We were told it was weeks to save the Euro. That came and went. Now we have apparently another few days. Mrs Merkel seems to think there is plenty of time to sort out the problems of governance, transfer payments, and control of taxes and spending. Mr Sarkozy seems to be in more of a hurry, partly because he faces an earlier election.
I think there is still a chance that Germany will partially relent on bond buying and money printing by the ECB to buy them more time. There is also a chance that the markets will force break-up, moving faster than the pace of integration and problem solving within the zone. I put it around 50/50. It’s all in Mrs Merkel’s mind. It’s the race to change German public opinion about printing and borrowing together versus the speed of the market imperatives.
Today I invite you, the readers, to tell the world what you think the Euro’s chances of survival are. Do you think they will print and spend enough to buy them time? Do you think more austerity in Greece and Portugal, Spain and Italy, on German recommendation, can pull them through? Or do you think the relentless pressure of the bond markets will force countries out of the currency?
December 3, 2011
I don’t think economic matters are the priority in the minds of Merkel and Sarkohzy. Their guiding light is the creation of a country called ‘Europe’ (run by the pair of them of course). The logic then is that they will do anything to keep this chimera alive. So stamping on other countries is well on the cards if that route will keep their home electorate voting for them. Of course eventually those other countries will rise up – Marx’s comment about ‘having nothing to lose apart from their chains’ is just a simple statement about what people will do when so cornered – and so civil war will erupt.
So for what it is worth, my analysis is ‘even more of the same austerity’ followed by the war Merkel claims she does not want, yet will have caused.
December 3, 2011
I agree. The most important factor is political not economic. It is reported that Obama is putting pressure on Cameron to throw the UK into the EU abyss to support Germany and France, possibly because the financial consequences will affect his election chances next year. Who cares about Obama’s views, he certainly made it clear that he does not like the UK or has supported any of its interests. I truly hope Obama is booted out of office.
Europhiles and Lib Dems also want the same (sordid despised little party with disproportionate influence in government and came a very poor last at the previous election). It was further reported that Cameron was trying to make a claim to Sarkosy that treaty change was not necessary, presumably to prevent a referendum taking place in the UK. If there were a treaty change the UK would have a referendum and is most likely to say NO.
Merkel faces electoral defeat if she goes with the plan to save the EU. Obama faces defeat if the EU problem is not solved and is putting pressure on all three to save his own neck, Sarkosy faces defeat if France goes down the pan because the EU is not saved. Cameron is an inexperienced PR man who will listen to whatever sounds good, flatters his ego and kudos. Therefore Merkel will say no and the others will blame her for the catastrophe.
Cameron will claim that all along he did not want to join the EU to save his neck for the next election. Unfortunately for him the tide has already turned against him. They do not believe a word he says. He has become discredited in a shorter period of time than Brown.
The public have already drawn the conclusion that he is an inexperienced Europhile who has the personal characteristics of a rich public school boy bully who is weak when faced by peers of the same strength. He has failed to deliver on all key policy issues and there has been no change from the previous Labour government that everyone hated. It is difficult to imagine anyone like Cameron could score such an almighty own goal.
December 3, 2011
Recommend 1.
December 3, 2011
Recommended 2.
December 4, 2011
“If there were a treaty change the UK would have a referendum and is most likely to say NO.”
No effort will be spared to design any treaty change so that governments, especially the Irish and UK governments, can easily avoid referendums.
They’ve had practice at doing that – this is from October 2010:
http://euobserver.com/18/31163
“European leaders have given way to German demands for a change to the European treaties, but the procedure for the change and its size has been calculated explicitly to avoid the danger that it could provoke referendums in some EU states.”
And that was successfully achieved in both Ireland and the UK – here is the statement Hague laid before Parliament on October 13th:
http://www.fco.gov.uk/resources/en/pdf/eu-section5-statement
“In my opinion the European Council Decision of 25 March 2011 amending Article 136 TFEU with regard to a stability mechanism for Member States whose currency is the euro adopted under Article 48(6) TEU does not fall within section 4 of the Act and no referendum is required in the UK. ”
As a last resort the Bill to approve the treaty change could include words such as “notwithstanding the European Union Act 2011”, and as that “referendum lock” law is unentrenched against normal repeal that would remove any legal requirement for a referendum.
December 3, 2011
Sarkovy will be out of office next May. Merkel has another 18 months. The Merkozy duality is about to end.
December 3, 2011
And this is Mr Cameron’s Iraq moment.
December 3, 2011
Or perhaps his “Major” moment.
John Major, according the Lamont, said that it takes an “event” to change policy: the following day policy was changed when the UK was forced out of the ERM.
Perhaps the current euro crisis will provide an “event” enabling Cameron to change policy.
December 3, 2011
But Sarko will be replaced by a Socialist. He is doing what French politicians always do. He is looking after France first. The French lose the most money of all if the PIIGS default.
December 4, 2011
Yes, I don’t think we want him to be replaced by a Socialist.
It would be interesting to hear from someone more on this e.g. what are their polls indicating, are there any impressive candidates (from the little I’ve seen I don’t think anyone has struck me as “presidential” and therefore I’ve been thinking that Sarko will get back)?
December 3, 2011
“Events, dear boy, events”! There will be something very soon to fracture any edifice being hurriedly assembled to cover the fissures yet to be witnessed. My bet is it will be Ireland that forces the issue by a withdrawal from the EU in accordance with the provisions of Lisbon. As in the case for The UK, so Ireland.
http://www.sovereignty.org.uk/features/articles/sov1.html
December 3, 2011
I have found myself bemused at the notion the Irish have any chance at all in a “fiscal” union. Their hope for recovery rests on that sacred low corporation tax.
December 4, 2011
I don’t know whether its me but I could find anything re the Irish situation on the link.
I was interested in your comment and wondered whether anyone could comment on what the feeling is in Eire. Is there a serious prospect that they may leave?
Whilst hoping they will, could such a result be particularly bad for us – I thought, but am not sure, we have particularly large exposures with Eire which they would default on because a devalued Punt wouldn’t be able to pay-off the loans in Euros?
December 3, 2011
Come on, a European war is very unlikely, for one thing – none of them have an army.
There is a reasonable probability that Merkel will fully triumph. The debt problem isn’t a question of overall resources, it’s a question of political ability to apply them in the medium (say 5 years) term.
Merkel’s is certainly willing to do this, however she has to convince the German public, and she is doing this brilliantly, she has brought them to the brink saying that she is against the obvious solution (ECB printing money), she requires the public to beg her to apply this painful solution.
It’s her style, leading from the rear, subtly shaping opinions and then acting on them “under pressure”.
My prediction: Euro will survive, Greece and Portugal may drop out but the rest will stay and during the next 5 -8 years will shape up and run as tight a fiscal policy as needed.
Will the people of these countries be happy? Irrelevant, they will cry and bear it.
December 5, 2011
Don’t be so certain about the war argument – wars have started over lesser issues than this.
December 3, 2011
Me, I am betting on the markets. I can well remember the ERM, you see. To me it is just a re-run of that.
By the way, Mr King yesterday was reported in the Telegraph to have made this statement: the British Banks are exposed to £16 billion directly in Europe. They are also deeply (80%) involved in personal and business loans there too. I am sorry to be so vague, but it is the best I can do.
Doesn’t this mean that, if the markets do force reality on the EU, then we English will get off with a bloody nose – and only that?
IF – big IF – Mrs Merkel manages to get the Germans to break their promise never to use the ECB as a printing press, then won’t there have to be a new treaty? If so, hasn’t David Cameron promised us all a referendum? Did I hear that right or was I dreaming it?
December 3, 2011
You did hear that right, but a few loopholes – such as FCO’s ‘discretion’ – were deliberately put in for just such a situation. And the official line is that if there is a treaty change that only effects the eurozone (which is of course a ridiculous thought as if they choose wrong and have years of stagnation that will effect everyone in the EU) even at the level of 27 countries we will not get a say – on the grounds that it is not a ‘transfer of powers’.
Its a little like Dave’s promise on Lisbon…
December 3, 2011
I think, on balance, it will be a case of Merkel saying one thing while preparing for a break up. I cannot see any real long term alternative to breakup that will work democratically.
Cameron assures us he will look after the UK’s interests no mention of a referendum.
Does anyone trust cast jelly Cameron to do this – I think he has no credibility left, given his actions so far?
Meanwhile he still does nothing to cut public waste and virtually nothing to create growth. Anything he does now will probably create growth for Unite and Ed Miliband.
December 3, 2011
Interesting to see that Clarkson’s poor joke was apparently scripted and approved by the producers too.
On “any questions” Sadiq Khan even brought up Clarkson’s old statement (about) Gordon Brown (etc – I don’t want to get into personal mud slinging on the back of Clarkson’s remarks -ed)
December 3, 2011
Clarkson is a one trick pony when talks about cars he is witty and speaks from the heart. When he is asked to talk about anything else he is an idiot who just pours petrol on the fire as most people with some wit and intelligence can do. Lets have a go: (please don’t -ed)
December 3, 2011
Clarkson had a very good point it is selfish, absurd and outrageous for the state sector unions to strike when they are better paid and have pensions worth about 7 times those of the tax payers who pay for theirs. Also when private pensions were also recently mugged by Gordon browns tax changes (with little protest from the state sector unions).
He just went rather over the top as is his way. The real outrage is the absurd bias of the BBC coverage which could have been scripted by Unison.
December 3, 2011
Cutting state pensions will not improve the scandle of private company pensions. This seems to be tour main concern. A pay cut for me does not mean a pay rise for you. You cannot spend this in Tesco. Should a company making massive profits not provide a pension scheme or pay a wage able to fund a pension scheme? Not to mention a wage that does not need to topped up with tax credits and thee like to make it liveable, but that’s another story. They are in effect subsidised by the taxpayer who will have to pay means tested income support in old age.
December 3, 2011
A pay/pension cut in the state sector or fewer state sector workers does indeed mean less need for tax and borrowing, lower interest rates, lower taxes and businesses that can again expand and compete in the world.
December 3, 2011
Did you actually hear the clip, Lifelogic? When I finally did, courtesy of John Humphrys this am, I fell about laughing. I don’t like cars (as you may once or twice have gathered) and I haven’t got a boy’s sense of humour.
The final punchline in the joke that caused the tidal wave of mock outrage was against the BBC, not the strike. It wasn’t coarse, it wasn’t laboured, it wasn’t compulsorily left wing and worn out. It certainly wasn’t over the top, because that was the whole point: the BBC requires violently opposing views to be given every time a moderate and sensible point is made, and that was what he was sending up.
As with the PM’s light-hearted jokes, it has been grossly misrepresented for political reasons, and people really shouldn’t parrot that it was a bad joke or in bad taste. It was funny, and it was apposite. That is what the left can’t stand, because it also made with gentle irony a good political point before the traduced punchline, that was inconveniently out of kilter with the spin being put out that day.
December 3, 2011
Bazman: “Cutting state pensions will not improve the scandle of private company pensions.”
Perhaps you do not understand the current economic situation. Here it is:
If you are working age below 40 you will never draw a state pension. Not by the way, because the nasty Tories have taken it away.
Once the market has finished with the Eurozone, it will move on to the next most vulnerable economic bloc – Sterling.
When that is finished with, government revenue will rely solely on tax revenue, that will contract dramatically in that type of circumstance too.
December 4, 2011
Rose – I did not hear it in full but the real outrage was the BBC consistently biased, pro state sector union coverage.
Some one did badly need to puncture that I agree.
As it say on Speakers Bercow’s expensive new coat of arms “all are equal” (but some will have state sector pensions of seven times the size and speakers themselves will have pensions of £2M).
December 4, 2011
The real scandal is that the taxpayer will pick up the tab via means tested income support for pensioners due to lack of provision by the taxpayer or private companies. That is the economic situation in the future. Not your petty middle class concerns that someone, ie a working class state worker, is getting something for nothing.
December 4, 2011
Lifelogic, you missed a really good joke then: he was saying, in agreement with the BBC woman presenter, that life without the boot-faced militant bit of the state sector was pretty sweet that day: just as efficient, and in many ways more pleasant. Traffic lighter, restaurants emptier, airports running more smoothly, etc. That is what the left hated us being told, and what they didn’t want you to have replayed. His supposedly offending punchline was just added on at the end, as a BBC tease, and makes no sense at all if played or read on its own.
So his main point was to suggest, with gentle irony, that the absence of the people on strike hadn’t inconvenienced us at all; far from it, life had been better without them. And then, because the BBC always requires balance, he added, in mock pub bore mode, that they should all be shot. But what we were supposed to infer from his overall joke, was gratitude to them, for staying away. Unforgivable. And unrepeatably subversive, because it was so engagingly funny.
December 4, 2011
Clarkson is in danger of becoming a blustering Colonel Blink character like many of the contributors on this site.
December 5, 2011
That is what he was sending up.
December 3, 2011
Even Jacques Delors now admits “Euro doomed from start” according to the Telegraph headline today – as everyone sensible thought at the time. While Clark, Heseltine, Major the libdems and all the rest (many still in government under cast jelly) plotted (against all the interest of the UK and the will of the people). Just to get us on board this economic Titanic still very few word from any of them to explain. why.
December 3, 2011
EUReferendum has a great post on that Telegraph article.
December 3, 2011
It is reported that he delaying the legislation for overseas aid to be enshrined in law before Christmas. Lib Dems and Mitchell applying pressure. With the Public sector pension row and language of fear for the consequences of the EU breaking up it would discredit him further. His sums simply do not add up. He is still spending more than he earns. We heard about cuts until we were sick to hear any more, but nothing in reality happened. He told the Uk public that it would pay to work- not under his government. Welfare increased by 5.2% last week. More welfare, more immigration, more overseas aid, more EU contribution, more EU bail outs, more banks bonuses. All he had to say was stop no more until we get ourselves sorted out.
Brown wrecked the private pensions and the Coalition have done the same to the public sector- who will help all of us when we are old? Blair, Brown, Clegg, Cameron?
Public sector pay and pensions drastically cut. Job seekers leaving university or people entering work must recognise that it does not pay to be in the squeezed middle. Immigrants realised that the UK is a welfare free state where housing, health, education and a living are provided for free. Who could blame them for coming here in their droves and bypassing France and Germany. The UK losing 140,00 asylum seekers must bring confidence to those who make such a claim. How do they pay tax or NI if they are lost to the system?
I agree with Lifelogic, Cameron is has proven to be useless and far worse, like Clegg, you can not believe a word he says.
December 3, 2011
One thing Merkel said after the Paris conference was that the Euro ‘has been good for Germany.’ That’s why Italy in particular will have to give it up. What has been good for Germany has hollowed out Italy’s industries.
December 3, 2011
I also read that when the wonderful “free at the point of use NHS” decides that Elderly patients should have “do not resuscitate” orders on their notes, it then often fails to contact their relatives to inform them of this fact.
I suppose it is a lot of hassle for staff to make such phone calls so much easier to just ring them after the death I suppose!
December 3, 2011
East Europeans love the WHS. relatives even visit so they can receive treatment for free. This is in line with the loony left Lib Dems free for all.
December 3, 2011
How exactly are they going to know who the relatives are? Usually if someone is listed as DNR they’re in a coma.
December 3, 2011
The same way they find out after the death or from public records or from records on admission of course.
December 3, 2011
Free at pint of use? Again I ask you what will be paid for and who will pay if this is abandoned? You cannot answer this and on this basis do not care if the person is unable to pay and cannot afford treatment. Absolutely unacceptable in modern Britain and political suicide for any political party.
December 3, 2011
A safely net is needed for a very few – but people pay for food, water, heat, light, housing, hair cuts why should they not pay for health and they should certainly stop all the quack treatments they fund.
December 4, 2011
Middle class ideology on the masses, but how many middle classes have the resources to pay? The red herring of quack treatments has not been missed.
December 3, 2011
Do you think they will print and spend enough to buy them time?
It is hard to imagine that enough money will be printed quickly enough. This could be quickly reversed if Germany changed tack and endorsed Big Bazooka, as part of the comprehensive solution.
Do you think more austerity in Greece and Portugal, Spain and Italy, on German recommendation, can pull them through?
I think that more austerity in peripheral troubled countries on German recommendation is going to be increasingly challenging politically and possibly in terms of law and order in the troubled countries. Perhaps, increasing austerity would be acceptable, if it went hand-in-hand with secure financing and other measures like stimulating investment.
Or do you think the relentless pressure of the bond markets will force countries out of bloc?
Sadly, I think that market pressures will eventually force countries out of the bloc. As soon as one sovereign or major bank falls, the rest will collapse like a stack of cards. History has shown that the only way to counter the markets is by releasing virtually unlimited central banking resources – there is is the challenge, the ECB is not behaving like a central bank and being an effective lender of last resort.
Whilst I respect the German position and Angela Merkel’s political skills, I fear that Germany is doing too little and too late. It is time for the German media to saturate German public opinion with the huge economic and political cost of the failed Euro.
December 3, 2011
Pretty much what I think. Slightly OT, I have been wondering why Cameron used the term ‘big bazooka’? The bazooka was a weapon of destruction used mainly against tanks (panzer) so I guess it was just a way of raising interest, but bearing in mind Germany’s leading part in all this, should he not have said ‘panzerfaust’?
Apologies for trite response but couldn’t resist bringing in the German equivalent of DC’s bazooka….
December 3, 2011
We are about to see the vindication of the maxim ” You can’t buck the market”.
December 3, 2011
In my opinion, the major problem with the EU and Eurozone is the tendency to delay hard decisions as long as possible. As such, I think they will try to do this again on December 9th.
The markets may rally for a few days then there is a great chance that the markets will finally force the issue and cause a catastrophic collapse before the 10th anniversary of the Euro on 1st January.
IMO, the current economic crisis should be approached as if we (Europe) were at war. Total commitment to sorting out the mess and promoting economic growth. It is THAT serious.
December 3, 2011
Germany will come to the rescue of the euro. The next summit will agree full fiscal integration and governance that Merkel can take back to the Germans with promises that if they back the euro now the problem will never arise again. So the euro will be saved but that will only be the first step on a road fraught with many economic, social and political dangers. Any of which could be as bad or possibly worse than the current crisis. The future is unknowable but it is possible to see the paths available and which one presents the better route. Saving the euro is the most dangerous but the destination promises a superstate and the security and strength that offers. The other path leads to a loose federation of sovereign states that may or may not stand together in times of adversity and would only cooperate with one another in an ad hoc way. We euro sceptics prefer the latter path because for the strength and security that the EU promises we believe it demands too much in return. However with the USA no longer prepared or capable enough to maintain the mantle of Europe’s protector and the rise of China and the Arab spring looking likely to produce more Iran like countries the first path may be one of necessity.
December 3, 2011
Antisthenes – I think your comment is very wise and describes the “pragmatics” well. I don’t think there are going to be perfect choices for us. I heard someone (either Mervyn King or a commentator, I can’t remember) say this week that economically, we were somewhere between “grim and catastrphic” and I rather think that this applies to Europe as well. It is rather sobering to reflect on those words – they are actually shocking.
Personally, I would love to be out of Europe. Although note that we would then need a strong Conservative government to reverse the objectionable elements from the EU that, of course, are now incorporated into our own legislation – is this likely to happen? Just don’t know, but my guess is that it would not, certainly to the extent that many of us would like e.g. employment laws, immigration – can one really see these being sorted out? Simply coming out of the EU would not be sufficient in itself.
Antisthenes also highlights the strategic context. I know that China has many future problems to face and “limits to growth” but I strongly feel that we are seeing an historic shift to the East and I don’t think the general population has a clue about the implications of this.
We are living through an absolutely momentious and historic period – people will write about us in the future (school children, in no doubt dumbed-down exams, will be asked to empathise with us!). It is not just the pace of change in technology, but also globalisation, the rise of the East, the impoverishment of the West, US with all it’s faults not being top dog anymore, and the financial crisis that help make these challenging times. Add to this the uncertainty in the Middle East with the possibility of more Iran-like states and the possibilty that there will be military action over Iran, not to mention the danger with nuclear Pakistan, and you realise just how dangerous the current situation is. Cameron has got an aweful lot of judgements to balance.
I’d like to make the following additional points.
1. I am worried about the calls for a referundem now. I think the situation is so serious that this would be a dangerous distraction. If we do have a referendum we have to be really, really certain we will win it because that trump card can probably, realistically be used only once. I do not believe we can be sure of this outcome at present – people will be too frightened of the potential impact on employment (and those Europhiles will ensure they will be terrified, that’s how they work). Better to keep our powder dry.
2. The Europhiles are incompetent – the Euro crisis is systemic it is not an accident. However, they are also extremely ruthless and they will do everything and anything to preserve their maddnesses. This is why I find it difficult to conceive that the Euro will collapse even though on logical analysis it should. I think the EU will wreak further havoc across Europe to preserve the Euro.
3. Perhaps Greece will leave but I don’t really even see this in the very short term. Perhaps in 2 years time when things are still not working, something may happen but, right now, Europe will fudge to keep the Euro going. This may be the best policy as it gives time for banks to shore-up their balance sheets etc.
4. Having said all of that, nothing would surprise me, especially taking account of rumours that Germany has been printing new Deutsche Marks!!!
5. I think Cameron does absolutely need to get something back for Britain – he may never have the chance again. I think this needs to be done sympathetically (at first) otherwise we will all be punished by the EU. Given the problem is that Europe is ever less competitive, surely Cameron can effectively argue that there must be changes that allow Europe to compete effectively. He needs to point out again and again that in an age of great perceived austerity that diamond studded regulations are no longer appropriate – we have to get real and lower the cost of doing business in Europe. We all need to accept we are in a differnet world and we need to be satisfied with less. The PM could go over the heads of leaders and appeal directly to the young and disposessed of Europe.
6. In connection with the above, I’ve noticed whenever you hear commentators, national politicians, MEPs from European countries that they appear to be in a completely parallel universe. It is quite shocking. I find this worrying – are we missing something or are they? Go on to some of web sites of European newspapaers (Die Speigel for example) – I find the debate is totally different. So I think WE need to get onto these sites and start influencing European opinion (but in a friendly tone!!) and DC needs to start going round Europe – just getting some of the Europeans to start thinking in this way will have a rolling snowball effect.
We should encourage the cautious (neurotic) Germans to question, question the way Europe is headed. We should point out to the other countries the hideous erosion to their democracy. This is for us to do – too difficult for a government due to diplomacy.
Could Mr Redwood do a European tour? I think it would be effective. Let’s turn some of the countries – they all have votes, so we shouldn’t forget some of the smaller countries e.g. Malta, Cyprus etc.
7. I don’t think we can go through such a massive and sustained crisis – and it is not over yet!!! without some new creed or philosophy emerging. Like the 1930s. I feel in my bones that something not very good will emerge somewhere in Europe. I went to Italy in September. I had a really strange feeling that it was almost in what I can only describe as a “pre-revolutionary” mood. Somebody will emerge somewhere and will galvanise the depressed and apathetic. Who and where – is it starting to happen already e.g. the St Paul’s protest and the public reaction to it?
8. Cameron should not fear a referundum. It all needs to be depersonalised. Whatever the outcome, if that is what the people want then so be it. In a campaign Cameron could take more of a referee approach and allow a wide ranging ,unwhipped debate. The Government is the servant of the people and so it should accept what the people say – and not take it as a great personal insult. A depersonalised, un-dumbed down debate is required – in short an adult approach.
Sorry to go on but I wanted to add my bit to this excellent site. I’m finding all the comments interesting – thank you.
December 3, 2011
“Cameron should not fear a referendum” – true indeed but, alas, he does and is desperate to avoid one.
December 3, 2011
Re Point 1.
You could be right. When eurosceptics get together there can result in a feeling of euphoric inevitability divorced from reality. If the whole of the “establishment” want to stay in the EU then it will be difficult to win a referendum to leave.
December 3, 2011
Very well put.
With reference to your point 5, the relatively simple change I harp on about, that is to restore parliaments full sovereignty over all EU diktats, should be Cameron’s aim. We could then chip away all those rules and regulations we find objectionable.
December 4, 2011
I agree that something new is going to emerge from the EU following austerity. Europe is big and it will only take one person to tip over a very unstable apple cart.
December 3, 2011
No, No, and Yes. The real threat is ‘strong leadership’ that claims to have answers.
December 3, 2011
http://www.intrade.com/v4/markets/contract/?contractId=713737 has the betting market on this topic. Looks like it is just starting to move.
December 3, 2011
If they do manage to hold the Euro together by overruling democracy by “fiscal integration” it will be simply a matter of time until it is ripped apart by more dramatic events. I’ve been watching the Greek press, and there is a lot of resistance to the current austerity measures such as the new property tax which is literally being extorted by force via the threat of electricity disconnection. The current “government” still have more measures to take to meet the existing “bail-out” conditions. Can you really imagine how a budget set in Brussels with Germanic attitudes will be recieved?
I wish enough people could step back and accept reality, as much as it might disappoint their theoretical and ideological wishes.
December 3, 2011
I didn’t hear Mrs Merkel trying to change German public opinion about printing money. Neither did she need bus-loads of supporters like Sarkozy did, in his effort to change French public opinion. Merkel has a record of getting her way at EU summits and will only move after securing that her way will be followed.
No chance of the euro collapsing. Markets will calm down once a clear reform is being implemented by politicians. The Netherlands once paid more than 8% on 10-year bonds for three years and didn’t collapse. Neither will Italy nor Spain in the short term.
December 3, 2011
Peter van Leeuwen: “Merkel has a record of getting her way at EU summits and will only move after securing that her way will be followed.”
And you can reconcile this statement with prior statements that the UK must be in the European Union to be able to influence the European Union, how?
December 3, 2011
@APL: “Influence” isn’t equal to “determine” and, unlike Germany, you cannot expect to call the tune if you’re not willing to pay for the (euro-zone) piper. Germany happens to be in a strong position for this issue of the euro, but it doesn’t always gets it way.
IMHO, preventing a financial transaction tax or any other “harm” for the City is easier inside than outside the EU. Making the single market better for services (against the will of France) would be another issue where the UK would win. Abolishing the fishery policy may be difficult but reforming it (as it is a dreadful policy in practice) should be possible too. In all these cases the UK has allies.
December 3, 2011
Peter van Leeuwen: “unlike Germany, you cannot expect to call the tune if you’re not willing to pay for the (euro-zone) piper.”
Oh! That must be my mistake then! I thought the UK were paying £10billion (or whatever it is now) pounds per year for influence. So how much more do the Germans pay to get their veto, the French?
You’re gonna make me feel sorry for Holland soon as at this rate influence in the EU will be financially out of your countries reach.
Peter van Leeuwen: “Abolishing the fishery policy may be difficult but reforming it (as it is a dreadful policy in practice) should be possible too.”
Incorrect. The fishery policy enshrined in the treaties, would require unanimity to change.
Peter van Leeuwen: “In all these cases the UK has allies.”
Where have these allies been the last thirty years? Pity they seem to melt away with the morning mist.
Reply: Indeed, the UK is the second largest contributor after Germany
December 3, 2011
@APL: I don’t believe that the UK will contribute to the ESFS or the ESM, so for these euro-issues, Germany’s influence will be much greater.
As the second largest contributor to the EU (in absolute terms, not per capita) and with such smart politicians as Britain has, it should be able to negotiate an a la carte membership in time I would think. But you first need to agree among yourselves. The EU deals with the UK, not with one faction within the UK.
December 3, 2011
Peter van Leeuwen: “I don’t believe that the UK will contribute to the ESFS or the ESM .. ”
Good, would you throw your guilders down the drain? Why should we? (oops! looks like you in NL did, despite the reservations of one or other faction in the NL).
But if, and I have no reason to disagree with our host, the UK is the second largest contributor (Germany being the largest) what more do we have to do to have influence?
Become the first largest contributor?
The point is Peter, this concept of being in the EU to exert influence over the EU has been proven as rubbish!
December 3, 2011
Dear Peter,
If the politicians as you say know a clear reform that the market will accept why haven’t they implemented it already? What are they waiting for?
Sorry mate the Euro is finished, kaput, Oh it will exist as the politicians against all the evidence and common sense will continue to throw their tax payers and wealth creaters onto the bonfire of their vanity to keep “the project” alive.
Small is the new way forward
December 3, 2011
@libertarian: Small is beautiful and indeed the way forward. I just don’t see that small and big have to be incompatible, they are just different layers of organization. In large companies one sees the organization pendulum swinging between centralization and decentralization. Given a long life you would see the same in the EU. See the libertarian uprising (tea party) in the USA.
And even in a future integrated eurozone, SMEs, towns, regions and countries would still compete.
Politicians now have to implement reforms against their will, but market forces will leave them little choice.
December 3, 2011
Peter
The difference is that we are now in a paradigm shift whereby bigness, central control, top down politics and corporatism are finished. Neither can compete with nimble, reactive small, local organisations.
We need smaller self determining countries, smaller banks, much, much smaller government. The whole point and power of smallness is self determination from a bottom up perspective. The EU is the last throw of 20th century mass manufacturing, multinational conglomerate, mass media, “supermarket” banking etc. Top down control is dead, its seen to be dead, it is no more it has ceased to be. Evolution by technology has once again moved us on into a new way, as always. The politicians are the last people to adapt as they are so far detached from everyday life.
Game Over
December 4, 2011
@Libertarain:
I wonder if we’re there yet. How does a Switzerland force Goldman Sachs to break up into small bits, or force Microsoft to end its monopolistic practice? How to protect small entities to be swallowed by larger ones? I don’t see that happening anytime soon. A too small government would only enable the “law of the jungle” and we’d be ruled even more by large banks and corporations.
December 3, 2011
No amount of austerity in Greece , Portugal , Spain and Italy will make the numbers add up .
The EU’s mantra for it’s underclasses , “Freedom through work” , will be about as believable now as it was almost 70 years ago .
The most endebted countries will exit the Euro .
Reply: The current circumstances are entirely different from the appalling attack on the Jews. I am sure you do not mean to imply otherwise.
December 3, 2011
If you want a real lesson in irony, the phrase ‘arbeit macht frei’ was initially adopted on a governmental scale in 1928 by the Weimar government as a slogan which would describe the beneficial effects of their desired policy of large-scale public works programmes to end unemployment…..
zorro
December 5, 2011
Fascinating .
I’ve been to Auschvitz 1 and Birkenau and seen the wrought iron sign . Was shocked to hear it was stolen but glad it has been returned .
Our media is not doing it’s job to warn us of threats to democracy . Nobody spoke up for the gypsies when France threw them out .
We are on a slippery slope with the EU . Whilst I don’t expect mass genocide I do expect smaller scale political disappearances to increase .
With a very limited amount of work to spread around the current policy of forcing people to work longer hours until greater ages is going to make matters worse .
A 20th century solution to a 21st century problem .
December 3, 2011
Short term it will survive, but long term it will fail as some/many leave the currency to protest at the Franco German bloc dominance of Europe as a whole, especially if the continue to dictate terms as they did with Greece; many now resent this.
I wonder if someone asked similar questions about Yugoslavia sixty years ago?
December 3, 2011
Sadly, I think Merkozy will print and spend just enough to keep the Euro going: both have elections pending and neither wants to be the one who pulls the plug on the project – and in the case of Merkel, be seen to be putting their own nation first over and above ‘European unity.’
Austerity imposed on Greece, Portugal, Spain and Italy by foreign technocrats will fail; the Greeks will continue rioting and may eventually trigger a revolution. The Italians will also riot and may become ungovernable, although the Spanish and Portuguese are more stoic. As unemployment rises, there will be mass immigration.
My hope is on the Irish. I cannot understand why Paddy fought the British Government for independence for so long, just to succumb without a fight to the dictatorial governance of the EU. Perhaps when the Commissars propose imposing a uniform Corporation Tax, the Irish will fight back.
I wouldn’t want to be a German on a Club Med beach for the next few years. The Germans are going to be hated, with a vengeance not seen since 1945.
Cameron is a fool to be encouraging the destruction of democracy in Europe. He truly is the new Chamberlain – and there is NO reason whatsoever to vote CONservative all the time he and his cabal are leading the party.
December 3, 2011
I agree with most of what you say. But I don’t think the German banks or finance minster will allow it. Secondly,I am not sure the French are going to be too chuffed either when they realise how they will be ruled by Germany. He will weakly agree to all German demands. He has caved in because he knows France is completely knackered.
December 3, 2011
You say “Cameron is a fool to be encouraging the destruction of democracy in Europe. He truly is the new Chamberlain – and there is NO reason whatsoever to vote CONservative all the time he and his cabal are leading the party.”
Indeed also further trying to suppress UK democracy (in relation to the EU total subversion of it) – at every available opportunity. While still pretending to be a cast jelly skeptic.
December 3, 2011
“Austerity imposed on Greece, Portugal, Spain and Italy by foreign technocrats will fail”
Who are these technocrats? The Prime Ministers of Greece and Italy are a Greek and Italian, respectively, and were chosen by Greek and Italian Parliaments. Portugal, Spain, and Ireland have their current leaders due to national elections.
December 3, 2011
The Greek and Italian technocrats were chosen by the EU; do you seriously think the national Parliaments had any real say in the matter.
Enda Kenny is doing precisely what the EU instructs. The Irish “government’s” budget was submitted to the EU for approval before being presented to the Irish Parliament. Do you seriously think that Kenny would defy the EU if they disagree with ‘his’ proposals?
Portugal and Spain CURRENTLY have their own elected leaders – and on the same basis as Ireland. If they try to do anything that the EU disapproves of, they will be out of Office before they have time to pack a bag.
The EU is destroying democracy in the PIIGS.
December 3, 2011
The EU is destroying democracy in the PIIGS.
I think that should be:
The EU has destroyed democracy in the EU membership
December 3, 2011
Even if a short term fix placates the bond markets, what then? do you really believe that the 30% competetiveness gap can be closed – the only way to ensure stability in the medium/long term -or that the germans will agree to permanently transfer subsidies to the south to compensate club med?
the greek unions have already sabotaged the collection of property taxes via utility bills – the notion that a culture of graft and habitual tax evasion will be cleaned up by gauleiters enforcing teutonic virtues would be laughable if not so naive.
clueless politicians kicking the can down the road to preserve their own self-image has got us here. you can only defy fiscal gravity for so long. it is possible they can stitch up a deal that will hold for 12-18 months(though even that I doubt) but if so simply sit back and wait for the revolutions – real, bloody civil strife, across the southern band, as people realise they have no democratic avenue to stop this and take matters into their own hands.
either chaos now due to immediate defaults and breakup or chaos later when the tanks roll onto Club Med streets. 2012 is the new 1848?
December 3, 2011
That is a very plausible consequence of saving the euro.
December 3, 2011
Agreed. If they force fiscal union on the PIIGS and then impose austerity there will be civil war.
Fintan O’Toole, writing in the Irish Times has raised the question of ‘who is making the decisions in Ireland’ and ‘the benefit/costs of Irish membership’ The comments are illuminating. The Irish are already angry and aggrieved – I wonder how long it will be before (it gets worse-ed)
http://www.irishtimes.com/newspaper/opinion/2011/1122/1224307948012.html
http://www.irishtimes.com/newspaper/opinion/2011/1129/1224308280035.html
December 3, 2011
As someone positioned on the basis we will see inflation, (the more the merrier) may I misquote President Raegan “Mrs Merkel, tear up that treaty and print”
More seriously, I fancy the ECB will have to start buying sovereign debt because no-one else will and as they have a small balance sheet there is one easy and stupid way to expand it. Thus politics trumps economic sense once again.
Ayn Rand observed “It is not the looters or the moochers who give money its value”
December 3, 2011
Clearly so excited to be churning out more anti-EU froth that he’s left this article still littered with typos
Reply: I have had such a full schedule for the last two days that I have been behind in moderation and did not check the first draft of today’s. Apologies.
December 3, 2011
It’s anti-EU but not anti-Europe. In fact, the article is pointing out some of the options available and seeking some more!
Almost anything anti-EU can only help the people of Europe.
And it is not froth! As Daniel Hannan has pointed out:
If we weren’t already in the EU, no one would seriously suggest joining.
http://blogs.telegraph.co.uk/news/danielhannan/100120975/if-we-werent-already-in-the-eu-almost-no-one-would-want-to-join/
December 3, 2011
Indeed being anti EU is being pro EUROPE pro the people of Europe and against the central socialist, command economy, through regulation & the political oppression of them.
December 3, 2011
Dear Ian
You think your concern with spelling and typos is important and contributes to the debate in what way?
You think grammar is more important than the financial meltdown of 17 countries…hmmm genius. I’m sure Shakespeare ( Shakspear, Shackspeare, Sheakspear or what ever way he chose to spell it) would agree…Not
December 3, 2011
Re Reply:-
To have run an interesting, daily blog without fail over several years is a tour-de-force by JR.
I hope a “full schedule ” is an indication of a voice of reason receiving a widening audience.
Reply: Thanks. I do seem to be in demand to talk about the Euro and the economic crisis at the moment.
December 3, 2011
In today’s Telegraph we read that : “Jacques Delors, the former president of the European Commission, claims that errors made when the euro was created had effectively doomed the single currency to the current debt crisis.” He also said that: “The finance ministers did not want to see anything disagreeable which they would be forced to deal with,”. This from the architect of this misbegotten scheme. I remain convinced that this was just a step towards – what has always been denied as the main objective – a United States of Europe. As such there remains a determination to arrive at this destination – hence the talk of fiscal union in the eurozone. If this is done it will be without the consent of the people of the member countries as their views are not considered relevant. After a period of time those people will realise that their democratic rights have been stolen from them and there may well be a violent uprising. It would be better if there was some form of orderly dismantling of the monster that has been created but the political leaders do not want to admit they were wrong. The markets, having awoken to the reality of this mess, will be the ones to force a resolution.
December 3, 2011
This is a nice summary of the dilemma facing Germany from Jeremy Warner in the Telegraph this morning:
When someone borrows far more than they can ever repay, ultimately the creditor always takes a haircut. Essentially, that’s what the eurozone crisis is about. The debtors are already insolvent, and the creditors find their own solvency threatened by the insolvency of their debtors. If Germany cannot find an orderly way of burden sharing with its fellow eurozone members, then it will be done in a disorderly way. Whichever it is, Germany will end up paying through the nose. It’s only a question of degree. The oddest thing about it is that Germans have not yet intellectually grasped this simple choice.
So we have to balance the cold Teutonic logic and intelligence of the Germans – the likelihood that they will finally comprehend the awful choice that they must make – versus their natural stubbornness and unwillingness to admit that they have made a huge mistake.
Personally, I like to think that the nation that gave us Goethe and Nietzsche will come to its senses and do whatever it takes to save the Eurozone (and us!) from looming catastrophe, but I’m certainly not ruling out the alternative.
I’d guess it’s more like 70%/30% that Germany will come to its senses and allow the ECB to behave as a proper central bank and lender of last resort, and to issue joint Eurobonds. It will come at a heavy price for the democracies of individual states, though, as the Germans will never again allow budgets in its fellow Eurozone states to become so badly out of kilter, and it will achieve this by having its own people scrutinising the spending of other countries (as they are evidently already doing for Ireland).
I have been known to be wildly over-optimistic, though! 😉
December 3, 2011
It is true that if the ECB behaves as a proper central bank and lender of last resort and issues joint Eurobonds, the immediate economic/financial crisis will be ‘reduced’, but it won’t go away. If structural changes are not made, the financial imbalances can only accumulate. It may be more ‘technical’ than debt, but it will be like having ever increasing blood poisoning, where only the medically knowledgeable will not be surprised in the ultimate state of affairs.
And, in the mean time, the political scene will become very interesting.
But John, you know that already, don’t you?
Reply: Yes, I keep saying they can delay sorting out the structural and competitive problems by printing but they cannot solve them by doing so
December 3, 2011
The present Euro area is doomed, and any resistence is as stupid as King Canute holding back the waves ( of speculation ). Hopefully a smaller Northern area maybe salvaged and will demonstarte the self-discipline necessary to be sustainable.
In the long term, a single euro-currency is inevitable, but it must grow from the bottom-up, never be imposed top-down, but all this needs a mature intelligent electorate, which is some way off !
December 3, 2011
It was amusing to hear the “renowned climate expert” Lord John Prescott on radio 4 this morning, blithely assuring us that virtually all scientists agree with him. Also that the many sensible countries that, do not want to cripple their industries and peoples with high energy prices are actually committing a “conspiracy” against poor countries. In some bizarre way I assume only poor countries will be hit by the c02 devil gas (and harmless tree and plant food).
Most sensible scientists know, full well, that AGW is at best a huge exaggeration and that the real conspiracy against the poor is the Carbon tax, PV, wind and the overpriced energy policies and religion of the EU, Huhne, Cameron, the coalition and Lord Prescott.
Still I hope he enjoys his jolly to South Africa. I trust he will set an example by going on foot or push bike and not by air or in his Jaguar(s).
December 3, 2011
He obviously hadn’t seen any of the Climategate II emails:
http://wattsupwiththat.com/2011/11/30/climategate-2-0-emails-thread-2/
They put more context around the Climategate I emails and show that the small group of climate ‘scientists’ promoting ‘Global Warming’ had grave doubts, themselves, about the quality of the evidence for it but continued to push their agenda without any caveats.
It also shows there was undue pressure to remove ‘inconvenient’ critics from the academic scene.
December 3, 2011
I agree with you. But why listen to an idiot like him? I would not waste my time.
December 3, 2011
Most of the poorer countries are hit harder by global warming because they’re closer to the equator (greater effect of global warming), in the southern hemisphere (greater effect of global warming due to the axis of the earth), and can’t afford to mitigate the problems.
“Most sensible scientists know, full well, that AGW is at best a huge exaggeration and that the real conspiracy against the poor is the Carbon tax, PV, wind and the overpriced energy policies and religion of the EU, Huhne, Cameron, the coalition and Lord Prescott.”
Can you post the link to any peer reviewed scientific paper written by these sensible scientists?
December 3, 2011
Yes we know cold places will get colder, hot places hotter, dry places dryer and wet places will all be flooded, malaria will be rife and hurricanes abound and all will be no doubt be followed by a plague of locusts. But the BBC still cannot tell you the weather on Thursday week by the way.
Start at Delingpole’s very entertaining blog – very many links from sensible scientists who have not been afflicted with the new green religion and avoid “climate scientists” is a fairly good rule – you can usually spot them by the slightly religious nature of their writings, lots of appeal to emotion few to logic.
The ones concerning the upper atmospheric temperature measurements are very interesting indeed.
December 3, 2011
Deligpole is a right wing journalist following his own agenda and in his own words an ‘interpreter of interpretations’. Yeah! and so am I. I’ll take anything he endorses and any quack scientists who associate with him with a truckload of salt. The solid scientific community consensus is that global warming is real and has been for a number of years.
December 3, 2011
You say rather like the BBC: “The solid scientific community consensus is that global warming is real and has been for a number of years.”
Not true the sensible position held by most scientists not on the gravy train is:
Mankind and C02 affect the weather as do very many other variables, many are not even knowable at this time and feedbacks are very complex and not understood fully – so predictions for 100 years hence are just a guess.
Anyway the solutions wind/PV do not work even in C02 or economic terms. It is therefore far better to address real current problems with current proven solutions now and very much cheaper.
Also on balance a bit hotter is probably better than a bit colder anyway the evidence suggests.
December 3, 2011
Delingpole was suggested for the good links to the real science.
December 3, 2011
The point of contention is not whether or not there has been global warming but the extent to which it can be attributed to human activity.
December 3, 2011
Bazman
Go and read Prof Richard Linzen
Prof of Atmospherics and meteorology at MIT and tell him the science is settled, this man won a nobel prize for his work on climate. He doesn’t agree with AGW at all and I’d much rather believe him than a railway engineer an East Anglian “scientist” that can’t construct an excel spreadsheet by his own admission or any of the so called scientists so far caught lying about Himalayan glacier melt, rising sea levels, decreasing polar bear populations and all the other drivel spouted by the green scamsters
December 4, 2011
Bazman: “Deligpole is a right wing journalist following his own agenda … ”
Bazman, you are funny!
‘Right wing ‘ makes a refreshing change from all the ‘Left wing’ scribblers on the Guardian, the Mirror and in the BBC.
‘His own agenda ..” Thank god there are some people who have an agenda of their own, personally, I am sick and tired of the collectivist groupthink we have been subjected to over the last decade.
If his ‘own agenda’ is a search for the truth and a desire to expose misanthropes where-ever they hide that too, is a agenda I would be happy to subscribe to too.
December 3, 2011
No doubt the speeches by Merkel and Sarkozy are the first salvoes in the campaign to prepare German and French public opinion for the (yet to be announced) treaty changes they will propose. It is not at all clear that they have yet agreed who will supervise the new regime, the Commission or another body, or whether it will enable the ECB to issue eurobonds to cover immediate needs. Nor is it clear how these treaty changes will solve the actual problems on the ground in countries like Greece. Then there is the little matter of getting the other EZ members to agree – presumably with referenda to be held where required constitutionally – not to mention other EU members outside the EZ.
With all of this in mind, your 50/50 chance of Merkel/Sarkozy saving the euro in its present form seems optimistic to me; my guess is that they have at best about a 10% chance of doing so. In the process of failing there will be much more kicking of cans down the road. I expect to see more of such fancy and not so fancy footwook next Monday, Friday and on 8/9th December. Hoping against hope that something will turn up will help keep the markets gyrating and churning and a few more traders in their jobs.
On the other hand if their treaty amendments show that they are ruthless enough to eject failed countries like Greece from the EZ, then their odds would improve to c50/50.
December 3, 2011
I agree. Every summit proclaims to have resolved the issues – for a few days. This situation has been rolling along for long enough to be pretty sure that there will not see a seismic change in the situation other than yet more promises to deal with it.
Surely it comes back to the fact that 17 economies cannot (or will not) converge especially if the point of convergence is set to German requirements.
December 3, 2011
How many work at Swan Hunter now then? Not many I bet. Was that to much competition or not enough?
December 3, 2011
They think it’s all over , it is now!
December 3, 2011
What the EU elite have achieve is to not only have a currency and fiscal instability, but political/constitutional instability as well. To impose on a people a Government that has one policy, austerity, and to remove the possibility that they can change the Government and policies is a the perfect recipe to create the conditions for a them and us gulf to open up between the ruled and rulers, with the only outcome possible a revolution .
So as Germany won’t pay the money in fiscal transfers to keep these fringe Euro countries quiet, we must hope the collapse in the Euro comes about before the people rise up.
December 3, 2011
If the euro fails the consequences will be as bad perhaps worse than if it does not the only difference being failure will restore some semblance of democracy and economic control will be returned to the state that would mean it would have a much better chance of weathering the storm and returning to growth more quickly. However the people are just as likely to rise up anyway as a period of austerity will be imposed by necessity perhaps even worse than that that is being imposed by the euro-zone.
December 3, 2011
I have long thought the end game for the EU is that it will break up because it is fundamentally undemocratic. Eventually people power will say “no more”, irrespective of what governments want to do. Ever Closer Union will never work as the people do not want to become a citizen of the United States of Europe, they much prefer their own national identity.
What has always been difficult to predict is by what means the end will come about and when this will happen.
It could be the current Euro crisis is the end-game event. It seems the only way the euro can succeed is by it becoming the currency of a single state, the USofE, but that seems a jump too far at present for even the most enthusiastic europhiles. So the best that can happen is something will be cobbled together to provide a short term solution. I expect that if the current crisis is alleviated it will be hailed as proof of the inherent goodness of the euro project and justification for its continuance, even though the longer term prospect is an even bigger crash.
So perhaps the euro is the catalyst for the break-up of the EU, and the timing is closer now than it has ever been.
December 3, 2011
I am becoming more pessimistic about this Euro-Crisis with every day.
Reading in the DT that the German Bundestag is already checking the Irish budget, even though the Irish parliament hasn’t seen it yet, reading that Obama is pressurising Cameron to agree to the Merkozy plan next week, so that the predicted depression isn’t going to scupper his chances of re-election (Peter Oborne, comments) and having observed what this government has done to resist further sell-outs to Brussels, I think doom and gloom are all what is left to us.
There won’t be a referendum. Cameron will commit us to shoulder even more financial burdens so that he can keep sitting round the table with the Brussels dictators (sorry, but that is what they are).
So good-bye to our sovereignty, good-bye to our Parliament being allowed to do it’s duty, which will devolve to the German Bundestag.
Why is it that the europhiles not just in Parliament but more so in Whitehall are so happy to abandon this, our ountry, for the glittering but worthless prize of a seat at a table governed by unelected bureaucrats?
I really so not understand it.
December 3, 2011
“Cameron will commit us to shoulder even more financial burdens so that he can keep sitting round the table with the Brussels dictators”
Are you referring to the European Council? If so that makes Cameron one of the Brussels dictators.
December 3, 2011
I can never understand why markets react the way that they do. Following Cameron and Sarkozy’s meeting and statements by Merkel, the FTSE100 rose. But nothing has changed, it was just more talk about what could happen subject to even more negotiations. Apparently, “with a Common fiscal policy, the EU will be able to take countries to court and impose fines if they don’t keep to the rules”. What would these countries do, borrow more to pay the fines? (It’s like our last government’s policy of fining NHS Hospitals if they failed to meet targets – the fine made it even less likely that they would be able to comply because they no longer had the money to do so).
I think that the politicians won’t be able to react fast enough to deal with the Euro situation, there are far too many countries involved for rapid agreements. Has anyone asked the “non-involved” Euro countries who have relatively stable finances like Holland, Sweden or Austria, what they think? Certainly I don’t think that the Dutch will be very happy! So my conclusion is that the Euro will fail because the markets will always move faster than the politicians.
However, my concern is not what the Eurozone might do in the short term, but the fact that Cameron and Sarkozy are now talking of changes to the basic EU treaty, for all members, not just those in the Eurozone.
If such changes are to be made, we should have a referendum, but is Cameron likely to take the same line as in the recent Commons debate, something like “With a major crisis on our hands, we can’t possibly have the distraction of a referendum at the same time”?
Thank goodness there are some countries which have a legal requirement for a referendum, such as Ireland; at least such an excuse will be far harder to justify.
.
December 3, 2011
Blowed if I know for sure. i think that it will depend on the German electorate. And I can’t see them being happy with their money (wealth!) being used for hand outs – because that is what it would come down to.
December 3, 2011
I can see you dancing and singing down there in Wokingham as you write the euro’s obituary.
But I wonder for how long. We’re deep in the pooh too.
Greece, Italy, Spain … default, bank default in France, and UK banks tumble over soon after, followed by our economy.
Mervyn didn’t bother this week to encrypt the code of disaster awaiting us.
Pity Merkel. German plans for domination? My left buttock. She’s in an impossible place. Better politics, surely, to recognise that position and seek a solution which addresses her interests as much as yours. Otherwise, remember that time in a train carriage after the first world war when the agreement extracted led to a marginally less bloody war twenty years later.
December 3, 2011
Are you seriously comparing the situation to 1919 when Germany had terms forced on her. It’s the other way round. Germany has the EU by the short and curlies! That is why Merkel has been holding out so long. She will dictate terms to the EU next week. All the small northern countries will hang to her coat tails as will France and Italy. The PIGIS will collectively submit through their elites and vested interests. The ECB will stand behind this new treaty and then the markets will turn their attention to the UK with the end game I described on the previous blog.
Germany has the EU where it wants it. It will have economic control and its lebensraum. It of course will exact economic assets for its endorsement of QE and bond buying.
This should come as no surprise to any student of German foreign policy since 19th century unification……
Zorro
December 3, 2011
In case of confusion, German policy is dictated by its banking and industrial interests.
Zorro
December 3, 2011
Heh, Zoro, “lebensraum” really?
Even if Germany has her hands on the levers of power do you actually think all the peoples of Europe will jump as they are tweaked?
December 3, 2011
I think due to sheer political will and commitment they will muddle through with a eurozone that will perhaps lose one or two members at most.
However the measures they take (in all likelihood Merkel’s plan for a centralised, antidemocratic fiscal union where the Franco-German axis has even more influence than it does now and the whole geo-political area is essentially controlled by a few French and German technocrats) will be completely disastrous for the whole area.
December 3, 2011
The Euro will survive but only on German terms, perhaps to be renamed Euromark.
France will become a bit player and lose its exalted position at the top table of two – although spin may suggest otherwise.
David Cameron will continue his dream of being a ‘big player’ in Europe whilst forgetting that his first duty is to be a ‘big man’ in the UK.
The Olympics will make a profit for the first time in their history.
England will win the European football championship.
Mt Redwood will become Minister for Europe.
All losing bets will be refunded by Greece.
December 3, 2011
I think John would rather be Harriet Harman’s PPS than Minister for Europe in such a scenario!
Zorro
December 3, 2011
I am afraid that we are about to see that the ambitions of the German nation are basically unchanged over the decades. The idea that the Bundesbank and its expertise just vanished and failed to exercise its famed control of economic policy after the Euro began in 1999 (notes in 2001) was always a chimera. The reality is they dictated Euro interest rates and used less ambitious (but nevertheless greedy) nations to stimulate Germany’s distressed traditional industry during a period of restructuring that included absorbing the unified Germany’s eastern inheritance. Merkel’s delaying, while German industry exports and German bonds remain low-interest, only strengthens Germany while other nations suffer. The aim is that such nations will clamour for German control of their affairs.
There are various ways to look at Germany’s policies, flattering and less so, but all of them show an overweening self-interest utterly in contradiction of the so-called communitaire principle which has been incessantly beaten into British representatives to quieten their commentary on the irrationality of the project. However, the project is truly irrational only if it were intended to bring what it said: stability and shared prosperity. If the project were to concentrate prosperity, and with it power and prestige, then it works- for Germany (and France are paid off in the usual ways…).
A separate question is whether the German gambit will work. My view is that it won’t- but, as we usually say- ultimately. The problem is the time between now and ultimately and the side effects of it. For example, I do not think that the Eurozone can solve Spanish unemployment, and nor do i think that the Spanish and their new government can endure it at the current high levels. However, I do think that unloading parts of the gravy train on the South of Europe could stave off their crises for a year or two, and in the meantime Germany’s “tight” fiscal union (and the wealth transfer they would then sanction) could make leaving the Euro very ugly indeed.
December 3, 2011
When Jacques Delors is seeing the light maybe the game is up for the Euro. My view remains the same – it is doomed. Whether it collapses in a heap or goes domino fashion is anyone’s guess. Even if some economic package is stitched together, the political fallout at the prospect of the undemocratic arrival of the USE will kill it.
December 3, 2011
Today on R4 had a piece about the likely outcome of the next round of talks on the saving of the euro. Much analysis of who might say what. Merkel will apparently be telling Germans that the rules will be tightened so that countries will not be allowed to backslide. She won’t be telling them, as Jeremy Warner pointed out yesterday (see Steve Cox above), that they will have to pick up the tab.
In typical BBC balanced reporting, there was much expert comment from euro political types and no contribution at all from anyone who understands markets. Such a person would have said that more blather from the politicians is no substitute for firm action from ECB – which ultimately will mean that Germany will pay.
Toodle pip
December 3, 2011
It is tempting to suggest that politics will decide the outcome but I favour economics. I can see a two tier Europe with Germany, France and the Benelux countries agreeing a new Euro and the others defaulting and returning to their own currencies. This format will be forced upon them by the markets. The final question is which banks will fail ?
December 3, 2011
It could stagger on for a long time yet – how many times do we see a business that is going to the wall, negative cash flow, no money to fund working capital.
You think it won’t last the week – a year later it’s still there – still losing money. Never ceased to amaze me.
Same with the Euro – but the fundamentals are still there – Southern states are uncompetitive – they will stay uncompetitive.
Unless there is an integration of sovereignty (won’t happen) – the forces at work driving the economies apart will succeed – but it could take a long time.
It’s obvious that “cuts” are not going to eliminate the deficit – only growth – so I hope that Mr Cameron uses this opportunity to de couple the UK from those EU laws that contribute to our lack of competitiveness.
Otherwise his time in office may be remembered for very little.
December 3, 2011
A good post, and I agree. Businesses can seem to conjure remarkable solvency and staying power out of negative cash flow. You wonder how they do it.
So who knows what time frame we are looking at here. But personally I don’t think the euro has a prayer of surviving in its current form, if at all, and to think austerity and a new set of rules will fix it is sadly delusional.
December 3, 2011
Well first of all I doubt if it is the end – only the end of the beginning.
My reading of the tea leaves is that the Euro will continue as a hard currency (DM mk2). There will be some sort of EU OBR (Office of Budget Responsibility). Countries whose books are a mess will face sanctions such as fines, loss of voting rights, leaving the Euro and even leaving the EU. There might be some sort of EU version of the IMF set up. Exactly where non euro countries not in the “sin bin” will fit in/want to fit in is a most interesting point.
December 3, 2011
Who cares whether the euro survives or not? It’s a political folly and we should let the pragmatists, hopefully the market, sort it out and we should also avoid contributing to its salvation via the IMF.
If it is to continue, how on earth are Greece, Spain, Italy, Portugal ever going to ‘compete’ within the EU? The future is extremely bleak for these countries, even worse than ours, as the Germans and the French will simply impose their will on the periphery.
The Germans might well be the saviours but they will be seen to be the conquerors due to the enforced austerity imposed at their behest.
December 3, 2011
As I see it, the French President isn’t just trying to win an earlier elction than the German Chancellor but also trying to stop his banks going bust and his country joining the other Latin countries in being downgraded. He is also presumably in talks with our PM to try and preserve the old Europe des Patries and avoid having a Fourth Reich. That’s the circle that can’t be squared: if he wants to go into the Fourth Reich to keep his banks solvent, then he can’t be De Gaulle. The German Chancellor has grown up with East German and Soviet oppression so she will be cautious in what she says, and survive whatever happens.
We should get right out while we can, and stop talking fiscal responsibility to the Germans out of one side of our mouths and national independence to the French out of the other. We should just get on and do both, on our won, as best we can. We don’t carry Mrs M’s burden, so why assume it?
So, in answer to your question, I think the Euro will survive because of all those vested Euro-Elite interests, which are not our interests. We should cut loose now, cut income tax to 20%, cut immigration, raise interest rates, and stop printing and borrowing money.
It will arouse a lot of class hatred against the Coalition leaders but they get that all the time anyway, so we might as well benefit from it for a change. anyway it couldn’t be worse than bailing out the Euro-zone with a Tobin Tax and not being allowed to set the treaty terms of the New Setup, whatever it’s called.
December 3, 2011
PS I mean have a flat rate tax: just slash through the Gordion Knot of chaotic confusion and complexity bequeathed by generations of political budgets designed to play to the gallery. The whole country would benefit from simplification and flattening of taxation, as every other country does which tries it. And no country ever prospered by debauching its own currency, whatever the short term gain to those in charge. Interest rates have to rise if we are to bring back sound money and habits.
December 3, 2011
Rose wrote: ” The whole country would benefit from simplification and flattening of taxation, as every other country does which tries it.”
I agree the tax system should be simplified (bring back Nigel Lawson!) but do flat taxes benefit the whole nation, Rose?
“[…] empirical evidence on their [flat tax] effects is very limited. This precludes simple generalization, but several lessons emerge: there is no sign of Laffer-type behavioral responses generating revenue increases from the tax cut elements of these reforms […]”
Source: http://www.imf.org/external/pubs/ft/wp/2006/wp06218.pdf
December 3, 2011
I see the benefits to the whole nation as being moral and social, not just economic, as the state relaxes its social engineering hold on us. This would need serious personal allowances in income taxation, obviously, to enable people on low pay to have incentives; and the family would need to re-emerge as the foundation of a stable and responsible society. I am not suggesting the transition would be easy. But what is staring us in the face isn’t going to be easy either.
Just one example of what the high and complex taxing state has done: at present there is no easy way for people in council houses and flats to move to where the work is, without giving up a highly prized and hard to come by benefit in kind. It is in effect easier for Poles and other Eastern Europeans to move to the new jobs here, than for councils’ and housing associations’ tenants who are in effect trapped as well as enticed into dependency across the generations.
There is much in your cited source that I could discuss with you, but the detail is not suited to this medium.
December 3, 2011
Is this one, in the short term, not rather hard to call? We have the self-hating German, obviously more comfortable with the egregious and entirely unpunished sins of the lately defunct Bolshevik empire in which she was raised, than with those of her erstwhile countymen, and someone without a drop of French blood in his veins representing the interests of his glorious non-ancestors. Then there are the banksters who have bought and paid for the US Congress whose interests no doubt will be promoted through the autocue of POTUS and through their PR representatve in the UK. National interests will not be protected by those without native ties.
So to what extent can the people of Europe be further enslaved, their future mortgaged in order to protect the banksters’ investments and facilitate an extension of their power and control over the people of Europe? The private secret Fed has a very powerful weapon, the ability to create the World’s reserve currency with a mouse click; will it be deployed to save the Euro? Will it underwrite potential bond losses in the same why that it underwrote the actual losses of its friends after 2008?
December 3, 2011
This is a bit like a nurture/nature question – (50/50).
On the one hand you have Brussels ET AL, who will do absolutely anything in their power, (i.e. sell their own grandmother and all that), to keep the whole thing going, as they all, individually, have a hell-of-a-lot to lose. On the other hand you have the markets.
I’m for the markets – the Euro SHOULD fail (and a lot of the banksters with it) and I desperately hope it does.
December 3, 2011
It is strange, is it not, that the original purpose of the EU (in its earlier forms) was to prevent the creation of a large single state in central Europe which would dominate its neighbours by virtue of the strength of its economic and military might. Yet, here we are, cheering on just this outcome. (OK, not, yet, military, but how long?)
December 3, 2011
Water runs downhill and for similar reasons currency values fall, or rise, to reflect value. You can pump it back uphill. If you really want you can buy a much bigger pump but it always keeps flowing. If Greece, Italy & Spain get locked into an overvalued currency they will not grow and thus become more overvalued with time.
Ireland is probably an exception since its collapse was because they had guaranteed the banks, which is a once and for all failure, rather than because the economy’s basics were usnound. Ireland’s economy consequently seems to be growing again http://www.guardian.co.uk/business/2011/sep/22/ireland-hope-growth-outstrips-expectations though even there they have the same long term problem with high priced “green” energy we have.
December 3, 2011
Much of interest being said here, plenty to think about but I note that no one has mentioned the fact that the Euro is 10 years old in January 2012. I wonder how many countries and people will be celebrating its birthday?
December 3, 2011
As long as the ECB can print more Euros to cover the shortfall between money available and the debt the Euro will survive. They can also make reform a condition of getting a bailout to prevent this problem happening again.
Also the Government’s plan seems to fix the problems of having 2.61 million people unemployed seems to be having more immigrants do the jobs that are available:
http://www.independent.co.uk/news/uk/home-news/wanted-more-immigrants-to-boost-british-economy-6271541.html
December 3, 2011
They are hopeless at letting in those that create wealth. Instead they allow in unskilled labour to hoover up jobs which should be available to those claiming benefits.
Zorro
December 3, 2011
The sooner it collapses the better for all!
We were promised by Ted Heath that the EU was for trade between nations only, since then we have the EU in Brussels trying to grab more and more political power at great cost to democracy in the EU member countries. We could all end up like the USSR under Stalin!
We ae told that the UK does 40% trade with the EU, yet we import more from the EU than we sell to it, so we should withdraw our full membership and go trading status at no cost.
We are never given how much actual trade in £sterling we do with the EU, if you subtract the membership fee our trade with the EU could well be worthless?
The UK companies are and have been very short sighted, and should have looked for trade outside the EU, it is what is called not putting all your eggs in one basket!
December 3, 2011
You call for predictions of what may happen. What do any of us know such that predictions could be considered accurate? I was recently asked this by an Australian friend and suggested the Euro would go within 2 years and the EU would decay over 10 years, but of course that’s just an uninformed guess.
Maybe there will be a catclysmic early collapse caused by the markets, but so far Merkozy has/have been able to spin out the crisis interminably (kicking the can down the road) and may succeed for some while longer.
After the French elections and the US Presidential election, the pressures for maintaining the Euro may be less and then we may see final disintegration.
December 3, 2011
A possible scenario for apocalyptic times:
Before the EU summit, an intergovernmental “extra treaty” for fiscal integration is proposed. Any EU member outside the eurozone may also apply to join (Schengen method). Afterward, a few countries could even feel “market encouragement” to join. In the long term this extra treaty would be integrated in the EU treaties, just like the Schengen agreement.
December 3, 2011
Peter
About the 1985 Schengen Agreement, please could you clarify:
a) Did any of its provisions infringe any provision of the then EEC/EC treaties?
b) Could it be operated without the five signatory countries making any use of the EEC/EC institutions which were the common property of all ten EEC/EC countries?
c) If the answer to b) is “no”, how did the five EEC/EC countries which were not signatories to the Schengen Agreement authorise the five signatory countries to make use of those common EEC/EC institutions?
December 3, 2011
@Denis Cooper:
Denis, I’m not a man of law like you, I don’t know. I imagine that it was possible to run Schengen without infringement on the EU treaty and without requiring EU resource (arbitration instead of the ECJ?). Now the fiscal integration would be more complicated, and keeping it separate from the body of EU law and EC manpower more difficult but, I assume, not impossible. One could pay for resources used, or house one’s own (fiscal-integration) resources in the same EC buildings or set up completely separate institutions. It would make a difference how many countries sign up: 17, 20, 26?
December 4, 2011
Well, you suggested that what you call the “Schengen method” could be followed, but I don’t think that it could be used as a substitute for EU treaty change.
If a group of EU member states want to pursue some course of action which is impermissible under the EU treaties then it remains impermissible under the EU treaties even if they make a separate agreement outside the EU, and the EU treaties are held to be superior to any other agreement an EU member state may make, with certain explictly stated exceptions.
And even if the course of action proposed by the group of states is compatible with the EU treaties in all other respects then they can’t presume to make use of any of the EU institutions without the consent of the other EU member states.
I’m pretty sure Merkel understands this, and that’s why she very much wants to involve all 27 EU member states in treaty change while bluffing that if she can’t get what she wants that way then the eurozone states will go off and do it on their own.
http://euobserver.com/18/114314
“However, Britain does not believe Germany will likely be satisfied by anything other than treaty change at 27, as the ECJ is the property of the full EU, not the eurozone.
“It is difficult to see how they can achieve their objectives through an intergovernmental agreement if their key objective is the use of the court to enforce budget discipline.”
The creation of a separate eurozone court would in theory be legally possible, but certainly messy.”
In any case while the eurozone countries remained in the EU their new eurozone court would remain inferior to the ECJ.
“If we don’t agree to what they want they’ll just do it anyway” is certainly a convenient fiction to persuade Tory supporters and the general public that Cameron has no effective veto and little bargaining power.
December 4, 2011
@Denis Cooper: I think that I understand your points, but I also see a difference between Merkel and Sarkozy. Sarkozy would like to forge ahead with the 17, but, like in the ECB, Germany’s voice is sometimes outnumbered by “soft approach countries” and it would like some more northern countries (non-euro) at the table (Denmark, Sweden, Poland, Baltic countries). Some level of agreement with the EU27 will be needed in any scenario, which should provide an opportunity for eurosceptics, but a full, significant EU-27 treaty change would require most from the EU27, and the best opportunity to a looser UK relationship (if that is what it wants). Time constraints (market pressure) may still lead to a Schengen approach, which will be, as you say, messy.
December 3, 2011
Could the EU issue “Eurobonds”? Brussels would need serious tax-raising powers to stand behind them, presumably mandatory intra-governmental impositions. The treaty for the fiscal union would have to be stringent and convincing, and in the best case would would require months to implement through the various legislatures. Even so Eurobonds may not get AAA rating. Major refinancing of PIIGS debt is required already in 2012. The ECB cannot buy new debt. The mooted transactions tax would hobble Europe’s financial markets, so impairing the issuance of Eurobonds. In short, the “Group of Frankfurt” is in a pickle: united they fall. The question is: how to engineer a controlled implosion?
Europe is like a boat that is sinking due to the weight of debt at the stern. The debt needs to be moved to the bow end, where the Germans, Dutch and Finns are, much as they would disapprove. A controlled and temporary inflation in Europe would do that, offsetting austerity in the south with overspending in the north, allowing the Euro to depreciate, and with it the debt. The ECB would buy up new government debt of the PIIGS and start the inflationary process. But austerity would still be required in the south, until the southern wage levels were brought nearer to the now inflated levels in the north. This is a “needs must” solution, overriding the northern anathema to inflation and monetary excess. That way the Euro can be saved. Otherwise it will be a disorderly “decouple, default and devalue” process for each of the PIIGS in turn, leaving the Euro to the core northern countries.
Reply: There has been much discussion of Eurobonds. Yes, they can help if they are guaranteed by all member, and markets want them. However, the aim to borrow on such a basis through the EFSF has not worked, as markets did not wish to lend much to them. There is a lack of confidence in the zone as a whole.
December 3, 2011
My second para did not assume Eurobonds, but that the ECB monetize southern government debt as it is issued, i.e. as it rolls over. This to create a necessary temporary inflation in the Eurozone, pushing up northern costs and depreciating the Euro, and correct the imbalance within the Eurozone. If neither that nor Eurobonds can be done then what alternative can there be but “decouple, default and devalue”?
December 3, 2011
I don’t share Mr Redwood’s view that there is a 50/50 chance of a break up.That would suggest that there could be some kind of practical tipping point when the practical downsides of EU integration will become too great. Because the EU currency project is not based on practical reality, no such tangible point can ever exist. The elite will always find a way to conjure up the right numbers or just move the goalposts.
By hook or by crook, fair means or foul, the project will remain intact. It’s just a case of stepping back and watching what happens, as it seems nobody dares to stand up and question the underlying motives of those wishing to enforce an EU superstate.
The collapse of the Euro is about as likely as criminals once again becoming afraid of the police, welfare benefits being given to the needy only, mass immigration being abolished or schools turning out children that can read and write properly. These ills are all borne of actions inflicted upon us by a remote elite that wish to change our society.
The Euro currency is too useful a weapon for the elite to lose – it is a wrecking ball being deployed to enforce further European integration and the destruction of national identity – ultimatley to make us servants of Brussels.
Those that do not grasp that the Euro is purely a political project,divorced from reality and instead choose to dwell on the practical considerations will come to a different conclusion and completely miss the point .
Because of political correctness, we are not allowed to say that the forces that led to one European nation seeking to dominate it’s neighbours in 1938 were not completely extinguished by the second world war. The tactics just changed.
I expect money printing on a massive scale, the fiddling of figures etc. as the tools used by the elite to allow them to save face.
December 3, 2011
I take the view that we will see a classic botch. These things are always difficult to judge because there are individuals involved. But I cant see the Germans paying another 5% EU consolidation tax after paying 5% East German consideration tax. I think the worry will be the the far right in East Germans getting stirred up.
Will continue … Shopping in Kings road for christmas stuff so need to keep other half happy
December 3, 2011
Mme Deficit has been stimulating the local economy with my sovereign wealth fund, I, like Germany will be exacting favourable terms in return….
Zorro
December 3, 2011
Second I don’t think the Germans will go for the inflation option. The deflation rate in the UK is -12. Plus the 20% QE M4 inflation brings us up to 5%. In Germany there is mild inflation so any QE / Euro bond buying near what is needed will cease 10% inflation in Germany. That leaves Germans paying via the IMF – to be good citizens yet not been seen as paymasters.
From the PIIGS point if view the problem is the size of the debt – and NOT – leaving the Euro. Leaving the Euro will cost £ across the EU but that could be deflated away EASILY through any breakup. People would still trade. Life would go on. But I don’t see politicians putting this on the table unless it’s a last resort. In the mean time I see a dual currency system in the PIIGS as an option. A law forcing acceptance of a dual currency and paying Government costs internally would go all the way to solving the problems.
Oh back to shopping …
December 3, 2011
I think the other issue in thecEuro zone is the reverse capital flows that hapoeneded at the start of the crisis and has led to so many funding problems. Especially for Governments and EU banks dependent on money Market funding. That problem is not going to go away and has the effect of amplifying cyclic funding issues. So I think even uf dual currencies and the IMf funding kicks in the deep problems in the EZ will come back.
Above all of this is the sheer scale of the debt and the psycho-political changes that are needed over the next 10-15 years to Change opinions.
December 3, 2011
Kings road shopping not very successful. Sales were on in alot of shops. I bought a new coat but my partner said she wasn’t spending.
Anyway back to the prediction. I see Germany paying thru IMF to get fiscal austerity. I see dual currency in PIIGS partially paying government wages, costs and benefits. But mostly I see 5 years of recession followed by 10 years of low growth. If youve had 5% of your growth from debt being spent unproductively you can expect 5 years of growth 7% lower than it would be. But it’s a whole lot worse than that.
December 4, 2011
Finishing off. I think that the IMF and dual currency will be the bitch, but the problem is the debts are too big. I see negative growth for many years that will cross many elections. That is the difficultly. I see political direction changing in at least one country. This and not a default will lead to a possible exit.
The EZ will drag on until the new year when further bonds rollover. Central banks will step in to stop any banks failing but this will just deepen the debt and prolong the crisis.
The EZ can go on getting into more debt for years before all the wealth is used up.
December 3, 2011
Wouldn’t your figures suggest 8% inflation for UK if correct?
zorro
December 4, 2011
No because they dont simply add up.
December 4, 2011
“Second I don’t think the Germans will go for the inflation option. The deflation rate in the UK is -12.”
Where abouts are you looking for this figure Javelin?
I’d be interested to see similar figures for the larger Eurozone members.
Whilst we have an inflation problem deflation across the Eurozone would be catastrophic.
December 4, 2011
‘The deflation rate in the UK is -12. Plus the 20% QE M4 inflation brings us up to 5%.’
Please explain how this makes 5%.
zorro
December 3, 2011
Is what is happening to the euro currency cock-up or cospiracy? Whatever your answer to that question may be then you will most probably answer the following in the same way – Is what is about to happen in the EU cock-up or cospiracy.
My response to both is that it is a carefully planned cospiracy which is proceeding exactly according to plan and on schedule. Unless some politicians develop some backbone, or something to produce some testosterone pretyy damn quick, then freedom, democracy, self-governance and prosperity are all done for.
December 3, 2011
Occam’s razor on the basis that so many supposedly highly educated economists and politicians could not be so stupid as to cock this up on such a monumental scale…….i.e. they aren’t stupid.
zorro
December 3, 2011
I think it was a conspiracy in that the intention was that it would sooner or later cause such a crisis and the solution would be forced integration.
I don’t believe it was carefully planned so much as a strategy and they had no real idea of the time it would take.
It’s a cock up in that the timing is unfortunate and the scale of the crisis looks such as to be unmanageable.
I believe that politicians are rapidly finding that this thing is getting beyond their control. I certainly don’t expect Cameron to do anything other than drift along with it making noises.
December 4, 2011
I’m not one for conspiracy theories but the current prime minister of Greece was the architect of their entry into the Euro. In other words he cooked the books and knew where the bodies were buried.
As a senior in the ECB is beggars belief that he didn’t keep half an eye on Greece’s finances, hence the crisis was inevitable and planned.
What was not planned was the scale of fraud that the Greeks perpetrated between entry and the current crisis. It took the IMF sifting through their books to discover the scale, the Greeks themselves didn’t have a clue how much they owed.
Everything points to the crisis being engineered as the last stage of the project, and so far the Eurocrats are still sticking to their original script.
December 3, 2011
Joan Rivers coined the phrase ” the apex of stupidity”. She was referring to Kansas City.
I would apply the description to all those molasses brained Europhiles I’ve despised since I was a teenager…..(sorry, had to turn off R4. Ken Clarke’s ghastly programme “Jazz Greats”. Can’t abide him or jazz).
The new “Apex of Stupidity” must be Brussels. Or Rome. Or Maastricht. Or Lisbon.
Take your pick. It was always going to end in tears.
December 3, 2011
Imagine if they abolished the European Commission to save money to use for saving the euro. The commission has done all that was asked of it and more so it is time they were put out to grass. The European Parliament, the Council of Ministers and the European Central Bank can cope without them now. It is a layer of government Europe no longer needs and can no longer afford. In the end the only way to rescue our economies is to repatriate employment laws to the national governments and abolish the European Court of Human Rights and allied things – our democratically elected governments can administer law better.
December 3, 2011
I still believe that there’s about a 70% chance the eurocrats will manage to preserve the present eurozone intact, so that it can later grow and eventually engulf us as well.
Why the UK government is actively supporting these attempts defies comprehension.
However 70% chance is down from my guess of 80% chance a few weeks ago, and I’m hoping that the odds will continue to swing in that direction.
December 3, 2011
I’m not so sure that the percentage won’t creep closer to 80% again with the way Cameron is performing. I agree with your end game analysis.
zorro
December 3, 2011
Whatever happens now is too little, too late.
A massive injection of printed Euros to keep the wolves from the door while the EZ is broken up seems the only plausible road ahead, and that is fraught with difficulty.
I fear we’ll see the status quo trying to be preserved as long as possible because no one has a clue about what to do next. It’s obvious there’s been no contigency plans drawn up for any kind of default so everyone is afraid to try anything radical not least because the chances of 16 other governments agreeing to it must be close to nil.
December 3, 2011
Games up probably the next round of elections. Austerity without a democratic mandate?
Printing Euros to buy bad debt as and when its due may work but only if the actual debt was cancelled and the country involved not allowed to reborrow but given direct spending grants from the centre.
The bank/system receiving the funds should also be required to capitalize and raise capital ratios.
Whatever is decided it should involve a UK referendum as we will be called to fund it in fair or foul ways. (Bilateral loans,IMF contributions, ECB recapitalization, EU contributions, intra EU immigration to England)
But we probably wont get a referendum one as it wont affect us!Just watch the actions and mute the words.
December 3, 2011
john, its time for that referendum.I am expecting that sunami of fibs on the tv that tell us we need more eu.I have promoted your wonderful article about fibs on talkcarswell.com.
December 3, 2011
I find it hard to believe the German electorate will want to subsidise Southern Europe indefinitely. If that is what it takes to hold the Eurozone together, it must eventually fall apart.
I just hope that this does not happen for some years, so that our own banks have had time to reduce their exposure to it, and are not brought down with the rest of the wreckage. Hope, not expect.
December 3, 2011
The euro was never a runner – apart from the obvious fact that there is no central control of the purse strings – as Tim Congdon pointed out at the time, Europe is not a natural single currency area. The economies are far too diverse for central government transfer payments ever to be large enough to plaster over the differences.
Delors’ suggestion that it would have been alright if only it had been constructed as he designed it reminded me of the claims of the left in my student days, that Marxism would work if only people would construct it the way Marx had designed it! Funnily enough, no-one ever seemed to manage it – though millions of lives were lost and blighted by the attempts. Delors’ folly hasn’t gone that far yet but this misguided fantasy could easily wreck the world economy and bring International strife in its’ wake.
December 3, 2011
Forgive me if this has already been mentioned. If the solution is “Eurobonds” at what rate of interest would they be offered or trade? Would the Eurozone be able to borrow at a sustainable/competitive rate if it issued a uniform bond. How would it compare with the current rate for Bunds? How would this affect German competitiveness? These seem important questions as to whether or not this strategy would be effective or would be acceptable to the Germans, but I have not seen them addressed anywhere.
Reply: The EFSF aimed to borrow at bund rates with an AAA rating. The last issue was at 177 bp over bunds.
December 3, 2011
The Question is : ‘Tell (us) what you think the Euro’s chances of survival are?
The answer is zero. If your neighbour was earning 1,000 euros a week but spending 2,000 euros a week, you can keep him out of jail and his children in school and food on the table by ‘lending’ him £1,000 euros a week. But if you are not prepared to sustain that spend, and if you ever expect to get ‘the loan’ back, then HE NEEDS TO CHANGE.
As the Southern European states clearly will not change, and will not live within their means, the union is bound to split apart.
The determination of the communists to prevent this split is a massive opportunity for someone like George Soros to make far more money then he did with the ERM, because when idiots are pushing against an irresistible force force with someone else’s money that does not create success, that makes a monumental mess up, like we are experiencing, and you aint seen nothing yet!!
December 3, 2011
I have faith that democracies can evolve and will heal themselves when they go wrong.
With that in mind I cannot see the Euro being able to find a country called Euroland because I don’t think the individual democratic nation states will give up governing themselves. They will want freedom for themselves above everything else.
I know that lots of Euro debt has been created and that Europe will not have any real growth until those debts are gone but the choice of bust seems to be of either an inflationary money printing type or a deflationary systemic banking collapse and I’ve no idea which is more likely.
As I believe that the Euro is a failed political concept then I don’t believe that it can continue and that means everyone going back to their own currencies and paying down their debts in the ‘new money’. That way creditors and debtors share some pain together.
There is a lot of meetings between heads of countries and officials at the moment and the paranoid in me thinks that they might be planning something big.
Maybe the Euro will be simultaneously dismantled on Christmas Day and the nations of Europe will go back to their own currencies and then we can all be friends again and start to grow our economies.
December 3, 2011
Without sounding presumptuous I would like to say that many of these Blogs are some of the best I have read on this subject . My thanks to John Redwood’s article for acting as a catalyst to draw so many erudite comments. I cannot really add anything to the mostly and obviously informed opinions expressed other than to mention the offer by “Disaffected” December 03 at 12:09pm and “Steve Whitfield” also 03 December at 02:50pm.
Personally I have become depressed and disillusioned with the Coalition Government,itssquirming Cameron and silly but dangerous gang of Lib-Dems now wielding a power far, far beyond their mandate or competence. The calling of an Election now with whatever result offers far less of a danger to this country than pursuing our membership of the EU. I did not vote for a reincarnated Chamberlain waiving bits of paper and bleating “Euro in our Time”.In any event I would forecast a massive return of the Conservative Party if it were to guarantee an immediate withdrawel from the EU but no convoluted promises about Referendums which have no substance.
December 3, 2011
I understand that the German Constitutional Court has to be dealt with first before Merkel can “relent” re the ECB – this apparently is in the offing.
See Der Spiegel: http://www.spiegel.de/international/europe/0,1518,800465,00.html
“Struggle over the Euro: German Constitutional Court at risk of losing power”
“Some see Germany’s Federal Constitutional Court as as a guardian of democracy in the euro crisis, others see it as an obstacle to rescuing the currency. Now members of Chancellor Merkel’s ruling conservatives want to lessen its power by amending the constitution — to remove its jurisdiction over European issues…
The government and the court are locked in one of their biggest power struggles to date. One judge at the court described it as a “latent constitutional crisis.” The government, he said, was trying to free itself of the restraints imposed on it by the constitution, and by the court.
Also from 14 November Der Spiegel: Merkel Eyes Constitution Revamp to Boost EU Powers
http://www.spiegel.de/international/europe/0,1518,797584,00.html
“Germany’s constitution is highly respected, but it also obstructs the transfer of power from Berlin to Brussels — a fact that has hindered the rescue of Europe’s common currency. At the CDU’s party conference this week, Angela Merkel may push for an overhaul of the Basic Law in order to hasten euro bailout efforts….
This operation to amend the constitution has already become one of the government’s most delicate political initiatives. If it succeeds, it would remove one of the euro’s biggest problems: The 17 euro-zone countries have a common currency but do not have a common finance policy, a fact which partly explains why the euro is teetering at the edge of an abyss. This is tackled in the key sentence of the new paper. “We need more Europe in key policy areas,” it says.
Merkel hesitated for a long time before making such a statement in public. It was three quarters of a year ago that German Finance Minister Wolfgang Schäuble reportedly took the chancellor aside and explained to her that the euro crisis could not be resolved with spur-of-the-moment policies. He told the chancellor that he was in favor of using the crisis to advance Europe’s political unity…”
December 4, 2011
Germany’s constitution also specifically forbids the death penalty.
This however has been quietly shelved, through a footnote on a footnote of the Lisbon treaty which allows it in the cases of civil unrest, war or pre-war circumstances. It applies to all signatories….
I predict that the EU will muddle through by the use of oppression, or will attempt to.
December 3, 2011
You have made a pretty good living for years from being an MP. Instead of sniping form the internet, why not take a brave stand? – Yours faithfully, Tories in Exile.
Reply: I remember resigning from the Cabinet to insist on keeping the pound. I recall voting recently for a referendum against the advice of the whips. I am not planning to resign from the party I advertised as part of my candidature for Parliament.
December 3, 2011
I believe the end game will be about the word ‘derivatives’. True, British banks have loaned money to euro countries which probably won’t be able to pay it back. However, surely the real danger lies in the derivatives market which is akin to punters gambling on the outcome of a casino game.
Even if a minor country like Greece defaults, the resulting chain reaction of derivatives contracts becoming payable would dwarf the initial exposure of UK banks.
The end game? Sadly, probably a horrible mess. Britain is no longer the manufacturing power it once was. It produces more derivatives contracts than widgets, so we will suffer.
December 4, 2011
Where it’s gambling rather than genuine insurance the contracts could be declared invalid – that was the point of the 1774 Life Assurance Act, which is still in force and which despite its title covers not just insurance on lives but on “any other event or events whatsoever, wherein the person or persons for whose use, benefit, or on whose account such policy or policies shall be made, shall have no interest, or by way of gaming or wagering”:
http://www.legislation.gov.uk/apgb/Geo3/14/48
December 3, 2011
Capitalism (in all its forms, including the Chinese communist version) rules ok. Always has, always will. So it will be those elements which make up the “markets” that will ultimately decide.
December 3, 2011
Strong chance that the markets will wait for Merkel and co to cobble some sort of solution together. The European Project, of which the euro is the lynchpin, is more important to these politicians than anything, and I think the markets know it. Still, we’ll see.
December 3, 2011
How long to review a posting? How many civil servants have you and Mr Maude got back there Mr Redwood?
Reply: This is a private website and I do the moderation. Usually a post is delayed if it comntains links that need checking or material that may be offensive to named people a or institutions.
December 4, 2011
If the dire economic predictions are correct and if the bureaucrats still require free movement of peoples throughout the EU, then I would predict large scale immigration into those countries where access to benefits such as housing and health care are the easiest to obtain.
If one of these countries is the UK, and it could certainly be the case for health care for instance, then has the UK government made plans for a large influx of people seeking medical treatment ?
December 4, 2011
Yes, they can print – as long as they still have their own printing presses. This would exclude Luxembourg & Malta etc which are both still probably OK, but also Cyprus who definitely would benefit just now from having its own pinting press. Solution: print enough of the old currency secretly, & issue it after a public holiday at par with the euro, making the new currency the preferred form of exchange except as customer deposits at banks, with the government then scooping up all the returned euros to help pay foreign accounts (both commercial & government ones). If this Friday’s meeting (9/12/2011) fails, the Xmas & New Year holiday beginning in the evening of 23/12/2011 will do very nicely for such a procedure, thank you very much!
December 4, 2011
John, Please will you tell Chris Hulm that there isn’t enough lithium ore to make that many batteries. Also to replace them every 3 years would be impossible. I know Im off topic but somebody needs to tell him that his “All cars to be electric” idea is simply undoable.
Reply: Indeed – and what is the saving if the electrical power to recharge them is generated from fossil fuels?
December 4, 2011
Thank you John.
December 4, 2011
I doubt if any country will leave the Euro. The two countries which should leave are now governed by the commissars from Brussels who have a brief to prevent them from leaving. The people of those countries cannot make the decision either directly or though their Parliaments. Likewise there are too many in the EU establishment to accept that their project is inherently wrong – the best they can accept is that there is not enough central control. As long as the Chinese keep buying Euros to challenge the dollar (not to save Europe) the exchange rates will hold. I think we shall see the collapse of the whole European economy rather than the end of the Euro. Whitehall should be planning on that economic collapse; not on countries leaving the Euro as that would in fact stabilize the Euro and help the European economy.
December 4, 2011
This is how I see it playing out.
The disciplined Germans, who can’t accept the overspending like there is no tomorrow attitude of the southern countries, will continue to squeeze through the imposition of austerity by the administrators in Greece and Italy (and maybe other countries in due course). Meanwhile they all move towards fiscal unity where taxing and spending is budgeted and enforced centrally. That after all is the plan. However one or more states will not accept the medicine and will be cast away, let loose from the Euro (and better for them eventually).
Thus the Euro will over time become a currency shared by a smaller group of closer nations, Germany and the German satellites plus some others who make the economic grade. The Euro far from collapsing will remain a relatively strong currency (although there may be significant short term volatility if/when Greece or others get ejected).
Then, unfortunately for those of us with a sense of British nationality, culture and history, Cameron or whoever at the time is our political master will say the time is right and bump us into the Euro, perhaps after a referendum which the establishment ensure goes their way through a campaign of propaganda designed to make us think that is the only way forward.
I don’t want this to happen, I would rather the whole EU international socialist experiment collapse whatever the collateral damage, but I think this is how it plays out.
December 4, 2011
Too much depends upon the answers and strategy supposedly being formulated in the EU to predict anything with certainty.
Looking at long term trends, with an eye to history however, does bring me to a few conclusions.
I think it is more likely that the EU is finished than the Euro. Counter-intuitive in the extreme however I think I can make the case.
Something has to give, that much is clear. Eurobonds or inflating the money supply would merely be a sticking plaster, the long term financial discrepancies still exist and are getting wider by the day.
Greece however cannot leave the Euro. This particular pig might have to suck on hind tit but the alternative is unpalatable both for Greece and, chiefly, France.
Yes Greece could leave and ‘solve’ it’s problems through devaluation of the Drachma however a great deal of the debt would still exist and it would be denominated in Euros. In the midst of a deflationary spiral what exactly would they regain competitiveness in? Those with something of worth (intellectual capital mainly, I think the Swiss deposit boxes are already packed past filling point with tangible assets) would flee and the black economy would flourish to an even greater extent than it does now. Try paying for a meal with a credit card in one of Athen’s restaurants and you’ll see this at work. All that we would see would be Greeks competing to be a hausfrau’s pool boy or maid, cash in hand of course.
More importantly in the great scheme of things the French financial sector would go bust overnight. This will not be allowed to happen, or more succinctly if it were going to it would have happened by now.
So the PIIGS ( or as is becoming more politically incorrectly common known the GIPSI’s) cannot leave. The Euro is the glue that holds the EU together, and there isn’t enough of it.
As banks tighten there will be even less of it. They won’t lend to each other as it stands. It also appears that joint bonds or other mechanisms for encouraging foreign participation are doomed to fail. China’s role is key here, but they will be thinking of the future not the present. Why buy small parts of Europe when they know it will be cheaper in a fire sale? Why invest at all when it doesn’t include the only prize they covet, namely Europe’s military technology? In short the Euro is massively overvalued given it’s internal weaknesses. If the currency weakens however, Germany grows stronger and the problems exacerbate.
Hence there is only one winner and the PIIGS will have to fight for scraps from the Teuton table. Germany will extract a high price, not out of idealogical Bismarckianism and not due to a wish to subjugate but purely through national interest. Merkel cannot hope to survive without this price, though it will have huge second order effects.
Across Europe populism holds sway. Given the turnouts at elections and the sameness of the opposing parties (it has to be thus as all European parties who are not vehemently opposed to the EU effectively have the same policies, they merely act within a framework already imposed by EU law) the peoples of the PIIGS will likely wake up and finally demand their say.
Whilst it is accepted policy on the internet that any mention of Hitler degenerates a discussion into the gutter the current circumstances require a look back through history. It was the rise of parties seen as anti-capitalist which projected the evil one into power. Anger at bankers and reparations lead to increased support for the Communist party, and in tow the anti-communist but also anti-capitalist national socialists.
Populism is hardly an ideology, it merely allows badly elected politicians to do what they will through a lack of voter interest. None of them can be trusted so there is no point voting. Opinions harden and change however when it is more difficult to put food on the table and when anger holds above reason.
Unhappily therefore I predict (civil disorder-ed), whichever solution is foisted upon the unhappy recipients. How the EU deals with this will be the defining moment, not the financial symptoms of the democratic deficit.
(para removed-ed)
Would the ragtag collection of failed politicians, unpopular academics, economists, international lawyers ( sic) and idealists finally realise that there is no European Demos and retreat?
History suggests otherwise.
Therefore I don’t see any country being able to leave the Euro, however I can see the EU self combusting into a repressive and increasingly insignificant bloc with nothing to show for itself other than history; reliant on Russia and the rest of the world for it’s natural resources, reliant on America for it’s protection and reliant upon comical Ali for it’s press releases.
No matter what happens this will not be Europe’s century, the insignificance of it’s markets and political clout is already being demonstrated by a certain disregard for laws and property rights. If I would not invest in it why would I want to be a part of it?
The world is far too interesting at the moment for my liking (etc etc)
December 4, 2011
Mr Redwood, I’m very concerned about what Mr Cameron is doing concerning our membership of the EU. We are not in the euro, however, it seems we are told constantly its success or failure is in our interests. Mrs Merkel’s and Sarkozy’s stance and agreements depend upon other countries agreeing and accept their proposals. It appears like bullying to me, are we to be bullied and accept it? I’m sorry but trusting Mr Cameron on the EU is not on, he’s made so many promises and failed to keep them, now we have differing opinions from that man, Clegg, and Mr Duncan Smith, who do we belive. I prefer the latter anytime. I’m sorry, but my vote will certainly not be the Conservative party it will be UKIP who promise to take us out of the EU, and make this country free once more, trade yes anthing else a clear NO. Any change to the EU treaty, we deserve a referendum, as promised, there lies the crux, a promise!
December 5, 2011
The following countries could share this currency:
Austria
Luxembourg
Netherlands
Slovakia
Slovenia
….forming a middle belly across Europe.
However, such a union could result in absorption of Austria into Germany which is forbidden by treaty (I believe). I also doubt that the Netherlands would join this currency union and this would discourage the others.
I think that the Euro will become the Deutschmark and be restricted to Germany only.
December 5, 2011
Hopefully, relentless pressure of the bond markets will force countries out of the currency. Preferably starting with Germany.
December 5, 2011
God wrote the end game from eternity past. He is acting to carrying out his sovereing plan, and is using Angela Merkel to bring forth a New Europe; it will be based upon intergovernmental compacts.
The concept of a fiscal compact providing a fiscal union and an intergovernmental Europe with iron discipline is emerging this week, as leaders labor in a ten day marathon to resolve the European sovereign debt crisis.
A European super state will be the first authoritarian kingdom of the ten toed kingdom of regional economic government identified in bible prophecy of Daniel 2:31-44.
In order to get people’s attention, Gods shaking the economic, political and investment bedrock of Neoliberalism, and is sending the first horseman of the apocalypse, Revelation 6:1-2, to effect a coup d etat in the EU nations, by installing technocratic government in Italy and Greece, and by starting a dislocation out the stocks which saw the greatest gains from ponzi financing and carry trade investing that came with the Milton Friedman Free To Choose floating currency regime.
The seigniorage of fiat money has ended, and the seigniorage of diktat has commenced. Not by any human action, but rather, at the appointed time, God will open the curtain, and the Sovereign, Revelation 13:5-10, and the Seignior, Revelation 13:11-18, will step onto the world’s stage to rule the Beast regime, Revelation 13:1-4, as it rises from the profligate Mediterranean Sea countries. This behemoth of regional global governance and statism has seven heads, symbolic of mankind’s seven institutions, and ten horns, symbolic of its governance in the world’s ten regions. A collapse of sovereign debt and the world’s banking system is imminent. And out of this crisis, a New Europe, whose sovereign authority comes from the 1974 Clarion Call of the Club of Rome for regional economic government, will provide a degree of economic security for corporations and governments; and the people will be amazed, and place their faith and trust in the seigniorage of diktat, as foretold in bible prophecy of Revelation 13:3-4.
Who might this Sovereign be? Herman van Rompuy is a leading candidate. And who might the Seignior be? Very possibly Mario Draghi.
Why is God bringing forth a beast system, ruler and banker to rule mankind? God has always meant for people to be ruled by a king. The sovereign king, Revelation 2:26-27, is coming to establish his kingdom on earth for a thousand years, Revelation 20:4-6. God is acting very decisively now to remove any doubt, as to who is sovereign, before the rule of his Son begins.
December 5, 2011
In the end the Euro will be saved in the short term but the current bailout package of 440 BILLION Euros will not do the trick.
What is required is 2 trillion Euros which leaves a shortfall of 1.56 trillion Euros.
So far the Germans have kept their hands firmly in their pockets and China ,Brazil and Russia have all refused to chip in .
America is effectively bankrupt and has traduced its currency so much and spent so much on black programmes and defence that it cannot really assist.
The Chinese ,could assist but take the view that the Euro crisis cannot be that serious because the Germans will not put money on the table.
Eventually Germany will have to if it really wants “ever closer union”.
Once they do the Chinese will grant some help via it,s sovereign wealth fund but only within the context of buying up Western banks and key assets.
This has already started with Sir Richard Branson,s recent purchase of Northern Rock via Virgin Money–His co-venturer was the Chinese Sovereign Wealth Fund and with the earlier help given to Greece by China which wanted an island in the Mediterranean sea for strategic reasons.
The discovery of $3 trillion USD in copper and $3 trillion USD in lithium at the Aynak mine in Afghanistan may hold the key to the conundrum.
China Metallurgical Corporation has secured the rights to mine against stiff competition by heavily bribing Afghan Government officials and promising to rebuild Afghanistan,s infrastructure.
350,000 Chinese mineworkers are hard at work at Aynak,guarded by American troops who had to first clear the area of Taliban fighters and more Chinese construction workers are building roads.
The lithium will power the first generation of new electric cars which will lessen our dependence on oil and our need to seize oil by force in dusty countries,whilst the copper will assist the Chinese economy during what for them is a slowdown.
One might envisage that one trillion might then be available to pump prime the US economy which would then be more receptive to Chinese goods.
Provided the Germans dig deep and austerity measures are applied to the PIIGS then the remaining trillion,secured by real assets and not paper could come to Europe from China .
In the long run however the Euro is doomed because Europe is by and large lazy ,unproductive and uncompetitive(except for Germany) and thinks it has the right to avoid paying its own way.