George Osborne leads EU charm tactics from new Government

George Osborne will be all charm and smiles on his first trip to Brussels as Chancellor today.

He will not make trouble about EU plans to regulate London-based hedge operations, despite cries of anguish from fund managers and business leaders.

And he will make clear the new coalition government's "positive engagement" in Europe.

Foreign Secretary William Hague used a Brussels-based magazine this week to laud the EU's importance and to promise "not to frustrate or sabotage the operation of the EU but to put Britain's role in the EU on a more positive footing".

On top of yesterday's visit to Brussels by Caroline Spelman, the Secretary of State for Environment, Food and Rural Affairs - the first by a member of the new coalition team - the sweetness and light is making some EU cynics highly suspicious.

Spelman spoke of "positive engagement", and she also chatted fluently with her agriculture counterparts in German and French.

Early speculation that this "softly-softly" approach is all down to the Liberal Democrat side of the new coalition equation can be dismissed by Mr Hague's pledge of "positive engagement" in Europe even before the unlikely political bedfellows got together.

But can it last? In three words, of course not.

One European Commission official said: "British governments, Labour and Conservative, have all promised to be at the heart of Europe' in the past, in those very words, but it's not in the British DNA. They all have to play to the domestic eurosceptic gallery sooner or later, willingly or reluctantly."

There will be plenty of opportunity to do so: the only reason the new Chancellor will smile politely today about EU plans to tighten scrutiny on hedge fund operations is because, for the moment, a British defeat at the hands of continental Europe can be laid at the door of the previous administration.

One coalition government official said yesterday: "The Chancellor wants to deploy our negotiating capital on other occasions - we must pick our battles."

Those battles include the EU budget and the future of Britain's multi-billion-pound rebate on its annual contributions to the EU purse.

Plans unveiled last week for closer economic co-operation across Europe, including close surveillance of national budgets even before they are approved by national parliaments, raise key issues of economic sovereignty.