Rhetoric and platitudes but no real deal in Europe

The “historic” agreement between the eurozone and europlus countries may have pleased Sarkozy, but with no real action plan announced, Britain is better off not putting its keys in the fruit bowl

Sarkozy is already pointing the finger across the Channel
Simon Miller
On 9 December 2011 12:20

The London Underground is a past master at Orwellian language but it surpassed itself on the Northern Line this morning as it announced a good service despite a ten minute wait for a tube at rush hour.

But even the tube has to bow its head to the French for its language as our erstwhile neighbours across the Channel accused David Cameron of being “like a man going to a wife-swapping party without a wife”.

Actually Cameron was more like a man who went to a wife-swapping party only to find that the French co-hosts had arranged the numbers to make sure the UK goes home alone while Paris and Frank have their way with Britannia and her purse.

Basically, Sarkozy has got exactly what he wants, which is to point the finger across the Channel during an election year if this agreement goes wrong – and it will go wrong.

What we see is a tweaking and strengthening of the stability pact that has repeatedly been broken by certain members of the eurozone.

There are no real proposals for fiscal union; no increased powers for the European Central Bank; no real transference of debt that marks a true union; no bond issuance; no banking licence for the European Stability Mechanism (ESM); no real plan to get the eurozone out of its mess.

What we have instead is yet further erosion of sovereignty for member states amid platitudes that the leaders have actually done something.

Somehow, eurozone member states should have their budgets balanced or in surplus despite the fact that the how is an issue that has not been addressed.

In addition, they must report national debt issuance in advance and if a member state breaches the 3 percent deficit ceiling it risks sanctions. Now where did we hear that before and how soon will France and Germany be the first to breach it again?

There’s more: powers that allow monitoring and assessing draft budgets before they are presented to national parliaments – you know like democracies do? – will be rushed through before the next budgetary cycle.

And let’s have a look at how the actual rescuing of the eurozone is going.

There is going to be a €200bn (£171bn) bilateral loan deal (with €150bn coming from the eurozone) to the International Monetary Fund presumably to circumvent German objections to greater powers such as bond issuance from the ECB. You see the money is probably exactly the same cost to Germany but as it will be issued via the IMF it is not the same, capiche?

In addition the ESM will be capped at €500bn. Now the ESM is a fascinating bit of untouchable bureaucracy. When it comes into power in July, the directors and officers past and present will be exempt from prosecution, the ESM will be able to demand monies from member states and they must hand over within seven days without quarrel, and all documents and papers will be kept secret.

What a marvellous piece of technocracy and what a marvellous advert for an organisation that likes to lecture other countries on democracy and freedom.

This is nothing but another plaster on the festering wound that is the euro

No real solutions, no real cash, just runes cast out into the wind in the hope that the fiscal gods look kindly down on this rotten core.

It may be good politics for Sarkozy to issue demands that no British Prime Minister could ever accept so perfidious Albion can once again play the role of the bad guy (who writes Europe’s script, Hollywood?) but, to paraphrase Terry Smith of interdealer broker Tullett Prebon, it is certainly better to have missed the boat rather than watch them rearrange the deckchairs on the Titanic.

Furthermore, the accusation that we are “isolated” is absurd. We are still the same net importer of euro goods, still a member of the EU, and we still have the financial power that Germany and France have always coveted.

So if we are “isolated” then, in the words of the famous cartoon, all I can say is “very well, alone”.

Simon Miller is the Editor of Financial Risks Today. He tweets at @simontm71

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