Naturally, I have to comment on the latest developments in Europe.
First, this is a major step forward towards a more united Europe. This is important for long-term reasons, like pursuing interests in a globalized world. Lately, Iran has already felt this united Europe when after the attack on the British embassy many European countries, including Germany, recalled their ambassadors.
But, dear Mr. Cameron, WHAT THE HELL?
Let's see what happened. 27 nations including Britain meet to discuss how to battle moral hazard and keep public debt in check in the future. Yes, that's not enough to solve the entire crisis and something still has to be done about private debt. But that's not Mr. Cameron's problem. Instead, he wants to use this situation to press through some special treatment for the “City of London”.
The City of London is a phrase for the financial industry over there that is extremely influential and also creates 11% of all taxes of all of Britain. But Britain isn't the only nation that has some special interests. Germany certainly would love some special rules for the German car industry, for example. But once one member is allowed to have some special rules other countries want this, too! Those special rules were unaccaptable for this reason alone!
But that's not all! Light regulation of the financial industry was a main problem that indirectly lead to the current crisis in the first place and also almost caused a collapse of the global financial markets. Special rules, that is less regulation for the “City of London”, is not smart. It is not what anybody should want.
And, still, that's not all!! At the end of the day Mr. Cameron failed at getting anything. Nothing, Nada, Niente! No special regulation at all. And here's the funny thing: Financial regulation in the EU is done by majority voting. Was it really wise to enrage all 26 other nations of the EU just to get nothing at the end of the day?
The only thing Mr. Cameron achieved was to isolate his country more than ever before. Now, I know, many British citizen like that. But here's the problem. Even - especially - if Britain got out of the European Union, the 26 nations (the largest economic bloc on the planet) will decide to regulate their financial industry more strictly. And they will make damn sure that the City of London won't profit. And Britain won't be able to prevent any of that because they just isolated themselves; they are not even sitting at the damn negotiating table!
But it's even worse. If, in the future, China decides that it doesn't like some action of the British government they can now easily decide on a few embargoes, because Britain is just a small island in the Atlantic at this point. Nothing that Britain can do can really harm the Chinese - or India - or the United States for that matter. Do the British want to be the 51th state of the US with no voting rights? Or do they intent to hope that the European Union is nice to them? If Mr. Cameron desires to imitate his iron lady: Mrs. Thatcher never ever actually exercised a veto in the EU. She threatened to use it a lot, yes. But she never excercised it. Because to actually do so is self-defeating.
The most distressing thought, however, is that Mr. Cameron apparently was quite willing to transfer more sovereign rights to Brussels. But only if the financial industry in the City of London gets a few promises. And this was so important to him that he was willing to sabotage the European project if necessary. Who do you represent Mr. Cameron? The British people or their bankers?
Unless there a very well hidden game being played here, the whole situation looks like a complete breakdown of the traditionally excellent British diplomacy.
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Last but not least I have a question for the British press. Apparently Mrs. Merkel is the reincarnation of Hitler. Germany, you say, should show more solidarity with Europe. Now, Germany, so far, has accepted a potential cost of 210 Billion €. For our american friends, if you scaled this according to the US's GDP and expressed it in dollars, that is the equivalent of about $1.2 trillion that Germany has declared itself willing to pay to other European countries if need be. I wonder how many Euros/Pounds the European solidarity has been worth to the British so far ...
Over here the story, perhaps not surprisingly is framed rather differently.
ReplyDeleteThe core of the euro crisis is part that nations spend more than they earn, part that the banks collapsed in 2007 catapulting governments into risky positions but also part because the way Europe trades.
Germany is fascinated by exports, by its position as one of the world's leading exporters. How do you export however to people who can't afford your goods? You extend them credit.
Thus the Euro-crisis has a lot to do with Germany selling goods to Southern Europe that it knew they could never pay for. And now you want us to bail out your Euro? There's a reason we didn't join it.
As for European solidarity every country will tend to support a notion that sees someone else paying. The Euro could have been sorted out by taxing exports but that would be bad for Germany. It could have been sorted out by reducing agricultural subsidies but that would be bad for France. instead it's been proposed to solve it by passing the bill to the Brits.
Can you not see why we said no?
I think the other main driver - apart from the economic aspects mentioned by stabs - is inevitably political.
ReplyDeleteEver since the Delors Commission started the process of European integration, there has been an understated position - "You can't have economic and monetary union, without political union"
This is what is now being proposed for all the indebted European states. Their budgets and fiscal policies will all be overseen from the Brussels centre.
I'm not saying this is wrong. It absolutely follows that if you want the monetary union you have to accept the political union.
Mr Cameron's position (and mine although I didn't vote for him) is that the price of the economic and monetary union is too high.
Who is he representing? Me, for one.
Here's the core of the problem from a British perspective:
ReplyDeleteWe're not part of the Eurozone. We dn't want to be part of the Eurozone. WEe have an agreement with the other countries of the EU that we don't HAVE to be part of the Eurozone. And like it or not, our financial services industry is a major foundation of our national economy, and anything that damages it is going to damage our economic recovery.
So when France and Germany come along and tell us that they want to wreak havoc on our economy to rescue their experiment in financial union, which we never wanted to be a part of in the first place and have their solemn promise that we DON'T have to be a part of, we're understandably reluctant.
To be honest, the euro would be better served by a swift amputation of some of the weaker members who shouldn't really have qualified in the first place - not just Greece. You could build a strong currency centred on France, Germany and the Benelux countries and then slowly admit more members who have proven that they genuinely qualify (as opposed to lie and have their lies accepted on a nod and a wink by politicians desparate to build a vision of a grand united Europe, ready or not).
I think to add to what stabs said another key point that caused the Euro Zone debt problems is the fact that the exchange rate of the Euro is artificially inflated by German success. This has been great for germany as if it wasn't for the Euro the relative strength of the German economy would of pushed up the German exchnage rate and hence the price of German exports. It is terrible for the weaker economies as the weakness of their economies would of pushed down their exchange rates making their exports cheaper.
ReplyDeleteRegarding what Cameron did it is being reported over here that effectively Europe wanted to make banking the scapegoat and raise a lot of taxes on banking. Due to the relative size of Britains banking industry this would of been a much bigger issue for us that the rest of the EU. To use your own analogy if the other 26 countries had wanted to raise massive taxes on the German car industry do you think the Germans would of been willing?
In the long term it is hard to tell what effect this will have. Britain is still in the EU and is still one of the largest economies in the World so I personally think the other EU economies would be stupid not to continue to include Britain to increase the standing of the entire EU block on the world stage.
I must admit despite not voting for him I agree with Cameron's decision based on the choice he had. I think the issue is could better diplomacy earlier have helped avoid this choice altogether.
As Nils pointed out in his Merkel posts, this crisis is, of course, partly manufactured, or at least exacerbated, by European elites anxious to push the political union dream forward. Fair enough on that.
ReplyDeleteThe problem with Cameron is that he's been frightfully clumsy about the whole thing. It's not like the Eurocrats didn't expect British opposition, and it's not like there hadn't been contingency options prepared. He had plenty of ways to protect the City behind the scenes. Van Rompuy was offering him a Gaullist case-by-case opt-out from ECJ enforcement decisions. There was latitude for watering down the language of the treaty ("without infringing the single market," etc.) up to the last moment.
It was an irresponsible move, for domestic political consumption. The Lib Dems should walk.
Well, to not want to join a more united europe is one thing. And in my opinion, Mr. Cameron could have told all other nations that he doesn't want to participate. But, he didn't do that.
ReplyDeleteInstead he was apparently quite willing to transfer the right about the national budget to Bruessels (partly) but only if he gets a few promises for his banks.
And then he doesn't even achieve this! Honestly, this boggles my mind. Would Mr. Cameron really have traded the will of the people against the benefit of the banks? And what does he win by completely failing ??
I mean, at this point the EU can decide on tigher bank regulation with 50% majority. And most nations don't actually like Mr. Cameron much now that he tried to sabotage the European integration (something most of them want very much) with some special demand. It's not like other nations can't imagine some special demand that would help their economy. But they didn't use this special demand to sabotage the european idea.
About what will happen in the future, I think this is quite probable.
I don't know a huge amount about politics or economics but I do know that the 'City of London' contributes a vast amount of revenue to the UK coffers and thus parliament tries to protect it at all costs. Frankly, they are terrified that Frankfurt will become the biggest European financial centre and kill London in the process.
ReplyDeleteAll of this goes back to the 80s when Thatcher shut down Britain's manufacturing and exporting ability and essentially turned London into one giant financial and service centre. If we lost the finance sector in London, it would probably cripple the country.
Again, I don't know a lot about these matters, but it does seem that governments, time after time after time, always just think about the short term and never the long. Even Cameron's decision to radically cut the public sector here is being done so quickly that we should be 'debt free' in 4 years... which just so happens to coincide with the next general elections.
Cameron's move was effective for 3 reasons:
ReplyDelete1) Satisfied the British public's appetite for 'standing up to Brussels' (whatever this means).
2) Satisfied Conservative back benchers who claim that Tory interests are not being pushed in a coalition government.
3) Satisfied the financial services organisation that bankroll the party.
The elephant in the room is that the U.K has been punching above its weight for a quite a long time on the international scene.
Well, if the Brits don't want to be part of the monetary union and have their own currency and so on, that's fine.
ReplyDeleteBut why do they think they have any vote at all regarding the Euro then?
Let them do their own thing and then make a tax for investments, deposits and bank accounts for foreign countries, while obviously GB counts as foreign.
GBs economy will be gone then, but that won't be EUs problem...
On that note, here's a great quote from "Yes, Minister" a BBC tv-show from the 80's:
http://en.wikiquote.org/wiki/Yes,_Minister#Episode_Five:_The_Writing_on_the_Wall
It is nice to read comments from people living in these countries. When it came to the US I tried to state some historic perspective on why many of the US citiznes believed as I do. I find it facinating to read the smae from citiznes of other countries about their country.
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