Friday, August 19, 2011

This is another EU Special, reflecting the importance of the issue. And the fact that most readers aren't terribly interested in reading about it in my normal posts. . . .

In Britain's obnoxious right-wing rag, The Daily Mail, columnist Simon Heffer makes the following points:-

Be in no doubt what fiscal union means: it is one economic policy, one taxation system, one social security system, one debt, one economy, one finance minister. And all of the above would be German.

If Germany is to continue to prosper, Europe must prosper: but a ruthless solution may have to be imposed in order for that to happen. If the European project is to continue, Germany will not merely have to underwrite it, but control it.

For good measure, he ends his article with a gratuitous reference to Hitler:-

Where Hitler failed by military means to conquer Europe, modern Germans are succeeding through trade and financial discipline. Welcome to the Fourth Reich.

On the other side of the political divide, The Guardian dismisses this as a rant and totally rejects the notion that we're moving towards an EU whose members' budgets and expenditure are controlled by Germany:-

Nobody, least of all in Germany, believes the often vague ideas embraced by Merkel and Sarkozy stand a cat in hell's chance of adoption.

Thus, the notion that the EU's economic and monetary affairs commissioner would be empowered to veto national budgets for their failure to comply with the stability and growth pact is a non-starter. All we're really talking about is Van Rompuy's own idea, endorsed by the commission, for a 'European semester' – a six-month period in which Brussels scrutinises and suggests amendments to national budgets.

What Merkel and Sarkozy, both facing re-election within the next nine to 24 months, are talking about is reinforcing their political control of the eurozone – and possibly the EU.

The so-called German takeover of Europe is, in reality, a typically messy stand-off/compromise between the EU's two biggest protagonists: France and Germany. Sarko gets Merkel finally to back his European version of the Tobin tax on financial transactions (a total non-runner) and she gets him finally to back the German model of a "debt brake" written into national constitutions (ditto).

So, if this columnist is to be believed, not only did Tuesday's Merkozy summit produce only words but in addition these were meaningless.

No wonder the markets are spooked.

Interestingly, someone has now extended the Two-Euro idea into a Three-Way Split, placing the UK in the Scandinavian/ Nordic group:-

It looks now as if the whole of the Brussels system has become the sick man of Europe. But we do not know how to get the Brussels system out of the bed in which we are all lying.

If no progress can be made there might be a split between three groups: the Scandinavian countries, the strong central countries and the weaker Mediterranean powers.

This would give Britain, Ireland and the Scandinavians a broader opportunity to govern their own affairs in the light of their own economic conditions. It would enable the weaker Mediterranean powers to be supported through a separate system with less exposure to the finances of the rest of Europe. It would allow the core countries of Germany, France and their immediate neighbours to define the eurozone’s objectives so the burden was manageable for them.

If Europe was starting with a blank sheet, there might well be a reorganisation along these or similar lines.

So . . Who's right? Who's got the best crystal ball? Does anyone really understand what's going on? Can anyone come up with a global solution before world events engulf us all and take the decisions for us?

Stay tuned . . .


Mike the Traditionalist said...

If it ain't broke don't fix it. I believe if Europe had just stuck to the idea of the common market things would probably not be in such turmoil. The way things are going at present the weak, who are tied to the Euro, are bringing down the strong.

Ferrolano said...

Hum, a three way split with Britain joining Scandinavia, would London be the leader of the group?? And, would Finland be part of that group or would they be one of the German satellites? If they were to become part of the Britain Scandinavia (BS) group, it would make a curious mix of currencies; pound, kroner (in various forms) and the euro.

Colin said...

Valid and interesting questions, I, of course, have no bloody idea . . .

Pericles said...

I back Ambrose's proposition of Germany, Austria, Netherlands & Finland issueing a new currency; Teutonic Mark, Nord Mark or pick your own name.

Ireland may revert to the Punt, aligned to the Pound & Iceland had better back track on the idea of adopting the Euro, or they'll be well & truly up the Swannee. The Swedish, Norwegian & Danish Kronors will prosper.

Kpau said...

Hmmm, I can just see a scenario with a split Euro...
All the PIIGS together in a fiscal union, German-France in another. Think many investors are going to be buying that national debt, given the choice between a strong German/France backed currency and a weak southern European currency? Hyperinflation, spiralling national debt costs and defaults for the weaker currency - and the stronger currency will be hit by its currency rising in value, and not being able to export as a result.
Remember, the Germans were enthusiastic about the euro in the beginning because most of their exports went to Europe, and the high value of the mark kept hitting their industry exports.
No, Germany / France any going to keep tightening the screws on the weaker EU member states to get their affairs in order - hark at this weeks referendum!

Colin said...

Suspect you are right. But will the people stand for this? As with the change to the Spanish Constitution. Vamos a ver.