by Hazel Lewry
In following the euro crisis it is clear there are several basic issues that are not being resolved. The EU like the UK has a fundamental problem, it has too much money in circulation that isn’t underwritten by anything tangible. The government’s standard solution has just been to print more money, effectively devaluing what’s already out there by the percentage of “new money” they print.
More electronic money will be in the pipeline as this week saw an apparent contradiction with most banks stating they’re now operating in the black. Yet the banks are in worse shape as a group, by almost 10 billion euros since October. They claim they’re in profit, pay bonuses, and yet lost billions in stress tests. It’s down to how they are allowed to crunch numbers.
More immediately important is quantitative easing or QE, where more money is manufactured without more wealth being created. Put simply if the wealth backing the euro is valued at 100 billion, but they print 10 billion additional euro or 10% to “aid the banks” then very quickly the price of everything an individual buys will increase by 10%. The same amount of wealth backs more currency so the currency devalues.
The City and the banks get bailed, the average individual gets butchered.
It’s this background that led to the Brussels summit last week, with Merkel and Sarkozy, now known as “Merkozy”, proposing massive changes to the Lisbon Treaty without any relevant fundamental democratic representation.
In its purest form the proposals were for an unelected body of European technocrats to be in charge of every national EU budget, starting with the 17 common currency nations, but almost without doubt expanding to the entire EU eventually.
The need at the summit, driven by “Merkozy”, was for a quick agreement to “save the euro”. They needed unanimous agreement to alter the Lisbon Treaty and allow the EU to grab national sovereignty across the euro-zone. That is not too strong a statement, they who control the currency supply and spending ability control the nation.
Against this overwhelming need by mainland Europe’s euro zone nations to resolve an impending fiscal Armageddon stood the apparently lone voice of David Cameron. He just didn’t know his was a lone voice at the time, a very sad state of affairs for a senior diplomat.
The UK PM went to the summit sworn to protect his paymasters, the City of London’s financial institutions, from more EU incursions. The inhabitants of “the City” are the Conservative party’s largest donors year on year. Upon Cameron’s return the spin was that he used his veto used to protect “Britain’s interests”.
Cameron’s major promise to the City of London was to exempt it from the “Robin Hood” or Tobin Tax, a proposed EU levy on large interbank or financial transactions, and stop more unwanted EU regulations for them. He would use the threat of a veto to make certain it happened. Even the Lib-Dems were happy. They all signed up to the threat.
The UK PM also had to deal with his back-bench rebellion against EU incursions into Westminster sovereignty, he would “repatriate” powers to Westminster using the same threat. This is an odd stance for someone sworn to prevent the same at Holyrood.
It’s now apparent nobody ever considered Cameron would execute the threat.
Europe was on the verge of an agreement in Brussels on Thursday and Friday. David Cameron then fought and lost for “the City”, his backbenchers, the euro and the UK.
As events unfolded they showed Cameron clearly lacks the ability to separate or prioritise national and international requirements from those of special interest groups in a world changing crisis situation.
It started with his withdrawing the UK from the centre right “old boys’ alliance” of powerbrokers including Germany and France. The UK then tried to initiate a rival faction at Brussels with a new group including far right extremists, but he buried his bones in the wrong garden.
Heading a group of strictly non-euro nations might have been feasible, but even this was ignored with Cameron’s unworkable demands that threatened the stability of the single market.
Diplomacy is about winning friends and influencing people. Having had to deal with earlier UK shenanigans, Merkel and Sarkozy were prepared this time and used their plan B, a Europe without a significant UK voice.
David Cameron lost, he lost big. For most of the rest of Europe the UK’s actions are unforgivable. The EU’s worst ever perceived crisis and its proposed resolution were held to ransom so Cameron could please the City and his europhobic backbenchers.
The United Kingdom lost big because the 27 EU nations are ignoring Cameron’s objections and are set to strike out on a separate treaty or new intergovernmental agreement.
In effect the EU vetoed Cameron’s demands and not the other way around.
There will be a two tier Europe, and the UK will be firmly on the lower level. This is an absurd result from an individual who puts such an emphasis on “having a voice and being able to influence policy at the top table”. The UK isn’t even 10% of the EU economy, it does not negotiate from a position of inherent strength. It is a net debtor. Many in Europe now view the probably imminent departure of the UK as a relief.
These were actions which were unnecessary.
Cameron could have ratified rather than vetoed the proposals and made it dependent on a referendum on EU membership within the UK. We vote to stay in the EU the vote is ratified, we vote to leave and the vote remains ratified.
Cameron could even have put the option of the European Free Trade Association (EFTA) on the referendum table. Effectively the PM has now relegated the UK to EFTA member status while paying EU member dues.
Despite playing his ultimate card, the veto, Cameron won nothing. He did not get his financial regulation exemptions and concessions. He repatriated no powers. The bankers themselves are horrified, they will now have to submit to EU regulations decided without “their man” at the table.
Irrespective of currency considerations the summit in Brussels looks set to go down as a defining event. It will be remembered as the night the second ‘Battle of Britain’ was initiated and lost by a single man, signaling the end for the UK in Europe unless there is a sudden unconditional surrender by the Tories.
The Guardian quotes “There are senior experienced UK officials who believe this is a disaster for the British national interest”. Nigel Farage of UKIP was decidedly upbeat on the impending demise of the UK-EU relationship, making reference to probable repercussions. Farage apparently views the Brussels debacle as good for his party.
The world view our supposedly top diplomat with disdain, the responses were typical but possibly the best was from “Der Spiegel” who took the position “Bye-bye Britain” and followed with an article entitled “Europe Can Work Fine without the British”.
The accord was torpedoed by Cameron, yet the euro remains relatively buoyant, certainly crash free. The markets and bankers who have engineered this crisis can’t afford the euro to fail, it would set the fiscal control project back decades at least.
Any doubt of this situation was removed by both the markets lack of significant reaction to the summits events and the statement by Standard & Poor’s Jean Michelle Fix: “There is probably another shock required before everyone in Europe reads from the same page.”
Read that to say, from the money men, downgrades are imminent and whatever other nudges they use to get their way without actually prompting a crash.
As the new week dawned the downgrades came, and the markets adjusted, the change was under 5%.
The only collapse in the last week was the influence of Westminster in Europe.
London was bluntly informed it would toe the line and implement regulation agreed by the 17/26. London’s only option is to withdraw from Europe or acquiesce. There is no middle ground, Westminster’s intransigence coupled to Cameron’s ineptitude have ensured it.
As Scots, who are basically a cosmopolitan cooperative and peaceful trading nation, comprehend the enormity of Cameron’s actions over time the impact of the euro veto may well prove to be more significant on the 1707 Union than the European Union.
It’s time for Scotland’s voice to be heard.