sector, such as the Deposit Guarantee Scheme Directive, are being pursued under QMV [Qualified Majority Voting] legal bases"

Coppola comments:

...they amount to imposing a UK veto in areas pertaining to financial markets and regulation. Existing EU practice allows decision-making in these areas to be done by Qualified Majority Voting, which would in effect mean that a tighter, more unified Eurozone could consistently out-vote the UK and therefore impose on the UK's financial sector regulation and taxation against the will of the UK government. It isn't correct to suggest, as some commentators have, that Cameron was trying to evade tighter regulation of the financial sector, or prevent imposition of a Financial Transactions Tax (FTT). In fact paragraph 2 of the proposed changes would allow the UK to impose higher capital requirements than the EU requires and unilaterally implement the ring-fence recommended by the Vickers committee. And the FTT is not mentioned in the proposals at all - and it would require all 27 nations to agree to it anyway. No, this was simply an attempt to preserve the UK's authority over its financial sector, which dominates its economy.

 I'm not entirely convinced by Coppola's argument about the FTT.  First, not every leaked note is a complete and accurate representation of what was actually discussed.  Second, Cameron may have been concerned that some of the powers he wished to limit could be used to twist the UK's arm - "if you can't agree to the FTT we'll have to introduce a swingeing new levy instead".

Be that as it may, what are the deal-breakers in the demand?  Sarkozy spoke of a "lack of regulation of financial services".  Cameron claimed to have "protected Britain's financial services...from the development of eurozone integration".  1i) would seem to be relevant: the notes tells us that "agreed...restrictions are being tested routinely in new legislation seeking to extend the supervisory powers of the ESA".  Still, it's hard to see that if both parties wanted an agreement they couldn't reach a compromise on ESA powers.  I think we should take Henry Peterson's advice and follow the money, so my attention is more on 1iii) and 1ii): Merkel wants taxes and levies to be determined centrally, Cameron wants them to be in the hands of member states.

Incidentally, Paddy Ashdown in the Guardian asserts that a deal couldn't be reached because Sarkozy is utterly fed up with Cameron.  But I persist in believing that it's Sarkozy who talks, but Merkel who decides.  Because Merkel is the one with the money.

Update: Peter Mandelson thinks the EU will be able to force the FTT on us:

...EU financial regulation will be decided by majority vote and the majority will argue for strong regulation to curb the activities of the people who have done most to exacerbate, in their view, the eurozone crisis. The eurozone will introduce a financial transaction tax that will hurt the City and we will be powerless to halt it.