Friday, December 9, 2011

The Euro Summit Didn't Go Very Well (Updated)

Opinion here. Sounds like another futile attempt to herd cats.

(Update) And this from The Economist:
What is clear is that after a long, hard and rancorous negotiation, at about 5am this morning the European Union split in a fundamental way.

In an effort to stabilise the euro zone, France, Germany and 21 other countries have decided to draft their own treaty to impose more central control over national budgets. Britain and three others have decided to stay out. In the coming weeks, Britain may find itself even more isolated. Sweden, the Czech Republic and Hungary want time to consult their parliaments and political parties before deciding on whether to join the new union-within-the-union.

So two decades to the day after the Maastricht Treaty was concluded, launching the process towards the single European currency, the EU's tectonic plates have slipped momentously along same the fault line that has always divided it—the English Channel.

Confronted by the financial crisis, the euro zone is having to integrate more deeply, with a consequent loss of national sovereignty to the EU (or some other central co-ordinating body); Britain, which had secured a formal opt-out from the euro, has decided to let them go their way.

Whether the agreement does anything to stabilise the euro is moot. The agreement is heavily tilted towards budget discipline and austerity. It does little to generate money in the short term to arrest the run on sovereigns, nor does it provide a longer-term perspective of jointly-issued bonds. Much will depend on how the European Central Bank responds in the coming days and weeks.
(Second update) The commentary at Der Spiegel is uniformly condemning of the British government's decision to veto a change to the EU treaty. For instance, this article notes intense criticism from German ministers, including statements that British PM Cameron is a coward, and states:
But despite all the frustration, the message is clear: The European project can not be allowed to collapse because of the UK's obstinate attitude towards the debt crisis. Cameron's critics are sending a clear signal to London: If necessary, things can carry on without you. Those critics are clearly hoping that Britain's decision will come back to haunt it at some point, and that the country will come to realize what a serious mistake it was committing when it turned its back on Europe.

This approach is also apparently being followed at the highest level. The 17 euro-zone states, together with at least six and maybe as many as nine other EU countries, aim to conclude a separate stability treaty in order to defuse the debt crisis. It's a risky step, because it is not yet clear whether the proposal can easily be implemented legally. But those member states are also sending a signal, namely that they can move forward without the British.
Does this mean that Britain is on the way out of the European Union. Maybe, says this opinion piece also at Der Speigel:
The euroskeptics now hope that the veto will be the first step towards leaving the EU. They share this wish with countless European parliamentarians, European Commission representatives and heads of state and government who are all tired of British blockades. But it probably won't happen. On the contrary, the British government has already declared its next battle in Brussels. They intend to ensure that the new parallel structure of the fiscal union doesn't violate EU law.
I'm trying to think of a historical analogy, and the only one that comes to mind is the adoption of the U.S. Constitution in lieu of the Articles of Confederation. Except, Britain rejection in this case would be like Virginia having failed to ratify the Constitution and instead insisted on following the Articles of Confederation. A formal split would have been inevitable, and likely is in this case.

However, I don't think this is necessarily a bad thing. As I've noted, this mess was caused by attempting a currency integration that was inappropriate. Britain has not rejected the idea of a free trade zone and cooperation that underlay the European Union, but has instead rejected a European Union that would be a de facto Franco-German empire. I would also note that in pushing ahead for greater integration, the other EU members have not adopted a plan to save the Euro. They are simply giving up sovereignty, hoping that it will somehow result in saving the Euro, with still no clear plan on how to get there.

No comments:

Post a Comment

New Weekend Knowledge Dump ...

 ... from Greg Ellifritz at  Active Response Training . Plenty of good stuff here, but let me focus on a few.     Greg links to an article f...