The UK political classes have been mesmerised by the Murdoch saga. The all party agreement to the motion to ask Mr Murdoch to withdraw his bid duly led him to do so.
Meanwhile, outside the pressurised atmosphere of the debating chamber, the EU’s power brokers are locked in battle with each other, and with the markets. This is a much more gripping and crucial battle for all our futures. At stake is the future prosperity of our continent, and the future rights and duties of citizens in the many countries likely to advance further towards a federal union.
Today, late in the afternoon, we expect the authorities to publish the results of the EU stress tests for banks. These will show that some EU banks, probably in Spain, Germany and Italy amongst others, have low levels of capital relative to the risks they are running. If the EU sets a fairly high bar, more will fail the tests, worrying people. If they set a low bar, more will doubt the validity of the tests, worrying people.
The last EU stress tests, which were analysed here, failed to point out that holding government bonds could be hazardous in the current climate and could lead to substantial losses if marked to their market values. They did not satisfy markets, as many commentators and investors thought them too easy. The Irish banks all passed, and promptly got into difficulties.
These new tests will draw attention yet again to one of the fundamental areas of weakness in the Euro scheme. Banks in weak countries have been made to buy and own too many domestic governemnt bonds, which are now sitting at large losses. EU banks generally have not been regulated to strict capital requirements. The European Central Bank has offered substantial assistance, as a Central Bank has to do, but some fear it will be held back when it needs to offer more bank liquidity, and if it needs to continue its government bond buying programme. If the regulatory authorities overdo the demands for more capital, it just slows the growth rates even more. This in turn cuts tax revenues and makes deficits worse.
The enthusiaists for the Euro are now demanding that the EU makes more rapid strides to having an EU Finance Minister, proper enforcement of budget limits on each member state, and use of the EU credit card to borrow more money for individual countries using the credit status of the whole area. There are also frantic calculations of how much money should be transferred between the richer and poorer regions of Euroland to try to balance things up a bit.