By Simon Miller
European markets are up this morning despite the UK vetoing the European treaty early this morning.
After hours of tense negotiations, the UK Prime Minister David Cameron effectively veotoed the agreement after failing to secure protection for the country on potential actions such as a financial transaction tax.
Yesterday, France and Germany demanded that a "Tobin tax" and convergence of corporation tax be incuded in the treaty which was aimed at resolving the eurozone crisis.
With Britain refusing to sign a deal, the agreement went ahead with the eurozone and a euro-plus members consisting of Bulgaria, Denmark, Latvia, Lithuania, Poland and Romania.
Cameron told reporters: "It is sometimes the right thing to say, ‘I cannot do that, it is not in our national interest, I don't want to put that in front of my parliament because I don't think I can recommend it with a clear conscience, so I am going to say no and exercise my veto."
French President Nicolas Sarkozy commented: "We would have preferred a deal at the level of the 27. That wasn't possible taking into account the position of our British friends. In order to accept treaty revision among the 27 EU states, David Cameron asked us - something we all judged unacceptable - for a protocol to be inserted into the treaty granting the United Kingdom a certain number of exonerations on financial services regulations."
However, it is not certain whether this new agreement can be enacted as Irish government lawyers examine the treaty to see if it has to be put to a referendum.
In addition, Cameron warned that the new group would not be able to use European Union resources causing doubt as to whether the new bloc would be able to enforce fiscal rules.
He commented: "Clearly, the institutions of the European Union belong to the union, they belong to the 27. They are there to do the things that are in treaties that we have all signed up to over the years."
Markets reacted calmly to the news with the FTSE 100 up 23.01 at 5,506.78 and the CAC 40 up 37.11 at 3,132.60 as of 11.20 GMT.
UK 10-year bonds are yielding at 2.16% while Germany's yield stands at 2.08%.