10 reasons why Cameron might gain from the EU deal.


10:10 am - December 10th 2011

by Éoin Clarke    


      Share on Tumblr

David Cameron by vetoing the a prospective EU treaty last night has taken one step closer to winning the General Election of 2015 for lots of reasons.

1. British Trade With Europe will not be affected.

Those who invest in the EU, trade with the UK, or decide to locate here will be no more moved by the UK’s actions last night than they were by our decision not to enter the EURO. Business will continue as normal.

2. Splendid Isolation is nowhere near as unpalatable as the chattering classes would claim.

In effect, the UK now has reduced liability for any future bailout or contribution to a stability fund. The distance from our EU partners might just exemplify our detached status and gain us the reputation of being more stable than our EU partners. Thus, Osborne’s laughable claim that the UK is a safe haven might now become a self fulfilling prophecy.

3. The UK retains its access to the Common Market

Britain’s trading position with the EU is entirely unaffected.

4. The UK voters are overwhelmingly negative about Europe, including a majority of Labour voters.

This point cannot be over-emphasised. The drift, or drip drip perceptions of an endless loss of sovereignty to the EU infuriated voters on the left and right. Those on the right resented a loss of national identity. Those on the left resent the global spread of capitalism. The neo-liberal monolith that some lefties had come to regard the EU as, has now been dealt a blow – a small one at least.

5. The Robin Hood tax is as unlikely as ever.

Although a sore point among lefties including myself seeking reform of financial services, protecting the London Business centre is a massive vote winner. It will strengthen Boris’s hand for the Mayoral elections. The main wealth generator of the UK may well be a magnet for banks wishing to escape the Tobin Tax or its likes.

6. A referendum has been avoided.

I have always argued that an EU referendum would result in a decision to remain in the EU, once voters were presented with the facts. But on Cameron’s watch, it was one he was keen to avoid and so by vetoing last night’s treaty he has achieved that.

7. Cameron has split the Tory right and created a new majority within the Tory Party.

Do not under-estimate the magnitude of the back bench rebellion over Europe in October. It would have scared Cameron that the right of his party was coming together in this way. Now he has detached the modest rightists from the John Redwood’s of the party and showed them that he is willing to stand up for UK interests in Europe. This is probably his best achievement.

8. The right wing newspapers will applaud him.

More people read the Daily Mail than voted for the Tories at the last election. Today, its headline reads ‘Cameron finally gets tough’. For those who keep an eye on the Daily Mail, that’s the nicest thing they have ever said about Cameron.

9. At a time when being the heir to Blair is less sought after, framing himself in the mould of Thatcher will be more advantageous.

At the recent Labour conference it was claimed that some booed on hearing Blair’s name. A subsequent YouGov poll found that the Tory Party voters also had majority negative feelings towards Blair. In short, being the heir to Blair was less of a vote winner than first thought. Thatcher won 3 elections each with a 40% share of the vote because a portion of the electorate warmed to her ‘Iron Lady’ mantra. Acting tough will stand Cameron in good stead for voter perceptions.

10. Had Cameron signed it, the drip drip of referenda and splits would have killed the coalition.

For those who still think Cameron was wrong to veto the bill, just imagine if he had signed it. Endless back bench sniping over demands for a referendum. He’d have further broken his cast iron guarantee. The Lib Dems and Tory right would have been at loggerheads. And Labour could have mocked infighting and division from the sidelines. In one foul swoop Cameron has replaced that – with mockery and laughter.

I have analysed the 8 UK newspapers responses thus far: you can my piece here.

    Share on Tumblr   submit to reddit  


About the author
Eoin is an occasional contributor. He is a founder of the Labour-Left think-tank and writes regularly at the Green Benches blog.
· Other posts by


Story Filed Under: Blog ,Europe ,Foreign affairs

Sorry, the comment form is closed at this time.


Reader comments


Well-judged post.

Also, Labour made a mistake by initially stressing the “isolation” and loss of influence points. The pressure is now on Ed Miliband and Ed Balls to say if they would be happy to have their budget homework marked by the French and Germans. And also to admit that Ed Balls’ Plan B would not be allowed under the new regime.

Had Cameron not used his veto, it is possible that an incoming Labour government, democratically elected, could have had its key tax and spending manifesto commitments turned down by an EU panel dominated by the Franco-German Centre-Right. Democracy anyone?

Finally, LibCon gets it right on the Eurozone deal.

Thread header: “British Trade With Europe will not be affected.” + “The UK retains its access to the Common Market ”

We don’t know that yet. Besides, the Single Market is still incomplete in respect of EU intra-trade in services in which Britain has a competitive advantage as the second largest exporter of services after America. We don’t know how the so far undecided financial regulations for the intended fiscal union for the Eurozone will impact on the London financial markets.

The claims being made are entirely premature. At present, we are still lacking an agreed EU diagnosis of the causes of the Eurozone’s problems and whether those issues will be resolved by a fiscal union intent on imposing a fiscal discipline on Eurozone governments with sanctions against rule breakers.

Nor is the EU facing up to the prospect of civil unrest in countries facing the duress of extended periods of austerity – especially since national government will be able to point the finger at the EU Commission in Brussels as the reason for imposing austerity measures.

4. gastro george

@1

“The pressure is now on Ed Miliband and Ed Balls to say if they would be happy to have their budget homework marked by the French and Germans. And also to admit that Ed Balls’ Plan B would not be allowed under the new regime.”

Surely that only applies to eurozone countries, not the wider EU.

5. Don Mac Auley

Confused article at best. Please explain why “The UK voters are overwhelmingly negative about Europe” and two points later, “I have always argued that an EU referendum would result in a decision to remain in the EU”. Author can´t make his mind up either it would appear!

@5 The OP is wrong about “The UK voters are overwhelmingly negative about Europe”. No party with an anti-EU platform has ever acheived anything at the polls in Britain. UKIP’s vote is pathetic and Hague’s anti-EU election campaign was a disaster (for him), as was Michael Foot’s in the 1980s. That’s why we get all this posturing from the tories. They daren’t actually say they want to leave and the loud-mouthed EU haters daren’t join UKIP, because their political careers would be over.

So we will still be a major player, as the EU perhaps will ask why the German the Spanish the Italian and all other banks in the EU which are in London have major offices in London will be allowed to stay. Large scale manufacturing which need a market will not be affected you hope it’s not, because if it is then sadly the UK will struggle for longer then needed.

fact is if we not wish to be part of the EU give us a vote on it.

There are so many miscomprehensions and ommissions in this, I can’t even be bothered listing them. Use a guest who has more a more evolved and sophisticated understading of international poltics next time time please.

Don Mc,

Several recent polls showed UK voters c.67% had negative feelings towards the EU
The majority of Labour voters want less close ties with the EU.
Two thirds of voters want an EU referendum.

However,

Past referenda have shown that the closer it comes to polling day, the appetite for change recedes..

eg 59% favoured AV in a Comres Poll in June 2010.

And so, I think the closer an EU referendum came to polling day, the appetite for EU withdrawal would dwindle.

In short, its not as contradictory as you allege.

10. Limiting Factor

Unfortunately, Cameron was right to reject the new treaty – but for the wrong reasons. The proposed new treaty is very bad – with the 3% deficit restriction this effectively outlaws expansionary fiscal measures, practically enshrining austerity. Yes, permanent austerity. American rightwing nutjob Grover Norquist once said “Our goal is to shrink government to the size where we can drown it in a bathtub.” – which is why the new treaty will please authoritarian, pro-market greedmongers right across Europe.

And probably over here, once they realise what it means.

That is undoubtedly what it looks like on the basis of the eight UK papers analysed — and while they may be right about the political fallout here, their prognostications about the wider European response fail to reflect the reality of the situation outside Britain.

It’s one fell swoop…. not foul swoop. Tsk.

The eurozone’s problem is not hard to figure out. The PIIGS are all running large CA deficits. Since they are members of a currency union they are extremely vulnerable to balance of payment crises. Restricting govt spending does noting to address this. Indeed, according to Martin Wolf’s most recent column, every country in the eurozone except Greece would have fallen foul of the deficit cap in the decade preceding the crisis.

14. Christopher Heward

Well judged.

@5 The guy said that after the facts were presented people would vote to stay in the EU. So presumably he’s saying they don’t have the facts now and are anti-EU. Also, the fact people are EU doesn’t necessarily mean they want to leave it, although whilst that isn’t an option they might exaggerate and say they do.

Generally I still can’t see why people say that the EU is capitalist free market neo-liberal. People really have these words mixed up.

Firstly, isn’t it funny that the word Liberal is seen as positive and Neo-Liberal is negative? Neo-liberal is a reincarnation of true Liberalism – which is minimal government intervention is economic and social matters (think of, for example, Nazis and Neo-Nazis – they’re a continuation in a slightly different form), so we need to stop using Liberal in the wrong way (http://en.wikipedia.org/wiki/Classical_liberalism).

Secondly, capitalism just means that people have property rights over their capital, in contrast to communism where they have no property right as everything is owned by the state (our economy is somewhere in the middle as there are lots of publicly-owned assets and land, etc.). So you could have a completely capitalist society (with regards to everything except income) that was also quite socialist, in that nothing was publicly owned by the Government used taxes to pay people to do public service.

Thirdly, if we focus on this accusation of free-market and neo-liberalism, well that’s ridiculous. I mean half the budget is spent on the CAP, which is anything but free-market – it’s all about subsidies, tariffs and import quotas. Putting that aside, a lot of the structures aren’t free market, they are pro big business. Even the Euro isn’t free market, because in a free market people could invent their own currencies, but to appease big business and save money for all those banks trading, and big companies shifting their money around between European banks, they created the Euro to make sure they keep even more of their own money. I mean it’s not exactly there to help those of us that go abroad a few times a year. OK it’ll benefit some small businesses that buy from abroad, but I don’t think it was them pushing for the Euro.

“The main wealth generator of the UK”? Where have you been living for the last three years? The parasitic city is a wealth destroyer which will take years to recover from and what is truly criminal, these so called wealth creators will do the same thing again and again.

16. Christopher Heward

@13 Makes a good point.

I think if you’d had this cap at the start things would have been a lot better (although a lot of the poorer countries might have therefore left ages ago as a result) and indeed I think that had been the suggestion, that they were supposed to have balanced budgets (or close to). But to enforce it at this point is just ludicrous. I mean, when you’re in economic trouble that’s the only time you should consider running a deficit, whilst in an upturn you pay down your debt and run a surplus.

This might appease the markets (although not necessarily for long), but the people won’t be happy, and if they get really unhappy then that’ll bring just as much instability as they’re trying to avoid…

I think too many people see politics as a spectator sport, or rather like the wrestling we used to have on a Saturday morning. Outside any effect on the tories and labour, there are very important things that effect us all. Rather than just criticise what particular factions of the main political parties seem to want, the big question remains as to whether this country’s membership of the EU is a price worth paying? It certainly costs us, but is it worth it?

I say no. We don’t need another government on top of our own – the one we’ve got is bad enough.

I think too many people see politics as a spectator sport, or rather like the wrestling we used to have on a Saturday morning.

Presumably the government is Big Daddy?

I fully agree with your analysis Eoin.

Ed is virtually in a no win position (again).

If he says that DC should have agreed to the accord, he would be in a position where the majority of the UK electorate disagree with him.

His stance of criticising DC, accusing him of not building relationships in Europe, and claiming Labour would negotiate better is very wishy-washy and poor.

I am afraid as much as I don’t like what the Coalition is doing, Ed is losing too many key battles.

He needs some courage, a better team of strategists and a bucket load of luck to even start to compete with the blues in 2015.

IMO Cameron had no alternative to take the stance he did to maintain Britain’s national autonomy on issues of monetary and financial policy. FWIW I think it likely that position would be endorsed in a national referendum. Had the Labour Party won the 1983 election – when Blair was first elected to Parliament – Britain would not be in the EU nowadays so the Labour Party’s credibility on EU issues is hardly solid.

There are full reports on the summit in Saturday’s FT. Among the safeguards Cameron sought was the option for Britain to set higher capital requirements for banks operating in Britain than the maximum permitted under prospective new EU regulations as well as protecting the flexibility necessary to implement whatever recommendations of the Vickers’ banking commission emerge after consultations are completed. Sarkozy dismissed that as “unacceptable” – which indicates a certain personal or national intransigence in response to a rational request for opt outs on Britain’s redlines.

I suspect a set-up engineered by Sarkozy because of the French presidential election next year. Because of current poor ratings in the polls, he evidently wants to appear very macho.

However, there is no knowing how all this will play out downstream so taking comfort from terms in existing EU treaties is entirely premature. Besides, as mentioned, the Single Market is still incomplete, especially in EU intra-trade in services where Britain has strong competitive advantages. There is an unresolved outstanding issue where the EU is pressing for institutions dealing in Euro financial trading to physically relocate in Eurozone territory – a nostalgic reversion to Napoleon’s protectionist Continental System perhaps?

I think your analysis is right in the short term.

However, I feel corporations looking long term will factor in the possibility of the UK leaving the EU and will be less likely to invest here. And why would Europeans favour UK businesses over others. I accept Ire3land and Denmark will be the exception.

I can’t see why anyone in the EU has any reason to be helpful to the UK. I can see that many will want us out and there will lots of sniping. The refusal to discuss the Tobin Tax and Osborne’s wrecking of the EU’s attempts to put pressure on Switzerland and other tax havens has made us many enemies. We are in reality no longer a full member of the EU this will become more apparent as next year progresses.

The Tory right wing have had a big boost. I reckon the demand for a referendum will be much greater. I can’t see how Osborne will be able to block it. This will cause conflict within the Tories probably on the same scale as under Major. (The neo-con new entrant Tory MPs have not really flexed their muscles yet – now would be a good time to do so).

I’ll be very surprised if the coalition holds together throughout the whole of 2012. Sadly Milliband’s strategy of really giving Cameron enough rope to hang himself won’t work. If we have an election next year it will be a disaster for everyone, particularly the country.

@21: “I can’t see why anyone in the EU has any reason to be helpful to the UK.”

Britain has a large, attractive internal consumer market in the 6th biggest economy of the world and London has the largest market in foreign exchange by a margin over New York and Tokyo.

On some demographic projections, Britain may become the country with the largest population in western Europe by mid century.

“Britain will overtake Germany as Europe’s most populated country within about 30 years. The number of people living in the UK will hit nearly 75 million – a European record – in 2043, as high immigration, rising births and fewer deaths push up the population.”
http://www.thisislondon.co.uk/standard/article-24002529-britain-will-have-biggest-population-in-europe.do

When Britain went to war in 1939, Britain’s population of about 40 millions was half that of the combined populations of Germany and Austria.

@20
Germany has a population of 82 million. Could you explain how the world of numbers has changed so as to make your argument valid? You are also assuming that Scotland will still be part of the UK.
It won’t be.

Phil @ 23:

“Germany has a population of 82 million. Could you explain how the world of numbers has changed so as to make your argument valid?”

Germany’s population is predicted to decline over the same period.

“You are also assuming that Scotland will still be part of the UK.
It won’t be.”

I know conventional wisdom has it that Scotland will declare independence if Britain ever leaves the EU, but I’ve never seen the assertion backed up. Are there any recent (i.e., after the Eurozone crisis began) surveys suggesting (a) that the majority of Scots still want to be part of the EU, and (b) that they feel strongly enough about the matter to split with England so they can continue being an EU member?

25. Sceptic Isle

“The UK voters are overwhelmingly negative about Europe” and two points later, “I have always argued that an EU referendum would result in a decision to remain in the EU”

The author clearly understands that if the British people did vote no, they would just be asked again and again until they got the “right” answer.

@23: “Germany has a population of 82 million. Could you explain how the world of numbers has changed so as to make your argument valid? You are also assuming that Scotland will still be part of the UK. It won’t be.”

I was careful to say: “according to some demographic projections” to mid century and to post a link.

I didn’t do the projections but the dynamics depend on a growing British population, as the result of a relatively high birth rate by European standards and immigration, compared with a shrinking German population by virtue of population ageing and a low birth rate there. Don’t blame me for the accuracy of that projection but it could motivate policy stances in the EU, especially so if Britain left IMO.

As for Scotland, its population is only 5.2 million. Just a few years back there was a lively debate in Scotland about whether the population was in decline or not.

27. Leon Wolfson

Eoin – Point 4 – show me the study. Not poll, study. I can write a poll showing support for slapping gingers by phrasing the question correctly, they’re worthless for anything but trends, as you well know, not numbers.

Point 6 – You’re arguing against the reality of the AV poll. Which was blatantly bought in the media by secret funding. Moreover, I agree with Atlee – they’re the tools of Tyrants.

You are supposed to be left wing. I now doubt that. I suspect Sunny’s agenda, bluntly.

@10 – Bullshit. Absolute bullshit. The Nordic countries are doing JUST FINE, and won’t run into issues. Strangely enough, that’s a great model to follow.

@22 – And we’ll have an economy which is the 14-15th largest according to a studies I’ve seen. Lots of people, shitty economy. And that’s assuming zero retaliatory measures, which is far from sure.

@24 – Scotland will leave *anyway* at this rate.

Leon,

You mean Attlee. 🙂

Leon.

You mean Attlee. 🙂

Eoin tells us lefties uncomfortable things. Sometimes we don’t want to hear them. But he’s usually right.

31. Leon Wolfson

@27 – So I do. Thatcher agreed with him, incidentally. Leaders with principle will… (Thatcher was wrong-headed, but had principles, unlike the coalition)

@29 – Then the answer is to surrender? Telling us what goes wrong alone is never helpful. It reads to be like a screed for Cameron having done the right thing for the right reasons.

We’re GOING to lose at least the Eurobond market anyway, and who knows what else in the retalisation which is sure to come, quite possibly taking a far bigger hit than if we’d signed on.

@Leon
It´s not all bad at least you´ll have Ireland back as a colony when we vote down the inevitable referendum on the new “EU PACT”. We´ll look to the old enemy/neighbour for succour in our time of need, hitch ourselves to sterling and offer nothing in return but gifted literature and whatever potato harvests we have left!

I think a lot of people are making the same mistake as the UK political punditry by assuming that a communiqué issued at the end of a summit is the same thing as reality. This assumption causes them to be perplexed when it regularly falls apart within a few weeks. Agreeing at a summit to do something and selling the same thing to a domestic electorate are two different things. I suppose if you see the electorate as just there to be told what to think you would find it perplexing. Hence, why the elite UK political punditry assume a communiqué is the same thing as reality. There are lots of things that could go wrong before anything concrete comes out of the latest summit, including referendums.

The Germans would genuinely like to keep the British on board in the decision making and not just in the sense of remaining EU members. The vertically challenged French President is playing up to his domestic audience by sticking it to the Anglo Saxons. Probably to no avail as he is turfed out of office next year. In the circumstances, tribalism apart, I don’t see what the UK PM could have signed up to at this summit. However, in the coming weeks I suspect that private negotiations between Mr Cameron and Merkozy will take place. The summit is a legal mess so there will need to be some movement in backdoor deals.

@ 23 + 24

In the 1970s referendum, the yes vote was lower in Scotland than the UK. In fact, the only regions in the UK to register a majority of no votes were in Scotland. The fishing communities absolutely detest the EU. Although, there is not much population in those areas. Recent developments create some interesting problems for Salmond that he would rather ignore. The SNP leadership are pro-EU, but a lot of their support are anti-EU who would prefer to be like Norway.

@30: “We’re GOING to lose at least the Eurobond market anyway, and who knows what else in the retalisation which is sure to come, quite possibly taking a far bigger hit than if we’d signed on.”

Compare this FT news report on 5 December and ask yourself why are international companies electing to launch issues of Sterling bonds in London?

Surge in sterling corporate bond issuance gains pace:
http://www.ft.com/cms/s/0/f0838614-1f5d-11e1-9916-00144feabdc0.html#axzz1gAisEdbL

“We’re GOING to lose at least the Eurobond market anyway, and who knows what else in the retalisation which is sure to come, quite possibly taking a far bigger hit than if we’d signed on.”

Tut tut – we shall have to leave then shalalalala we.

This Weekend’s edition of the FT has the best coverage of the EU summit – as can be expected given its regular readership. This edition will still be on sale on the press stands of many supermarkets on Sunday for any who want to catch up on the safeguards that Cameron was seeking to protect Britain’s national autonomy on monetary and financial policy.

The house-price bubbles in Ireland and Spain are examples of what happens when monetary union members are unable to set interest rates to suit national conditions:
http://www.economist.com/node/21540231

37. Leon Wolfson

@31 – Yea right. More likely Ireland will drop the CFA, and they will join Schengen along with Scotland and Wales.

@32 – Norway, the “Fax democracy”? They want to adopt the Nordic Model, sure, but I can’t see them doing so from outside the EU.

@34 – And how is becoming a Fax democracy ourselves helpful?

38. Leon Wolfson

Er, CTA, not CFA

39. Leon Wolfson

@35 – And the house price bubble in the UK? So much for that theory.

No, Cameron is seeking to protect your 1% bubbles. City > People.

” And how is becoming a Fax democracy ourselves helpful?”

Ah well get slaughtered either way:D

Leon: “And the house price bubble in the UK? So much for that theory.”

Ignorance is strength. You really are dim – and you fell headlong into an elephant trap.

Similar economic phenomena don’t necessarily have the same cause – which is why we distinguish between demand inflation and cost inflation. The appropriate policy responses are different.

In the Turner Review of the FSA published in 2009, it was admitted that the FSA fell down on its task of regulating banks and other financial institutions. The government had the option of trying to secure agreement on minimum down payments for house purchases on mortgages but failed to act when it could have done so unhampered by any EU regulation. On ONS figures, household debt as a percentage of household incomes rose from 102 pc in 1997, when New Labour was elected to government, to 160 pc in 2010. The Labour government chose to do nothing about that.

The government could have included an element to reflect housing costs in the Bank of England’s inflation target – as Charles Goodhart (LSE prof and ex member of the BoE’s MPC) has advocated. Instead, in February 2004, GB changed the inflation target set to the Bank of England from the RPI index, which included an element for housing costs, to the CPI index which doesn’t.

Around 2000, John Monks, then general secretary of the TUC, went around advocating that we join the Eurozone. An argument he kept making was that home owners buying their homes on mortgages would benefit from the lower interest rates then prevailing in the EU. Had we accepted that advice and done nothing to tighten the availability of mortgages, the house-price bubble would have been much worse.

42. Leon Wolfson

@39 – Yes, we do. And the way chosen, we’ve isolated ourselves. Sigh.

@40 – There is no “trap.” You want bubbles. That’s all there is to it. Keep advocating them, as I said, they only hurt the 99%…

“@39 – Yes, we do. And the way chosen, we’ve isolated ourselves. Sigh”

You speak as though, by simple agreement the UK would have wielded great influence and turned every issue in our favour…why are you terrified of ” isolation”

Leon: “There is no ‘trap.’ You want bubbles. ”

That’s more mendacious rubbish. I’ve regularly posted warnings about the bubble with links to news reports of the warnings by Charles Goodhart and Roger Bootle going back to 2002/03.

The New Labour government could have acted to curb the inflating house price bubble in ways discussed @40. The government FAILED to act.

GIven the spectacularly ineffective way in which the EU Commission has failed to manage the flourishing crisis in the Eurozone, there are no rational grounds for supposing that it will be any more competent at regulating financial services markets.

Of special concern is the fixation that the crisis of the Eurozone is due to fiscal indiscipline when economists here and economic writers in the FT and elsewhere converge in agreeing that the root of the Eurozone’s problems is chronic balance of payments deficits as the result of the diverging competitiveness of national economies. The Eurozone already had a Growth and Stability Pact from 1995 to established guidelines for fiscal discipline which was regularly breached. So much for the ways in which Eurozone governments adher to mutual agreements.

I’ve set out in other threads here how chronic balance of payments deficits create recessionary pressures which governments have sought to alleviate by compensating fiscal boosts funded through borrowing and more borrowing until the financial markets for those government bonds revolted.

Focusing on fiscal discipline with no mechanism for transferring funds from chronic trade surplus countries to chronic deficit countries will just intensify recessionary pressures. Britain has an internal fiscal union with such a transfer mechanism..

45. Leon Wolfson

@42 – Because isolationism in a global world would do more to collapse our economy than anything else. Realism, in other words. England is facing up to being trapped as the only significant economy on the continent not part of it’s single market, when single markets are rising around the world as countries realise they can’t compete alone.

@43 – Blah blah… I don’t care for the excuses. You’re now defending the city at all costs, and inflating another bubble. All you’re saying is “don’t learn from history”.

Leon: “I don’t care for the excuses. You’re now defending the city at all costs, and inflating another bubble. All you’re saying is “don’t learn from history”.”

That’s unmitigated rubbish.

I’m saying that the EU Commission is demonstrably incompetent for allowing the Eurozone crisis to flourish and that EU governments are being mis-sold the diagnosis that fiscal indiscipline is the root cause of the Eurozone crisis – nothwithstanding the frequently breached EU Growth and Stability Pact of 1995 – when the root cause is the chronic trade deficits of some EU member countries – such as Greece, Italy, Spain – along with the absence of a systemic mechanism for transferring compensating funds from chronic trade surplus countries – such as Germany – to chronic deficit countries.

Large trade deficits exert a depressing effect on countries with chronic trade deficits so the governments have corrected for that by fiscal boosts funded by borrowing but bond markets are now revolting at the scale of borrowing because of growing concerns about the increasing likelihood of default.

We have such fiscal union mechanism in place in Britain which effectively redistributes the buoyant tax revenues generated by London’s financial markets to subsidise public spending in other regions. This paper by Oxford Economics estimates the inter-regional transfers from a time before the onset of the financial crisis:

Regional winner and losers in UK public finances
http://www.isitfair.co.uk/Reports/Public/OE%20UKPublicFinance.pdf

None of that critique of the Eurzone amounts to a defence of London’s financial markets “at all costs” – nor does it imply that asset-price bubbles should be promoted. The New Labour government failed to act to curb the house-price bubble in Britain by policies discussed at length @40.

At no time have you shown how signing up to a new EU treaty will prevent asset-price bubbles inflating. On the contrary, loss of national autonomy over monetary and fiscal policy opens up the greater likelihood of asset-price bubbles as has happened with Ireland and Spain – see the link to the the survey in The Economist posted @35.

47. Leon Wolfson

There wasn’t the possibility – broadly – of a new treaty (given only Germany really wanted one), the possibility was a far more limited protocol 12 agreement. Cameron said no, *forcing* a new treaty.

He, in bad faith, wanted issues not on the current agenda to go back from QMV to unanimity. It’s the only way to fly, for this government (bad faith…)

And given your support for austerity here, “ha” is all I need to say.

(Don’t bother linking, I won’t read your “research”, and haven’t since your Scottish menace nonsense)

Quote: “Tougher rules to tackle the eurozone debt crisis can be achieved without changing EU treaties, European Council President Herman Van Rompuy says. ” 11 December 2011
http://www.bbc.co.uk/news/world-europe-16062378

A new treaty is more form than substance. But Mrs Merkel wants a new EU treaty so EZ countries breaching fiscal discipline rules can be punished.

Why is that necessary when the EZ Growth and Stability Pact of 1995 laid down strict rules for fiscal discipline?

Because that Pact was widely breached, including by France and Germany. EZ member states can’t be trusted to adher to mutual agreements so automatic punishments are deemed necessary.

As suspected, early polls show strong public support for Cameron’s stance in refusing to sign up to a new EU treaty without safeguards to protect Britain’s national autonomy in monetary and financial policy. Clegg has flip-flopped and is now looking totally discredited. Ed Miliband is in danger of looking seriously silly.

The safeguards are necessary to give the government sufficient flexibility to apply recommendations of the Vickers’ commission on banking once the current consultation process is complete. Also, the safeguards included the scope to set higher capital requirements for banks operating in Britain than might be allowed under maximum requirements set by the EU under a new EU treaty – this flexibility could allow capital requirements to be moved contra-cyclically, which is one means of reining back credit booms financing asset-price bubbles. The EU is sensitive about banking capital requirements being set “too high” because significant numbers of banks in the EZ are looking to be vulnerable in banking stress tests, according to reports.

The EU Commission is looking spectacularly incompetent for allowing the EZ crisis to flourish as it did and because the Commission and Mrs Merkel haven’t correctly diagnosed the root cause of the EZ crisis – chronic balance of payments deficits for some EZ countries because of insufficient “convergence”, when convergence is a key requiremaent for maintaining a stable monetary union. The proposed EZ Fiscal Union is a disciplinary organisation, not a means for effecting transfers of funds from EZ countries with chronic trade surpluses to countries with chronic deficits – as happens in Britain’s fiscal union – to compensate for the recessionary pressures from trading deficits.

Candidly, Mrs Merkel and the EU Commission are looking economic illiterates.

49. Leon Wolfson

@47 – Again, completely wrong. That article is from the 7th, and completely outdated.

It could be done without a new treaty IF and only if there was unanimity. Cameron refused. He’s FORCED a new treaty, one where we don’t have a say and which will invariably expand it’s scope. And will affect us – badly – anyway, given the grudges we have caused.

“As suspected, early polls”

POLLS. Worthless crap. Produce a study. Tick tock!

Candidly, I wouldn’t trust you in control of a candy machine.

The regular Dumbo: “Candidly, I wouldn’t trust you in control of a candy machine.”

That’s even more personal abuse without addressing the analysis but then you are manifestly an illiterate on economics.

Suggestions that the UK will have to leave the EU are surely premature.

Closer integration and expansion are in the EU’s DNA, and it will not want to lose the UK’s GDP or population. In addition, the UK is a both a net contibutor to the EU budget, whilst also running a trade deficit with other EU countries.

As always, no doubt, “a way will be found”.

As regards “isolation”, are we out-numbered 26 to 1, or just 2 to 1? I for one would like to hear a lot more from the other 24 nations, and rather less from Merkozy. It’s pretty arrogant to believe that the UK, France and Germany are the only nations that matter.

Jack C: “It’s pretty arrogant to believe that the UK, France and Germany are the only nations that matter.”

C’mon. It’s become an established tradition for France and Germany to run the EU.

At one time the running was hatched up at those regular bilateral meetings between Mitterrand and Kohl. Lately, its been done at the bilaterals between Sarkozy and Mrs Merkel. Britain wasn’t invited to those meetings – so Britain can hardly be blamed for the crisis in the Eurozone that was allowed to flourish.

@47 Bob B
I note your terms of address “Mrs Merkel”, “Clegg” & “Ed Milliband”. C´mon Bob your roots are showing!

Bob B/51:

I’m aware of the reality, just highlighting the inconsistency this represents. Is the EU a union or not?

“C´mon Bob your roots are showing!”

Quite often in popular political journalism, women are accorded a title while men aren’t. It’s Ed Miliband instead of Miliband to avoid any confusion with David Miliband, his brother.

There’s absolutely nothing sinister or remotely profound about any of that – and I’ve posted enough criticial comment about Cameron and his Big Society notion to disabuse anyone from the delusion that I’m a signed-up supporter of the Conservatives. The fact is that I’m a long standing floating voter and come from the career tradition of Speak truth unto power. I didn’t vote in the 2005 general election out of disgust with the three main parties so I’ve no responsibility for the government screw ups which followed. OTOH I campaigned for a “yes” vote in the 1975 referendum on Britain’s continued membership of the, as then, EEC, along with someone who went on to become a Conservative MEP.

Commentary on the analysis of EU fundamentals makes for better contributions than the froth stuff and ad hominems.

“I note your terms of address “Mrs Merkel”, “Clegg” & “Ed Milliband”. C´mon Bob your roots are showing!”

.

Jack C / 53: “Is the EU a union or not?”

Supposedly, the EU is a union where the same agreed rules apply to all member states unless there are agreed opt outs enshrined in the ratified treaties. But equality does not prevail in the de facto power structure – some states are more equal than others – and some some member states make bigger financial contributions to the running of the EU than others.

It would be healthier IMO if discussions about the EU paid greater regard to the realities than to the aspirations. As a veteran of online debates about EMU around 2000, it became increasingly evident that rational discussion was impossible. Some Europhile debaters regarded any criticism of EMU as amounting to heresy in the medieval meaning of that term. Critics were dubbed “insane” – I was. As Delors has recently commented, the Euro was flawed from the start because carefully laid plans for EMU from the time he was President of the EU Commission were simply ignored in the rush for European integration. On the Maastricht convergence criteria, only Luxembourg was eligible to be in at the launch of the Euro.

As a result, we are where we are. The economies of countries in the EZ have not converged, which is why we observe some with chronic deficits in their balances of payments, which exerts a depressing effect on their economies that the governments have compensated for by running budgetary deficits financed through borrowing and more borrowing.

Mrs Merkel keeps insisting that the Eurozone crisis is all due to fiscal indiscipline – without admitting to the motivating factor of chronic balance of payments deficits.

” Some Europhile debaters regarded any criticism of EMU as amounting to heresy in the medieval meaning of that term. Critics were dubbed “insane” – I was”

Apparently to most, you still are, and its not that you were right its that you want it to collapse because your any number of stupid sounding words, and be careful how you address the grand leaders of our times, its not as if any ones attention is placed upon the issues that happen to matter, you xenophobic slayer of the poor war warmongering 1%er bnper polluting financial horseman of the apocalypse troll.

59. gastro george

Bob B is right here – this is a balance of trade problem, not a solvency problem. This could only possibly work during the good times when a blind eye could be turned to any deviancy from the rules. In the bad times it’s unsustainable unless the trade problem is resolved, or inter-country transfers. This is especially the case if the debt/deficit rules are tightly enforced, as they are extremely deflationary. All we are going to see is more deflation and more recession.

@54 Bob B
“Quite often in popular political journalism, women are accorded a title while men aren’t.”
So why does Mrs Thatcher get special treatment?
http://liberalconspiracy.org/2010/06/11/so-what-if-the-labour-candidates-went-to-oxbridge/
@35 “…Ted Heath and Margaret Thatcher went to their respective local grammar schools. Margaret Thatcher read for a science degree at Oxford, not PPE.”

“I didn’t vote in the 2005 general election out of disgust with the three main parties so I’ve no responsibility for the government screw ups which followed.” Inconsistent with quantum leaping logic. It´s a wig after all!

More ad hominems up there which are totally irrelevant to the issues in discussion about EMU and the problems of EZ.

I’ve experienced this before many times in the online debates c. 2000 about EMU when, as mentioned, rational discussion became impossible because of persistent efforts to sidetrack discussion to puerile issues. A Brit – Bernard Connolly – working for the EU Commission, was sacked in 1995 effectively for raising challenging technical questions about monetary union. The constricted opportunity to conduct open discussion on EMU is one of the main reasons why we are where we are.

The perpetrators can’t admit to insufficient convergence of national economies in the EZ because that would amount to admitting that the EZ is not an “optimum currency area” and therefore liable to stability issues.

I was awkened to the potential problems of EMU lacking sufficient convergence, not by Conservative Eurosceptics but on reading a paper by the late Prof Rudi Dornbusch (MIT): Euro fantasies, in the issue of Foreign Affairs for September 1996:
http://www.foreignaffairs.com/articles/52431/rudiger-dornbusch/euro-fantasies-common-currency-as-panacea

The essentials of the analysis are represented in updated editions of his popular text on Macroeconomics (McGraw-Hill) for those who are up to reading that regular undergraduate text.

@ 60. Bob B

Edward Hugh has a good summary of the type of politics going on. I agree with him that most of them do not even know what they are signing up for, they are just terrified about their financing costs. This could be something that runs for some time. I must say some of the hysterical punditry from the UK press has been hilarious. The Guardian writers sound as if they are going to have a mental breakdown. Will Hutton deciding that the UK is to blame if the euro fails is particularly delusional. Hey, new history being invented already.

http://www.economonitor.com/edwardhugh/2011/12/11/a-deep-seated-hostility-towards-european-construction/

63. Leon Wolfson

@49 – And you’re an Anglo-Saxon supremacist. You had a point?

And you still haven’t explained why the body-blow the UK is about to suffer to the City is a good thing. You hate this country SO much…

@50 – Read up. None of the other countries have rejected the treaty. A few have gone back to their parliaments, but ONLY the UK has rejected it so far.

64. Leon Wolfson

@61 – The UK IS directly responsible for any damage caused by a delay, and should pay every penny of it to our treaty partners.

Leon,
The UK has merely exercised the right of “a treaty partner” to express an opinion. Whether or not this leads to “delay”, and whether or not this delay leads to any “damage” remains to be seen.

Anyway, be careful what you wish for: any penalty paid by the UK will mean fewer resources for all UK resources. I could say that your hatred of democracy and the poor is telling, but won’t.

@61 Richard W

Many thanks for that link to Edward Hughes – he and I were once regular discussants about the Euro in another online forum many years back. Note him citing Wolfgang Munchau on Mrs Merkel’s plan for an austerity pact on steroids. I’ve met local Conservatives who passionately believe that undiluted Micawberism is the solution for stressed economies. They have no understanding whatsoever of the consequences of the savings paradox.

Sunny has posted up a link to an illuminating brief on the EU summit in The Economist:
http://www.economist.com/blogs/bagehot/2011/12/britain-and-eu-1

If that is a fair report of the French position then they are worryingly confused.

There are two logically distinct issues:

– foreseeable EZ problems stemming from insufficient convergence of participating economies
– whether Gordon Brown’s policy of a “light regulatory framework” for financial markets made good sense

It is logically consistent to contend both:

(a) EMU was premature because of potential convergence issues – on the Maastricht convergence criteria, only Luxembourg was eligible to join at the launch in January 2000

(b) the regulatory framework for financial markets in Britain was far too lite – in the news, the FSA has admitted to falling down on the job of regulating the RBS and preventing that horrendous management mistake of the RBS takeover of ABN AMBRO.

My intuition that Cameron was stitched up at the EU summit seems to be broadly correct. But it’s far from clear what he could have done to prevent that other than by signing up to Mrs Merkel’s plan for an austerity pact on steroids administered by the EU Commission with automatic punishments for deemed rule breakers.

I really can’t undertstand how Ed Miliband can go on saying that Cameron should have said Yes to the diastrous Merkel plan for saving the EZ.

67. Leon Wolfson

@64 – Cameron has deliberately sabotaged the EU. There’s no way round that.

And won’t? CAN’T. You are the one who wants to kill the poor, not me. We can start with the Olympics, HS2 and NHS cost bloat for cuts, and continue with other trash like the coalition.

@66 Leon

You have amply demonstrated that you have no comprehension of the issues at stake at the EU summit or the reasons for the instability of the EZ due to insufficient convergence of participating economies.

You really do need to go and swat up the extensive economics literature on monetary unions and what happens if participating countries find that the value of their net exports is falling – for any of several reasons – as that generates recessionary pressures leading to rising unemployment. How are governments to respond to that?

The Merkel solution is straight forward – financial discipline and continuing austerity.

Cameron was absolutely right about not going along with that. I’m amazed that anyone claiming to be from “the left” disagrees.

69. Leon Wolfson

@67 – You have amply demonstrated nothing. SCOTTISH MENACE.

And keep ignoring the Nordic model. It works, and debunks the British austerity you support so fervently. Moreover, keep ignoring the fact that the measure you’re talking about would not have applied here…you’re defending arguments in bad faith. As usual.

Leon – In your message @69 you appear to be addressing yourself @67.

This is undeniable evidence of your confusion.

Rest is advised. Take the opportunity to read up some of the professional literature on monetary unions. For starters, try Robert Mundell’s seminal paper: A theory of Optimum Currency Areas (AER 1961)
http://www.sonoma.edu/users/e/eyler/426/mundell1.pdf

Refresh your recollection of the Maastricht convergence criteria – easily retrieved by googling – and consider the consequences if the economy of a country in a monetary union is very different from other economies in the union and responds differently to policy levers. What develops if such an economy runs into increasing balance of payments deficits?

A good reference: Walter Eltis: Britain, Europe and EMU (Palgrave 2000). Eltis was Heseltine’s economic adviser when he was DTI minister. Eltis is very clear on why Britain was best advised to stay out of the Eurozone.

71. Leon Wolfson

@70 – No, this is evidence of Sunny’s broken database.

This is typical of your strategy – to eschew facts and launch on rants about idiocies such as the Scottish Menace, spewing content-free paragraphs.

Austerity and bubbles, your gods, remain the Coalitions goals. Either admit it or stop supporting them.

We’re GOING to lose at least the Eurobond market anyway

Why? Do you know what a Eurobond is? Hint: nothing to do with the Euro.

@ Leon:

Yeah, that’s right, keep arguing for a treaty that will impose cuts worse than the savage Tory austerity programme on the Eurozone periphery. Gotta keep that 1% happy, after all.

74. Leon Wolfson

@72 – Never mind that Nordic Model, I mean, it might actually work. And have a happy population. Without deficits.

Inconceivable, the 99% must be crushed! Keep up the good word, Peon XXX!

Leon – That’s more and more incoherent nonsense.

76. Leon Wolfson

@75 – Of course, it violates your dogma, hence you are unable to comprehend it.

This has been evident for some time. Thanks for admitting it, though.

Yeah, that’s right, Leon, keep throwing Nordic red herrings up to try and distract us from your visceral hatred of the poor. 1%er fascist brownshirt anti-Semitic Tory concern troll.

I am happy to have left the UK just in time before the UK leaves the EU.

A detectable percentage of those now hand wringing over Cameron’s refusal to sign up to a new EU treaty at the EU summit last Friday were among those who wanted Britain to join the Eurozone early in the last decade. We were wise not to follow their advice then.

The LibDems are wise not to bring the coalition government down over this. My guess is that Cameron would win a handsome majority for the Conservatives at the ensuing general election.


Reactions: Twitter, blogs
  1. Liberal Conspiracy

    10 reasons why Cameron might gain from the EU deal. http://t.co/SHbBiKAf

  2. Jed Miliband

    10 reasons why Cameron might gain from the EU deal. http://t.co/SHbBiKAf

  3. kosmopolit

    10 reasons why Cameron might gain from the EU deal http://t.co/IWG3nkOX via @libcon < good points but only until the 'veto myth' is exposed

  4. David Taylor

    10 reasons why Cameron might gain from the EU deal. http://t.co/SHbBiKAf

  5. Jose Aguiar

    10 reasons why Cameron might gain from the EU deal. http://t.co/xA1W3mXM via @libcon

  6. Sue Davies

    10 reasons why Cameron might gain from the EU deal. http://t.co/SHbBiKAf

  7. P. S. Wong

    10 reasons why Cameron might gain from the EU deal. | Liberal Conspiracy http://t.co/7mSBxXdB

  8. sunny hundal

    '10 reasons why Cameron might gain from the EU deal' – by @TheGreenBenches – http://t.co/3AXnlEu0

  9. bloggingportal_2

    #euroblog: 10 reasons why Cameron might gain from the EU deal. | Liberal Conspiracy http://t.co/MO8o4Ngo

  10. Gareth Winchester

    @Nosemonkey Seen this? http://t.co/VLQcwkk2 Apparently his veto makes it easier for the Tories to win in 2015

  11. Tony Kennick

    '10 reasons why Cameron might gain from the EU deal' – by @TheGreenBenches – http://t.co/3AXnlEu0

  12. johnabrams

    '10 reasons why Cameron might gain from the EU deal' – by @TheGreenBenches – http://t.co/3AXnlEu0

  13. Alex Gordon

    '10 reasons why Cameron might gain from the EU deal' by Éoin Clarke @The Green Benches http://t.co/eMMIhs5x Chattering classes won't like it

  14. Amira R.

    '10 reasons why Cameron might gain from the EU deal' – by @TheGreenBenches – http://t.co/3AXnlEu0

  15. Adele Bailey

    '10 reasons why Cameron might gain from the EU deal' – by @TheGreenBenches – http://t.co/3AXnlEu0

  16. Alex Gordon

    '10 reasons why Cameron might gain from the EU deal' by Éoin Clarke @TheGreenBenches http://t.co/eMMIhs5x Chattering classes won't like this

  17. Gary Birkenhead

    10 reasons why Cameron might gain from the EU deal. http://t.co/SHbBiKAf

  18. Robert CP

    10 reasons why Cameron might gain from the EU deal. http://t.co/SHbBiKAf

  19. Adam Stewart

    '10 reasons why Cameron might gain from the EU deal' – by @TheGreenBenches – http://t.co/3AXnlEu0

  20. Janis Cowan

    RT @Tabacaria: 10 reasons why Cameron might gain from the EU deal. http://t.co/trcYuoBh via @libcon

  21. Molly

    Interesting RT @libcon 10 reasons why Cameron might gain from the EU deal. http://t.co/UsVSzkzI

  22. Dr Eoin Clarke

    RT @libcon: 10 reasons why Cameron might gain from the EU deal. http://t.co/1mgMg7Df

  23. Andy Hicks

    Incredible but true: RT @TheGreenBenches: RT @libcon: 10 reasons why Cameron might gain from the EU deal. http://t.co/mzRmUNI0

  24. Saggydaddy

    Incredible but true: RT @TheGreenBenches: RT @libcon: 10 reasons why Cameron might gain from the EU deal. http://t.co/mzRmUNI0

  25. Victoria Uong

    A lot more balanced than today's The Sun… http://t.co/k25ICYxR ^.^

  26. pi = 3.1415926

    RT @libcon: 10 reasons why Cameron might gain from the EU deal. http://t.co/1mgMg7Df

  27. Garry Kitchin

    DC may have upset the chattering classes but most Brits will back him. Ed M's criticism looks out of touch http://t.co/dQo5vMxx via @libcon

  28. Jedibeeftrix

    10 reasons why Cameron might gain from the EU deal. | Liberal Conspiracy http://t.co/Di87790E via @libcon

  29. andrew

    10 reasons why Cameron might gain from the … – Liberal Conspiracy: David Cameron by vetoing the a prospective … http://t.co/93nWLdxF

  30. psycho_boss

    @GordonTinline @stephenbevan @ProfCaryCooper a different view here-10 reasons why Cameron might gain..@TheGreenBenches http://t.co/u9qCNEyj

  31. Noxi

    RT @libcon: 10 reasons why Cameron might gain from the EU deal. http://t.co/t8DAS3rC

  32. Jose Aguiar

    @AldaTelles http://t.co/bkLmhf9r

  33. Alda Telles

    10 reasons why Cameron might gain from the EU deal. | Liberal Conspiracy http://t.co/rDzv0oB4 via @Tabacaria

  34. Bloggingportal.eu/blog » Blog Archive » The Week in Bloggingportal: Summary without Cameron

    […] him. He’s not among us anymore. He’s to the Union what the Union is to him. Even if he couldn’t have done anything else, it’s clear: He and his country are on the edge now. He said […]

  35. Bloggingportal.eu/blog » Blog Archive » Week in Bloggingportal: #We’ll meet again…(?)#

    […] backfired on the City of London, the very thing Cameron set out to protect. But maybe Cameron will gain from the veto. If this is a sign that’s Britain will leave for good, then should we let them go – a […]

  36. @polleetickle

    #EFU: Ed Miliband & Ed Balls must prove they'd be happy to have their budgets approved by #eurozone. via Flowerpower http://t.co/mi4mn5NA

  37. Billy Bowden

    #EFU: Ed Miliband & Ed Balls must prove they'd be happy to have their budgets approved by #eurozone. via Flowerpower http://t.co/mi4mn5NA

  38. Morgan Dalton

    10 reasons why Cameron might gain from the EU deal. | Liberal Conspiracy http://t.co/HvcOft0M via @libcon





Sorry, the comment form is closed at this time.