The euro is killing Europe – can the coalition turn the chaos to its advantage?

Last week’s rebellion by David Cameron’s backbenchers in support of an EU referendum ended eight years of peace in the Tory party on the European question. Now, the offer by the Greek Prime Minister of a referendum on the ­bailout package — designed to appease nervous Greek Socialist party backbenchers — means that the uncertainty surrounding the eurozone will drag on into the New Year.

George Osborne regards the confusion surrounding the future of the single currency as the single biggest obstacle to a British economic recovery. The Chancellor and his colleagues have become increasingly convinced that only when the markets have confidence about what is going to happen will businesses be prepared to invest their cash, and not just sit on it.

The British government hoped that there would be a moment of clarity and confidence at this week’s G20 summit in Cannes. Back in September, Osborne tried to make Cannes the deadline for a package to save the euro, and there was every indication, last week, that his efforts would be met with success.

After the European Council and eurozone meetings, both the Treasury and the Foreign Office were confident that there was a good chance of the details and numbers behind the rescue plan being made public by the end of this week. There was a belief that the political barriers to a deal had been overcome. Indeed, the French had moved on to preparing the backdrop for the Cannes gathering. They had even boarded up the designer shops in the area where the various world leaders would arrive, to better fit with the theme of austerity.

But the proposal for a Greek referendum dashed hopes of progress. As one government source puts it, ‘all the preparatory work for Cannes has now been unpicked’.