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December 10, 2011 8:05 PM   Subscribe

The European Union said Friday that 26 of its 27 member countries are open to joining a new treaty tying their finances together to solve the euro crisis. Only Britain remains opposed, creating a deep rift in the union. In all, just 23 of the 27 EU countries signed on outright to draft a new treaty binding them to a uniform regime of deficit controls and budget regulation. Only one country said no: Britain. Three more say they are open to the idea.

Cameron used his power of veto after EU leaders, let by Sarkozy, refused to bow to his demands for special safeguards for the City of London (Britain's financial centre that is estimated to contribute 10% of British tax revenue). Some say prime minister David Cameron has caused the EU to fracture.

Timothy Garton Ash says David Cameron's 'no' is bad for Britain and for Europe. The Guardian also predicts David Cameron's long night in Brussels may rearrange British politics - Not since Margaret Thatcher gave the House of Commons her reaction – "No, no, no" – to calls from Europe for more integration 21 years ago has the belligerence of a UK prime minister been the subject of such heated debate and controversy.

Deputy prime minister and coalition government partner Nick Clegg, and senior Liberal Democrats have turned dramatically on David Cameron over Europe, accusing the prime minister of endangering the interests of the British economy, just 24 hours after appearing to back Cameron.

The problem? UK firms will find it more difficult to export to Europe at a time when the British economy is expected to contract. As well, Britain now has no say over new laws, rules, and regulations that will affect it in the future.

The Telegraph, which traditionally (but not always) supports the Conservatives, says the PM has shown great political courage. Now he must make sure that No doesn’t become Yes.

Another Telegraph columnist says the leaders of France and Germany have more or less bulldozed Britain out of the European Union for the sake of a treaty that offers absolutely no solution to the crisis at hand, or indeed any future crisis. It is EU institutional chair shuffling at its worst, with venom for good measure.

A Guardian cartoon commenter says:
Surely it's the Continent that's isolated, not Britain ?

No one despises Cameron more than I, but he had few options on this occasion. While I think it would be better in the long run if he destroyed the City and all its works, you could hardly expect him to see it that way. Why do you think Gordon Brown gave the banks billions of our cash, rather than nationalising them without compensation and jailing their executives - which is what I'd have liked. He wanted to restart the tax flow ...
In Europe, prominent members of the European Parliament have strongly criticized the British prime minister and sent him a clear message: Europe doesn't need you.
posted by KokuRyu (96 comments total) 26 users marked this as a favorite

 
This (Telegraph) oped gives an explanation for his decision.
posted by Chocolate Pickle at 8:10 PM on December 10, 2011


And there's the classic question: If everyone else is going to jump off a cliff, would you jump, too?
posted by Chocolate Pickle at 8:11 PM on December 10, 2011 [3 favorites]


If Britain signed onto that treaty, it would collapse. Its deficit spending is so large that if it were forced to curtail it, the economy would go into a tailspin. So tax receipts would drop, forcing more spending cuts, forcing more economic contraction -- it would eventually stop, but it would hurt like bloody blazes. It would look a lot like Greece.

Of course, if they don't stop deficit spending, then eventually the market will stop buying their bonds, and they'll go into the exact same tailspin, but worse. Or they could then print money like crazy, and given the extremely high level of spending in that country, quite likely put themselves into a hyperinflationary spiral. It might very well end up looking a lot like Zimbabwe -- if the government tries to spend more than the economy can support by printing money, it is devastatingly destructive. Printing money is, more than anything else, stealing wealth from poor people, funding your government on their backs. Rich people can protect themselves; poor people just take it in the teeth.

The only really good solution to this kind of a debt problem is never, ever to incur that kind of debt in the first place. The economy becomes dependent on the debt, and then you can't stop borrowing, but you MUST stop borrowing. But you can't. But you must. But....

It is an extremely efficient and thorough way to destroy a civil society and put the corporations in charge.
posted by Malor at 8:26 PM on December 10, 2011 [7 favorites]


Bureaucratic unelected bullies grabbing sovereign power never ends well.
posted by stbalbach at 8:28 PM on December 10, 2011 [1 favorite]


Europe signs up perpetual recession, Britain refuses. It may be the one time in my life that I agree with David Cameron.
posted by alms at 8:28 PM on December 10, 2011 [10 favorites]


The tl;dr version: if you don't mind your pocketbook very carefully, whatever size entity you happen to be, you will end up in the control of those that do.
posted by Malor at 8:28 PM on December 10, 2011 [1 favorite]


The only really good solution to this kind of a debt problem is never, ever to incur that kind of debt in the first place. The economy becomes dependent on the debt, and then you can't stop borrowing, but you MUST stop borrowing. But you can't. But you must. But....

Or you could do like the Jews used to do and have a debt jubilee.
posted by T.D. Strange at 8:39 PM on December 10, 2011 [4 favorites]


The issue may be the mechanisms to be used for the decision making - from consensus driven (which tends to suit the Nordic temperament and culture) to majority votes.
posted by infini at 8:46 PM on December 10, 2011 [1 favorite]


The treaty would collapse not only Britain but the entire Eurozone, because it's a terrible, terrible plan.
posted by mek at 8:49 PM on December 10, 2011 [2 favorites]


Bureaucratic unelected bullies grabbing sovereign power never ends well.
posted by stbalbach at 8:28 PM on December 10 [+] [!]


Are you talking about the EU or the City of London?
posted by Avenger at 8:53 PM on December 10, 2011 [11 favorites]


Kevin O'Rourke covers it much better than I ever could: A Summit to the Death.

TL;DR: With this in mind, the most obvious point about the recent summit is that the “fiscal stability union” that it proposed is nothing of the sort. Rather than creating an inter-regional insurance mechanism involving counter-cyclical transfers, the version on offer would constitutionalize pro-cyclical adjustment in recession-hit countries, with no countervailing measures to boost demand elsewhere in the eurozone. Describing this as a “fiscal union,” as some have done, constitutes a near-Orwellian abuse of language.
posted by mek at 8:54 PM on December 10, 2011


A few questions here from a somewhat clueless American:

1) How exactly is Europe "signing up for perpetual recession?" That seems like the kind of thing most people would avoid.

2) What is the alternative to the Euro and the EU? Is Europe really going to be better off if they go back to 20+ currencies, trade and travel barriers, etc.? If the Euro is bad and wrong, what is the better alternative?
posted by Avenger at 9:15 PM on December 10, 2011 [3 favorites]


As expressed quite neatly up ^ there. This was a fight between City of London and the European Union.

The City of London didn't want to sign up to stricter banking and financial regulations and regular financial auditing by EU agencies to see that no funny business is going on.

As far as business confidence goes you would think that tighter controls, mandated fiscal responsibility and supranational auditing is just what financial markets need. This could be a case of the first trading block to take the harsh medicine is the first block to recover. Initially the medicine may look like it is killing the patient, but that's how you kill cancer.
posted by vicx at 9:28 PM on December 10, 2011 [4 favorites]


The entire mess boils down rather simply: the European Central Bank is unwilling to act as the lender of last resort, and it is unclear how the Euro can survive in the long-term without any central bank serving that role. In the short term a "perpetual recession" pact may stave off doom, but if attitudes don't change significantly it's not a matter of if, but when the Euro fails.
posted by mek at 9:40 PM on December 10, 2011 [3 favorites]


Avenger:

1) Part of the pact is that each country must agree to a balanced budget amendment to their constitutions. An EU country that fails to maintain a balanced budget will face sanctions.

Keynesian economics tells us that countries should run budget deficits in bad times and budget surpluses in good times, a counter-cyclical adjustment. As private businesses start laying people off, government starts hiring. This strategy reduces the severity of economic downturns at cost of somewhat less exciting boom times. This worked moderately well in Canada (budget surpluses up until the crash, some stimulus spending lately).

Insisting on balanced budgets at this time is pro-cyclical. Reducing government spending means cutting government jobs just as private companies are also firing people. That will further slow down European economies. That means lower tax revenues. Downward spiral: budget cuts, fewer government jobs, higher unemployment, lower tax revenues, repeat.

They may have limited options for further borrowing at this point, but deliberately cutting back hard seems disastrous. Maybe not perpetual recession, but it's fiscal policy that would make things as bad as possible for as long as possible.
posted by justsomebodythatyouusedtoknow at 9:47 PM on December 10, 2011 [14 favorites]


Is there more information on this treaty? Ain't surprising they're regulating banks more since German banks are highly regulated anyways. What else are they doing though?
posted by jeffburdges at 9:48 PM on December 10, 2011


Keynesian economics tells us that countries should run budget deficits in bad times and budget surpluses in good times

The problem is that they only hold to one side of that equation.
posted by Malor at 10:02 PM on December 10, 2011 [3 favorites]


Or they could then print money like crazy, and given the extremely high level of spending in that country, quite likely put themselves into a hyperinflationary spiral. It might very well end up looking a lot like Zimbabwe -- if the government tries to spend more than the economy can support by printing money, it is devastatingly destructive.

Britains debt is well below historical levels and still lower now than it was for most of last century. To say that they are "likely to put themselves into a hyperinflationary spiral" is an inflammatory exaggeration.

Suggesting that Britain could end up like Zimbabwe if they raise their inflation target is like saying that its likely you'll burn your house down if you have a candlelit dinner. Sure, it's possible, but a long chain of stupid and extremely unlikely events would have to occur.
posted by euphorb at 10:15 PM on December 10, 2011 [13 favorites]


Talk about doing the right thing for the wrong reasons! Cameron has no real idea how to get out of this mess, but at least he isn't willing to sign up for group suicide. Welding oneself to an anchor and jumping overboard is just too Continental, it seems.
posted by Kevin Street at 10:32 PM on December 10, 2011


Of course, if they don't stop deficit spending, then eventually the market will stop buying their bonds, and they'll go into the exact same tailspin
How long is "eventually"? five years? 20 years? 100 years? Enough time to come under a balanced budget?

Right now the UK's borrowing rates are much lower then countries that are part of the EU. It's insane to say that somehow the Eurozone and the ECB are being more "responsible" then the UK, when judge by the bond market. Yet, people who want to claim deficit spending somehow terrible always do it by saying it should cause problems with interest rates, and the fact that it never does is just ignored.

If you can't make a prediction for how long "eventually" is you have no business saying it's true. Keep in mind the crisis was two years ago and so far the UK hasn't had problems with borrowing. In fact, the problems come from the austerity measures they've put in, which have been hurting GDP numbers. What the UK needs to do is invest in stimulus programs to restart the economy.

Also look, the fact that the UK still has it's own currency has been a saving grace for the country, they haven't seen borrowing rates spike like Italy and Spain, despite having similar levels of debt. The EU's policies in the face of their recent problems have been insane, and UK is correct to stay out of it. Cameron is totally correct here.
The tl;dr version: if you don't mind your pocketbook very carefully, whatever size entity you happen to be, you will end up in the control of those that do.
Which... isn't as much of a problem when the people who you owe money to is your national central bank.

(You also predicted hyperinflation in the U.S, which never happened.)
posted by delmoi at 10:38 PM on December 10, 2011 [5 favorites]


Also, keep in mind that a lot of times people buy government bonds not because they think it's going to make a lot of money, but simply to 'store' their money. They can be confident that the government will pay them back dollar for dollar (or pound for pound) even if there's inflation. But with the Euro, that doesn't work. Greek citizens don't know whether or not the Greek government will be able to pay them back Euro for Euro, nor do Italian or french citizens.
posted by delmoi at 10:42 PM on December 10, 2011


Maybe the ECB will print, but not before all the ducks are in a row.

Anyone predicting the death of the Euro might be missing the birth of something.
posted by vicx at 10:57 PM on December 10, 2011 [5 favorites]


German banks are holding most of the bad paper; if countries default on debt, who stads to lose the most? Follow the money! This is an inside job conducted by private financial institutions. Just like here; they are holding the cards. Just like here, they get their cronies elected. Just like here, their civilian sector is screwed. Welcome to the new world order.

How do we get out of this mess? Get rid of commercial bankers, and get rid of the Fed!
posted by Vibrissae at 11:58 PM on December 10, 2011


Option 1: Forge a fiscal union as described in this post.
Option 2: Have Greece, Italy, and Hungary accept austerity measures.
Option 3: Have Greece, Italy, Hungary, Ireland, and perhaps Portugal break away from the EU; France and Germany are tired of putting up with the slack. The stronger economies can go on with the EU.
Option 4: Don't intervene and muddle through. Have the central bank by bonds.
Option 5: Print money
Option 6: Let the countries in question default on their debts; they then borrow and muddle through.
Option 7: Let Germany break off and go back to the Deutsche Mark.

The travel and trade are there, and always will be; but with the recent crisis, a political will has been blooming for a fiscal union. And yes, countries are going to have to balance their checkbooks. Deep cuts are needed all around.
posted by captainsohler at 12:50 AM on December 11, 2011


Option 1: Forge a fiscal union as described in this post.
Option 2: Have Greece, Italy, and Hungary accept austerity measures.
Option 3: Have Greece, Italy, Hungary, Ireland, and perhaps Portugal break away from the EU; France and Germany are tired of putting up with the slack. The stronger economies can go on with the EU.
Option 4: Don't intervene and muddle through. Have the central bank by bonds.
Option 5: Print money
Option 6: Let the countries in question default on their debts; they then borrow and muddle through.
Option 7: Let Germany break off and go back to the Deutsche Mark.


In all honesty Option 7 seems the most sane. The simple fact is that Germany is too strong a competitor for the rest of the Eurozone. Their current account balance is huge and their trade surplus is absurdly large. Apparently German leaders are expecting the periphery to trade with any life found on Mars to get their balance of trade straightened out because they have no interest in helping the PIIGS get their exports to be competitive besides telling them "PAY YOUR WORKERS LESS!"

At least if Germany breaks off and goes back to the Deutsche Mark it'll appreciate like crazy and give the rest of the continent some breathing room.
posted by Talez at 1:01 AM on December 11, 2011


Just before the Summit, I interviewed Will Hutton, who was deeply worried.
posted by quarsan at 1:38 AM on December 11, 2011 [9 favorites]


At least if Germany breaks off and goes back to the Deutsche Mark it'll appreciate like crazy and give the rest of the continent some breathing room.

The Germans like selling things to the rest of Europe. A separation and re-float is probably the best solution for the PIIGS, but it will mean that German technology has suddenly become more expensive for the troubled countries while holidays in Spain are much cheaper for German tourists. Germany doesn't particularly want that; they've enjoyed having European money pour into their economy for the past twenty years.
posted by Joe in Australia at 1:47 AM on December 11, 2011


Quarsan, that was a great interview. Hutton's predictions re: eurozone collapse are nigh-apocalyptic and yet totally plausible. Terrifying.

It's staggering to me that we're in this situation - a situation a bloody econ undergrad would know how to rectify. Great example of why I'm so leery of "technocrat" stuff in lieu of proper representation etc. Knowledge is certainly valuable, but attempts to posit it as apolitical are unsustainable, and unrealistic. When you do that, what you're really doing is trying to move policy from the public sphere, to a private one where special interests can comfortably hold sway, with appeals to authority branding any objection as illegitimate.
posted by smoke at 2:02 AM on December 11, 2011


It's quite astonishing to see that most commentary in UK/US press is so unanimous in spreading this conception - that it's totally easy, "a bloody econ undergrad would know how to rectify" it. If you believe this, you've not understood the situation.
Do you understand why the 26 other countries made the decision they made?
posted by dhoe at 2:12 AM on December 11, 2011 [2 favorites]


I'm not a Tory, not a proponent of debt nor a fan of 'The City' - but I also can't see how the Euro as a currency can really work without much tighter integration between member countries than anyone dare propose (it would look more like the US than the EU by the end).

So, basically, nobody knows what's going to happen but signing up seems more risky than not and I find myself slightly happier that Cameron had the (unexpectedly large) balls to say no than I would have been had he agreed to join in.
posted by dickasso at 2:22 AM on December 11, 2011


dhoe: Because some of them are close to or under the 3% limit so don't have a lot to loose by agreeing and some of them knew that the only way to get the ECB to function as a proper central bank, or to make progress with financial transfers to the periphery to offset the massive trade imbalances in Europe was to agree to the upgraded stability pact was to sign onto this deal, since Germany would never move forward on either without it.

Also because politicians everywhere in the west have decided to forget everything that the human race ever learned about economics, and quite a bit of basic math and instead pretend that if everyone cuts their budgets at the same time somehow there will be a net increase in spending and everything will work out.
posted by Grimgrin at 2:27 AM on December 11, 2011 [3 favorites]


@dhoe: do enlighten us.

My guess is that small countries need big friends (which the UK has now lost) or need to be part of a larger gang. Many of them, like teenagers, saw the EU as a deep pocket they could dip into regardless of the consequences.

Many of the 26 are in a very bad position, this is the lesser of two evils for them. France, Italy, Greece, Ireland, what choice did they have? I tend to agree with those who think that the UK had nothing to gain by joining in with this.
posted by epo at 2:35 AM on December 11, 2011


As expressed quite neatly up ^ there. This was a fight between City of London and the European Union.

With the Conservative Party acting in its customary role as the political wing of the City of London.
posted by reynir at 2:49 AM on December 11, 2011 [2 favorites]


As others have mentioned, the City of London was important here. The EU (especially France and Germany) is very keen on further regulation of the financial sector, although these particular negotiations didn't relate to that issue. The UK has the biggest financial sector in Europe, and Cameron had said he would only support the proposals if the EU promised to give up on plans for a financial transactions tax, and other regulation.

So he was introducing an unrelated issue to these discussions, in the belief that the EU would be so desperate for the UK's support that they'd agree to his terms. Clearly it didn't work.

Worth mentioning too: it's non-trivial on both a legal and practical level for any country to leave the Eurozone (eg ditch the euro as its currency), but still remain in the EU. There is literally no provision for it in the Treaty of Lisbon or any other EU treaty. A country can leave the EU, but only after receiving agreement from the other EU states, and it takes two years. So for Germany to leave the euro and return to the DM, they'd have to get agreement from the rest of the EU and wait two years, or change the Treaty of Lisbon (which forget it) or uniterally renounce the treaty and leave. (Then there's all the issues of printing and distributing new notes, redominating debts and contracts, etc etc).
posted by Infinite Jest at 2:58 AM on December 11, 2011 [1 favorite]


So I was walking past St Pancras International on Saturday morning, when I saw the normally calm Le Monde weekend lead with a dramatic "L'Europe a 27, c'est fini" Chilling, and not just because of London's weather.

This is a hard one to take sides on. On the one hand, while I'm quite concerned that further austerity will lead to a lost generation etc, I'm also inclined to believe that UK lost a historic opportunity to influence the recovery in Europe. And not necessarily at the summit, but in the lead up to the summit. There does appear to be a clear lack of intent here in engaging Europe in what they think is their biggest crisis.
posted by the cydonian at 3:06 AM on December 11, 2011


I live in the Netherlands and Im very worried about the future. Is there any hope ?
posted by Pendragon at 3:07 AM on December 11, 2011


So he was introducing an unrelated issue to these discussions, in the belief that the EU would be so desperate for the UK's support that they'd agree to his terms.

Yup, in fact, they apparently thought he was negotiating in bad faith. Not the impression to convey when everyone is apparently concerned about the future of the continent.

Which is why I'm inclined to think that the Tories went into this with the full intention of pulling out as a first measure.
posted by the cydonian at 3:16 AM on December 11, 2011 [1 favorite]


First thing Cameron has done right, IMO.
posted by spitbull at 3:17 AM on December 11, 2011


I get the sense that this is less a courageous or stupid choice by Cameron that it was the only choice he could make and keep his government, given the gains made by the Eurosceptics among the Tories in the last election. Time will tell whether is was a good choice for Britain or a bad one, a good choice for Europe or a bad one (my prediction: "It's complicated..."), but it had pretty much nothing to do with protections for the Square Mile (a convenient excuse) and everything to do with the fact that a sizable portion of the House of Commons either didn't get the memo dated 1947 that the world was no longer run from Whitehall, or have decided that maybe nobody would notice if they just ignored said memo.

Then again, I'm mainly reading German-language media on this one, so I'm probably carrying a bit of bias.

Pendragon: There's always hope. Yeah, things are bad, I wouldn't try founding a restaurant or a theme park right now. As long as the decisions are made in Berlin they will get worse before they get better, but in long term if the policy organs of the democracies of the European Union are less beholden to the whims of the "market" (whoever that is), things will get better.

Germans may be twitchy about inflation (one-quarter of this is a cultural memory of the early 1930s, three-quarters of this is that they hold very little debt and mountains of cash, so inflation hurts the average German even more than it helps the average American) but they get one thing right: the markets can't set your policy (as they have in Italy and Greece) if you don't owe them more money than you have.

As for the panic, apocalypse sells newspapers, but humans are crafty, we like trading stuff, and in the absence of serious impediment (corruption, war, impractically silly religions, etc.) economies are very hard to kill. We managed to feed and clothe ourselves for several millennia before we invented bond traders and forex guys, and whatever the change in the coming order is, we'll keep doing so.
posted by Vetinari at 3:20 AM on December 11, 2011 [3 favorites]


Cameron has been receiving a lot of praise for his actions, but I think much of it is misplaced or will be short–lived. Domestically there is growing play of the fact that he was acting firstly in the interests of the City of London. Regardless of how much income it brings for the UK as a whole, there is already resentment about how the Conservative party represents financial interests above those of the country's citizens. Further, Cameron is in no real position to become an arch–eurosceptic because of the need to maintain the coalition. The Liberal Democrats will only take so much before significant parts are openly opposing the coalition. Lastly, the Conservative party itself has had two decades of strife over European policy, and a large part of leading that party is keeping that split from dominating. Throwing a bone to the eurosceptics in his own party may have been a good move for Cameron, but he appears to have shifted the entire policy in their favor. Already the eurosceptics are asking for more, such as the rather petty demand that not just EU institutions, but even EU buildings, cannot be used by the new eurozone treaty organization. There is now much less standing in the way of eurosceptics demanding an in–out referendum, unless Cameron is willing to throw away the good will now earnt by refusing them outright.

On the European scene Cameron is also likely to find his policy damaging. Rather than negotiate or attempt to be reasonable in some areas in order to push demands in others, his act is a simple "no". For the leader of a party which has already isolated his MEPs in the European Parliament by withdrawing them from the largest political grouping—of which Sarkozy's and Merkel's parties are both members—to so plainly refuse participation in the negotiations will make his list of allies even weaker. This is especially difficult because the UK's past European policy has often been to act as a baffle on negotiations, stalling or weakening the outcome. Even if the UK is not lawfully obliged to abide by the terms of any new treaty, it cannot influence what other member states choose for themselves, nor rally whatever opposition there may be in other member states against the proposals.

For many years gone Eurosceptics have complained of a "Franco–German axis" in the EU, when in reality the UK has often been a significant source of strength. Ironically, by their actions in opposing such an axis to the outmost, they have created what they feared. Although I am not hopeful that the EU will at last grab the nettle, I wish that they would take whatever steps necessary to a full fiscal union. The removal of the UK makes this easier, and they need to seize the opportunity to cut away the remaining opposition. Some member states may complain, but the outcome will be far better in terms of speed and quality of recovery.

In short, this is a wonderful gesture from Cameron, but no policy worthy of the name.
posted by Jehan at 3:21 AM on December 11, 2011 [6 favorites]


Sarkozy and Merkel wanted a new treaty: they got it, only without the UK. Cameron wanted a right of veto on EU financial regulation: he did NOT get it. It remains, as before, subject to Qualified Majority Voting at the EU Council (and now Britain is facing 26 other angry governments there).

And this is a victory for Cameron exactly how?
posted by Skeptic at 3:41 AM on December 11, 2011 [2 favorites]


I'm surprised to hear how strongly people are advancing the old line about how the UK needs to be on the inside in order to have influence, just at the very moment when it has become clear that no-one inside has any real say except Germany - not only over the euro itself, but increasingly over members' domestic policies too.

Elect who you like, Greeks, Italians, Irish: Berlin will be telling them what to do anyway.
posted by Segundus at 3:53 AM on December 11, 2011


Skeptic: I don't think it's a victory. But signing onto a measure that gives Europe a measure of control over the UK's fiscal policy, including unspecified penalties if they ran large deficits, without receiving any guarantees around financial regulation would have been an even more serious loss.

It'd be one thing if it looked like this plan had a chance of working. But it doesn't address the imbalances in European trade and it doesn't address debt sustainability, except to say that the write down Greek bondholders had to take was a one time thing and will not happen again if it's possible to avoid it.

I do wonder who exactly Germany thinks will be buying their goods when the cuts kick in. Or if they've considered what plan B is if this new agreement doesn't reduce interest rates on soveriegn debt to sustainable levels.
posted by Grimgrin at 4:00 AM on December 11, 2011 [1 favorite]


I'm surprised to hear how strongly people are advancing the old line about how the UK needs to be on the inside in order to have influence, just at the very moment when it has become clear that no-one inside has any real say except Germany - not only over the euro itself, but increasingly over members' domestic policies too.

It's been the UK's policy for decades. Even if it's no longer true or workable, we've been offered nothing else in way of policy. Cameron's gesture neither amounts to a new policy, nor attempts to save the old.
posted by Jehan at 4:08 AM on December 11, 2011


What, so Cameron not joining up doesn't involve any change in the policy of always joining up? You're too subtle for me.
posted by Segundus at 4:15 AM on December 11, 2011


What, so Cameron not joining up doesn't involve any change in the policy of always joining up? You're too subtle for me.

You have misread what I said. Cameron may well have repudiated previous policy with this act, but he has not articulated a new policy. That's why it's a gesture. The UK could well be left without a coherent European policy if Cameron cannot decide whether to negotiate and be involved with the EU or submit to the BOOers and call a referendum. Just what the fuck is the UK's approach to Europe now?
posted by Jehan at 4:31 AM on December 11, 2011


As Paul Mason points out, the new fiscal compact enshrines neoliberal ideology at the heart of European policy:
I can only add at this stage that, by enshrining in national and international law the need for balanced budgets and near-zero structural deficits, the eurozone has outlawed expansionary fiscal policy.

It has done what the US Republicans would like to do - and if you think about it, it has made what Gordon Brown did, and what Barack Obama (and indeed Wen Jia-bao) is doing illegal.

The result, if it works will be stability. It is hard to see how it promotes long-term growth.
That's not why Cameron baulked at the deal - he shares the ideology and wants to be in Europe as do the vast majority of his party's MPs and UK non-fiscal capital, but he chose to represent the interests of the City.
posted by Abiezer at 4:52 AM on December 11, 2011 [2 favorites]


As Paul Mason points out, the new fiscal compact enshrines neoliberal ideology at the heart of European policy:

It makes you wonder why Clegg and Cable are so "furious" with Cameron - since Clegg has ruled out leaving the coalition, their fury seems like so much empty posturing.
posted by KokuRyu at 5:14 AM on December 11, 2011


I've just read Will Hutton's blistering reaction: 'As an act of crass stupidity, this has rarely been equalled'
posted by quarsan at 5:44 AM on December 11, 2011 [3 favorites]


Cameron's withdrawal is a serious blow to Europe, the world’s largest single economy – making a collapse of investor confidence in the continent far more likely, and forcing the bloc into an imposed Franco-German solution rather than the sort of larger arrangement that Britain could have helped organize, if it had been constructive instead of destructive.

This is not a localized matter: All major economies, including Canada’s, are highly exposed to the euro; a fall could collapse banks in North America, too. This was the worst imaginable moment for nationalist isolation. Yet, that was what we got.

posted by KokuRyu at 5:50 AM on December 11, 2011


Bagehot at the Economist reckons Call-me-Dave simply over-played his hand, rather than setting out to scupper the deal from the off (and also points out that the agreement we have effectively outlaws Keynesianism).
Was reading elsewhere that the Socialist candidate for the French presidency François Hollande has also been speaking out against the treaty, so we ought to be cautious at imagining cohesive national blocs on this.
posted by Abiezer at 5:52 AM on December 11, 2011 [2 favorites]


...by enshrining in national and international law the need for balanced budgets and near-zero structural deficits, the eurozone has outlawed expansionary fiscal policy.

Looking much further down the line, I wunder how this might develop into a federal/state budget split. If the states are no longer allowed to overspend, there could be a call for the federal budget to source money from borrowing and utilize such money in an expansionary manner. Or even, states would have an incentive to push spending items from state to federal level because they know the cost will then be shared with other members. They could then withhold appropriate budget increases to the federal level to force the situation.
posted by Jehan at 5:57 AM on December 11, 2011


THE WORLD HAS COLLAPSED.
ONLY BRITAIN SOLDIERS ON.
posted by Scoo at 6:07 AM on December 11, 2011 [3 favorites]


Nobody has brought up the agreement Cameron passed over yet. This was being passed all over trading desks in the city, probably a hour or so after it was signed. I've got a copy here [ .pdf ]. Its an interesting read, only five pages long. Key points that I found interesting: So a dramatic reduction of sovereignty was put on the table and Cameron refused to sign. As the media reported but another factor was the blank cheque - the EU can direct member states to bail out periperhals nations, and tell each how much they must contribute. Also, as several have mentioned unthread, it was The City he was really trying to protect. The UK is running a budget deficit of roughly 72% of GDP, expected to peak at 78% in 2013. Thats the good news, bad news is in 2009/2010 the UK financial services sector contributed roughly 11% of tax revenue and some 10% of GDP.

The Germans and French were pushing "harmonisation" of financial regulation, something that would more than likely impact Britain negatively. And in many financial circles there is scepticism if EU technocrats could possibly run such a broad reaching regulatory agency.

The British have carefuly, over a period of roughly three centuries, created an environment amendable to foreign capital, en masse as it were. Currently they control about 23% of European banking assets [ .pdf ], but that is deceptive as tehy have a tight grip on many of hte more lucrative captial markets (e.g., FX). Since the formation of the Bank of England in 1694, provisions have been introduced to attract capital (eg.., The Country Bankers Act of 1826, The Bank Charter Act of 1844, The Bank of England Act of 1998 ... ).

Harmonisation would more than likely result in significant capital flight, not only from the UK but also across Europe, and many Asian nations are keen to attract the Investment Banking business.

Regardless, what happened last week was just another show; great photo opp, I'm sure a fine meal, but nothing substantive was accomplished, the markets have to wait until March 2012, and that is a serious problem.

I built a regulatory capital model then sold it to an investment bank, nothing earth shaking, methodology is straight out of Hull (2010) so anyone could do it. Its how you parametrise such a model that counts. The model tracks 89 Eurozone banks and assuming 7% Tier 1 capital and NO haircuts for peripheral nation debt we're looking at 42 banks failing and a hit to EU GDP of 0.3%. Seventeen of the banks are in Spain, four are in Greece, two are in Germany and only two in France.

If we give Greece a 50% haircut (debt reduction) 45 institutions fail. If all five peripheral nations get some form of debt relief 63 institutions fail and we see a hit to EU GDP 2.19%.

I have no idea what they're doing with it now, but they were laying structuring some synthetic risk free securities (peripheral nation sovereign debt plus a Credit Default Swap = synthetic risk free bond, paying a very high coupon, make even more money if you borrow at Central Bank, near zero rates to establish the position, essentially free captial), and I think they were using it to screen protection sellers.

Anyhow, the entire Eurozone problem s is another reason we've been predicting deflation for a long time now; there are very, very strong deflationary forces already manifesting themselves as The Great Deleveraging progresses (five out of seven indicators after Shilling (2011) actually). Zombie banks are inherently deflationary. In terms of my own investment activity I'm currently running about 25% cash for the first time in my life. I've always been 100% fully invested but now I'm just sitting back and watching.

The thing that concerns me most about this situation is when the crap hits it probably won't be out the Eurozone - some bank somewhere will blow regulatory capital and then we'll see a domino effect. More than likely, we'll never see it coming.
posted by Mutant at 6:13 AM on December 11, 2011 [34 favorites]


Mutant, you just reminded me of how much I missed your posts.
posted by SouthCNorthNY at 7:04 AM on December 11, 2011 [3 favorites]


Go long ammo and fear.
posted by atrazine at 7:08 AM on December 11, 2011


Mutant, your agreement link is borked, try this one (and are you sure that's the agreement? It's headed 'interim report').

Here's the statement by the euro area heads of government from after the summit.

On the reg cap issue, how do you feel about the EBA report announced last week? Also, what about the declaration that the Greek debt relief is exceptional? (Presumably translating as no haircuts on other sovereign bonds?).[Mentioned in the first two links above].
posted by Infinite Jest at 7:21 AM on December 11, 2011


KokoRyu : You think we’re gonna be wrong?
Mutant : Nah. They’re all fucked.

Please do not take this as endorsement of that piece of shit film, I just like hearing Paul Bettany swear
posted by fullerine at 7:38 AM on December 11, 2011


Just what the fuck is the UK's approach to Europe now?

Well, it's full participation except in the euro and the projected new treaty designed to stabilise the euro. Doesn't that qualify as a policy? You know, not every question requires "yes, as much as possible", or "no, none whatever" as an answer. We're allowed to have policies that don't say either "sign up to everything proposed by anyone, come what may", or "break off all relations with everyone".

Right or wrong as it may be, the emergent policy seems at least coherent to me - and indeed rational. Why would the UK sign up to restrictions designed to regulate the euro when it doesn't participate in the euro?
posted by Segundus at 7:42 AM on December 11, 2011


Good post.

However, I think Paul Mason is wrong to say "the need for balanced budgets and near-zero structural deficits, the eurozone has outlawed expansionary fiscal policy."

A structural deficit is one over the whole business cycle. So you could still have a fiscal stimulus in a recession, as long as it was paid back in the boom.

(In practice, a structural deficit is a bit of a nebulous concept which can be massively fudged, since it depends on estimates about future growth).

The UK, since it's not a member of the Eurozone (single currency) would not have been affected by the balanced budget or structural deficit requirements.

Also, restrictions on fiscal deficits by Eurozone members are not a new thing. They were part of the Stability and Growth Pact of 1997, which was an attempt to stop what has actually happened: some nations building up large national deficits which are dangerous to the Eurozone as a whole. However, the sanctions against breaking deficit limits were always fairly weak, and were weakened further in 2005. Restrictions of national deficits are not a sudden grab of sovereignty now, but an attempt to actually implement what was agreed to in 1997.
posted by TheophileEscargot at 7:57 AM on December 11, 2011


debt jubilee
This might be a good idea, if it was announced in advance.

But we didn't plan it in advance. And springing it on everyone by surprise? Have fun explaining to all those retired people that "put more and more of your money in bonds as you get older" was actually really, really bad advice.
posted by roystgnr at 8:37 AM on December 11, 2011


Yey Mutants back! :) I'd never heard about the biblical concept of jubilee, thanks for mentioning it, T.D. Strange. Google has 7.5 million hits for "debt jubilee", while "austerity" has 21 million.
posted by jeffburdges at 9:04 AM on December 11, 2011


Don't forget Poland. 30% of entire Poland's budget to be handed over to the IMF in order to bail out other countries. Thank you Polish citizens for transferring your wealth!
posted by stbalbach at 9:35 AM on December 11, 2011 [1 favorite]


I'll bring up a couple of issues about the statement by the heads of euro governments (which builds on the report Mutant linked).
In order to ensure that the ESM [European stability mechanism] is in a position to take the necessary decisions in all circumstances, voting rules in the ESM will be changed to include an emergency procedure. The mutual agreement rule will be replaced by a qualified majority of 85 % in case the Commission and the ECB conclude that an urgent decision related to financial assistance is needed when the financial and economic sustainability of the euro area is threatened.1

1subject to confirmation by Finnish parliament.
Regarding that footnote, the constitutional and grand committees of our parliament have stated that Finland cannot give up unanimity in ESM decisions and our finance minister has said that unanimity will stay or Finland will leave the ESM.

The other thing is that in the government coalition negotiations after the recent elections, the finance minister's Social Democratic Party made it a strict condition that Finland will insist that private sector investors would have to accept losses on debt they hold from bailed-out countries. Now there's a lot of fuss going on in here whether this part of the agreement means that we've given up on that demand:
Concerning the involvement of the private sector, we will strictly adhere to the well established IMF principles and practices. This will be unambiguously reflected in the preamble of the treaty. We clearly reaffirm that the decisions taken on 21 July and 26/27 October concerning Greek debt are unique and exceptional; standardised and identical Collective Action Clauses will be included, in such a way as to preserve market liquidity, in the terms and conditions of all new euro government bonds.
I fail to begin to have an idea what that means.
posted by Anything at 10:42 AM on December 11, 2011 [1 favorite]


Which... isn't as much of a problem when the people who you owe money to is your national central bank.

(You also predicted hyperinflation in the U.S, which never happened.)


Of course it hasn't, yet. I'm talking long-term, not short-term. You can't get to hyperinflation from a standing start, it takes a hell of a lot of monetary abuse before it really takes off. We're already seeing powerful inflation in many areas, which is being hidden through statistical whackjobbery. Been shopping for food, lately?

There's only two ways off the train we're on, in the US -- a deflationary crash, or a hyperinflationary runaway. We have far too much debt, and that debt cannot be repaid. So either the debt will be recognized as bad, causing a deflationary crash, or it will be inflated away -- but because of our incredible consumption levels, because we continue to spend more than we make as a society, once that process gets entrenched, it will be unstoppable.

One or the other of these things will happen. The economy is trying very hard to deflate; the Fed is trying very hard to inflate. One or the other will eventually win. I'm betting on inflation, personally.
posted by Malor at 11:54 AM on December 11, 2011


A month or so ago everybody said that the problem with the Greek banks wasn't the debt itself; it was the unknown number of financial instruments like CFDs that would come into play if Greece defaulted. I haven't heard any more about those fears for a while - the present concern seems to be the actual Greek debt, and the bad moral effect a write-down would have on holders of Italian and Spanish debt. Is this right? What changed?
posted by Joe in Australia at 12:06 PM on December 11, 2011


A month or so ago everybody said that the problem with the Greek banks wasn't the debt itself; it was the unknown number of financial instruments like CFDs that would come into play if Greece defaulted. I haven't heard any more about those fears for a while - the present concern seems to be the actual Greek debt, and the bad moral effect a write-down would have on holders of Italian and Spanish debt. Is this right? What changed?

The ISDA is going to declare inflation illegal next!
posted by Talez at 12:53 PM on December 11, 2011


What changed?
The EU determined that there would not be a 'credit event' and therefore should be no CDS payouts. This was, as is now acknowledged, a disaster. The bond rout began in earnest when it was clear that peripheral European debt was not just risky, but could not be insured against. In a now famous phrase, such bonds had become Return free risk.

But the debt is still a problem. It's not going away.

May I ask if anyone understands whether the British 'demands' were provocative or not? There seem to be different views. The Economist seems well informed, that the proposals "amounted to a big winding-back of the clock for many EU leaders, setting a "horrendous precedent" that could unravel the single market." and represented "a huge ask that had nothing to do with the subject at hand (saving the euro) or was a sign of bad faith". Yet Nick Clegg, who apparently spent two days before in secret shuttle diplomacy initially described them as "modest and reasonable. They were safeguards for the single market, not just the UK";

Here's the annex, but I don't understand it, nor whether, in different circumstances and if better presented, the proposals might have been accepted. On the surface it doesn't seem so - they seem to fiddle with established voting arrangements for particular industries for no good reason.

So are we looking at a deliberate provocation, doomed to fail?
posted by grahamwell at 1:38 PM on December 11, 2011 [1 favorite]


Credit Default Swaps need to be banned, or made far more expensive. As far as I see, they inject far too much positive feedback into the financial system. They're recession amplifiers.
posted by Popular Ethics at 4:20 PM on December 11, 2011


It's a strange time to be an expat living in Britain. It's much easier to be objective about politics and events like this when one cannot vote.

The way business school mates read this is that Cameron took the best of bad options. There's a bit of history and background that came up which personally I found fascinating.

1) Britain has had a substantial hand in EU decision-making without itself being fully-exposed to the outcomes of that decision-making. Meaning that Britain participates to a large extent in formulation of EU policy whilst retaining wholly-independent financial sovereignty. The ECB refuses to print money, the BOE prints happily. The ECB required certain debt-levels and blah blah, the BOE exists on its own course.

2) The Euro has become a disaster for Southern Europe. Regardless of why or whose fault it is, Southern Europe has lost sovereignty and is now at the behest of European technocratic leadership.

Witness the chap in Italy who is piloting Italy into the same currents as Greece. As recently as last year, the Economist reported that whilst Italy's economy was slow, Italy also had tremendous levels of private savings and one of the lowest balances of private debt in Europe. There was substantial public debt, however, the base of the economy -- the citizenry -- were by and large fine.

Northern Europe does well out of this. Germany and France have strong export markets around the EU and harmonised trading rules. The Euro has worked for them. For Sweden, it's arguable that nothing has really changed, same with the Netherlands. But for Southern Europe, it's been a fucking disaster.

3) The Euro is important as a trading bloc to counterbalance the American, Chinese and someday Indian economies. It's a simply supplier-power relationship. Europe as individual countries cannot complete with the US and China as effectively as a union can. And don't bring up Switzerland because Switzerland is about as EU as it gets. The Swiss Franc is a great buffer currency for the European wealthy and its very clear how it exists in relationship to European power.

So, the take seems to be:
1) Cameron had two choices, bad and worse.
2) The Euro has been a disaster for some member states
3) The Euro is a necessity for Europe.

To me, it looks as if Cameron did side with the City of London, but more importantly sided against the technocratic leadership of the EU and the ECB.

If he went along with the treaty as it was, Britain suffers more than it gains. And in most people's minds here -- my own included -- that is a bad trade.

Overall, there needs to be a more workable solution to the problem. The current solution amounts to economic imperialism and operates under a fallacious argument. Germany asserts that because it's economy is strong, what it has done is correct and others need to follow. Yet Germany's economy is in part strong due to the fact that it has weakened its neighbours.

There needs to be a solution that does penalise corruption and profligacy, however the solution also needs to take into account the people in the entire EU, and not simply try and remould the losers in the shape of the winners.

So I don't think Cameron was trying to torpedo the EU. I think his point was that the current solutions on the table will do some members more harm than good. Except in most other European countries, leaders with the same views have been replaced by technocrats.

If this had happened a year ago, one can imagine there would have been more than Cameron in opposition, but there's not.

And whilst I disagree with a lot of this government's decisions, in this case, he's done well, for he's:

1) stood up for the people he represents -- the City is key to the British economy, regardless of whether it should be, at the moment it is.

2) not gone along with momentum of saving Europe with potential disastrous consequences for a lot of the people involved.

3) Shown big balls in a time when most governments are rolling over.

Two huge problems with the Euro is two-fold. Unharmonised tax-and-spend policies, and non-expansionist monetary policy. What Germany and France are proposing do nothing to address either of those problems. And making David Cameron the bad guy in the situation is not going to solve either of those problems.

I forget which paper published it, but the essence was that Merkel and Sarkozy are pursuing ideological courses of action. They want the right kind of Euro that will work in perpetuity. They want sober, coherent policies, and they want Central Bank 2.0, with a lot of the kinks worked out.

That same piece went on to say, it's a lovely dream and hopefully that dream won't get in the way of achieving such a vision.
posted by nickrussell at 4:41 PM on December 11, 2011 [2 favorites]


There isn't any need to ban CDSs outright, anyways foreign markets can provide them.

Instead, you should simply change accounting rules so that CDSs don't count much towards improving a portfolio's credit rating whenever systemic risks outweigh non-systemic risks, i.e. bonds issued by nation states or massive companies.

In this way, rich people could still gamble amongst themselves all they like, but consumer financial institutions are less able to obfuscate systemic risks to ordinary people's accounts, pension plans, etc.

One could even interpret such accounting change as being OWS's "tax systemic risk" suggestion. And perhaps the E.U. has brutally insured this change by moving against CDS payouts.
posted by jeffburdges at 4:43 PM on December 11, 2011 [1 favorite]


Keep calm and the concessions for the City along with its currently tax-agnostic status and carry on.
posted by the cydonian at 4:48 PM on December 11, 2011


Mutant: "The UK is running a budget deficit of roughly 72% of GDP, expected to peak at 78% in 2013."

Okay, that one struck me as way out of the ordinary. Just for anyone else playing at home, I presume Mutant meant total debt, rather than an annual budget deficit, as that's what the citation discusses. I don't know if this is a common distinction made often in Europe, but I see it regularly in the US press.

Other than that, an enlightening post. Deflation's been on my amateur radar more than inflation, although I don't follow central banking policy and actions closely enough to know whether they're overcompensating or not.
posted by pwnguin at 5:29 PM on December 11, 2011


OECD Warns of Developed World Funding Crisis.
For the foreseeable future it will be a “great challenge” for a wide range of OECD countries to raise large volumes in the private markets, with so-called rollover risk a big problem for the stability of many governments and economies.

Rollover risk is the threat of a country not being able to refinance or rollover its debt, forcing it either to turn to the European Central Bank in the case of eurozone countries or to seek emergency bail-outs, which happened to Greece, Ireland and Portugal. The OECD says the gross borrowing needs of OECD governments is expected to reach $10.4 trillion in 2011 and will increase to $10.5 trillion next year – a $1 trillion increase on 2007 and almost twice as much as in 2005.
A trillion here, a trillion there, starts to be real money. Watch the Italian 10-yr Bond rates.
posted by stbalbach at 8:06 PM on December 11, 2011 [1 favorite]


Regarding the switch from unanimity to 85% majority in ESM decisions -- apparently, if Germany itself was in the position that they are asking smaller countries to accept, it would, by their own laws, be unconstitutional.

I don't read German but I've read a Finnish summary* of the main point and a seemingly passable Google translation of this interview of a German constitutional scholar in Der Spiegel. Here's Google:
SPIEGEL ONLINE: What is important here in terms of content?

Schorkopf: Just to give you an example: The fact that the European Stability Mechanism (ESM) is now to be deviated from the principle of unanimity, and shall, instead of a qualified majority of 85 percent of the Member States would then be a huge problem, if so, a decision against Germany would be . Here it is very important that the voices are weighted so that Germany retains a veto. Otherwise, it would be difficult to envisage that this scheme would be approved by the Federal Constitutional Court.

SPIEGEL ONLINE: Not even with a change in the constitution?

Schorkopf: Under the previous rule would such a constitutional amendment probably illegal because it would violate the democratic participatory rights of citizens.
posted by Anything at 2:44 AM on December 12, 2011 [1 favorite]


"France set a trap for Britain on Thursday" - a thoughtful update from Bagehot at the Economist.
posted by grahamwell at 4:56 AM on December 12, 2011 [1 favorite]


Britain is now more isolated then ever from the rest of Europe.
posted by diazchris1 at 7:00 AM on December 12, 2011


Credit Default Swaps need to be banned, or made far more expensive. As far as I see, they inject far too much positive feedback into the financial system. They're recession amplifiers.

No. What we need is a clearing house for swaps and for them to be backed up by collateral at either no leverage or sane leverage ratios (i.e. 2:1 to 4:1 max not 11:1).

People were tying up the system by selling a CDS and buying a CDS against the CDS. Everyone is basically leveraged to the gills to each other.
posted by Talez at 8:03 AM on December 12, 2011


Hell Will Freeze Over Before Finland Signs Treaty. Is hell in Finland?
posted by stbalbach at 8:41 AM on December 12, 2011 [1 favorite]


Britain is now more isolated then ever from the rest of Europe.

..or, it's Europe's scapegoat. From the above Finland Hell link:
Given that Merkozy cannot bring themselves to accept that Europe's debacle stems from the euro itself, from a 30pc currency misalignment between from North and South, and from an over-leveraged €23 trillion banking bubble that German, French, Dutch, Belgian regulators allowed to happen… given that, yes, I suppose they have to find a scapegoat.

They have to whip up a witchhunt against somebody, so why not Anglo-Saxon bankers? Nasty reflexes are at work. German and French politicians in particular should be very careful about inciting populist hatred against a group that makes such easy prey.
posted by stbalbach at 8:47 AM on December 12, 2011


Given the headline I want to just highlight what is said early on in the post:
Reader Janne from Finland claims "hell will freeze over" before Finland signs the Merkozy deal as it is structured right now.
posted by Anything at 9:03 AM on December 12, 2011


Yeah, I heard it was a warm week in Hel
posted by infini at 9:41 AM on December 12, 2011


Proportion of Conservative party funding - funding without which it would be bankrupt, and unable to fight an election - which comes from the financial services sector: 51%

Proportion of Conservative party funding - funding without which etc. - which comes from 'hedge funds, financiers and private equity firms' (source): 27%

It may be the case that in this instance Cameron's action also happened to be in the wider interests of the British people. But it's entirely possible that is more of a side-effect rather than the point.
posted by reynir at 11:26 AM on December 12, 2011 [1 favorite]


1) stood up for the people he represents -- the City is key to the British economy, regardless of whether it should be, at the moment it is.

It's really not as important as made out. The most troublesome parts of the financial services are only a fraction of the whole, the rest is pretty mundane stuff every country needs. The recession we have suffered probably wiped out more worth than this small fraction adds, yet we're still okay overall. As a UK voter, I would be happy to take the pain for a couple of years if I knew that it was building long–term stability by ridding us of those irresponsible businesses. I'm fed up with the cuckoo in the nest.
posted by Jehan at 3:01 PM on December 12, 2011 [1 favorite]


The first full post–veto poll. The outcome is Con 39%, Lab 40%, Lib 10%. That's an improvement for the Conservative party, but not huge. If we can expect the bounce to be greatest immediately after the act, then it could soon return to the norm leaving no lasting trace. Indeed, the Conservative result is probably within the margin of error for this poll. I don't think that Conservatives will be happy with that.
posted by Jehan at 3:18 PM on December 12, 2011 [1 favorite]


Looks like the van Rompuy spin on private sector involvement was inaccurate and haircuts are still very much on the table.
posted by Anything at 12:47 PM on December 13, 2011 [1 favorite]


The European political process has been such a complete failure throughout the crisis -- how the hell are we to expect it to solve anything after banks start failing all over the place and everything gets even far worse than what we've seen so far?

Excuse me while I go blankly stare at images of old banknotes.
posted by Anything at 9:07 AM on December 14, 2011


so you think I should close that Nordea account on Mannerheimmintie?
posted by infini at 9:20 AM on December 14, 2011


I'm not aware of any big alarm being raised on our own banks so far. Some recent news:

'Nordea and Danske Bank groups’ capital positions are also assessed as being strong, and no recapitalisation is needed.'


'Finland says banks alright despite S&P worries'

On this front I'm certainly not pessimistic, but I must mention I don't know any more than anyone else does.
posted by Anything at 10:24 AM on December 14, 2011


Thank you! Less worried about the banks, because I'd see an article about their assessments being strong, more concerned whether there will be even be a euro by the time I get out for Juhannus break.
posted by infini at 11:23 AM on December 14, 2011


Interesting to note that the local Singapore paper has a huge op-ed piece by two eminent ambassador/EU representative types (Singaporean, so no link, it was a commissioned piece) on the EU's prospects and how so much of this doom/gloom is emerging from the UK/US english language press/media.
posted by infini at 10:17 PM on December 15, 2011


That would be a really interesting read. I've tried to follow the broader European press (Presseurop has been helpful but I wish it got more updates) but can't go beyond what's translated and what's commented on in the English and Finnish language media. The sense I vaguely get is that there don't seem to be many answers given to what the pessimists (in the English language media) are saying; i.e. that the absence of 'doom-and-gloom' is a case of denial rather than informed optimism. But like I said I have limited access to the discussion and, with that, it's hard for me to argue this. I'd like to see what the op-ed says.

As far as the future of the euro goes, I just have no idea. My tendency of belief keeps fluctuating between the various scenarios, and the shortage of informative statements from the eurozone heads, including our own, isn't helping.
posted by Anything at 7:06 PM on December 16, 2011


And 'various scenarios' includes 'nothing's going to happen'.
posted by Anything at 7:14 PM on December 16, 2011


Anything, you're in luck - two days have passed and they have put the article up as a PDF

Read the op-ed by Professor Tommy Koh (founding Executive Director, Asia-Europe Foundation, 1997-2000) and Dr Yeo Lay Hwee (Director, European Union Centre in Singapore) that was published in the Review section, Straits Times, 15 Dec 2011 (Courtesy Singapore Press Holdings).

The local papers have published some British and American commentaries on the situation in Europe, many of which have been negative. In this article, the authors try to give a more balanced view on the euro zone crisis and answer some frequently asked questions on European integration.

posted by infini at 9:43 PM on December 16, 2011 [1 favorite]


Thanks a bunch!

I have to say, though, that the op-ed reflects very much the same problems I alluded to above.
The recent decisions taken by the EU leaders do address the fundamental weakness of the system, that is, how to enforce fiscal discipline. Except for Britain, all the EU leaders agreed on a new inter-governmental “fiscal compact”, which allows for automatic sanctions on budget rule-breakers, and calls on governments to amend their national Constitutions to prevent profligacy and ensure budgets that are balanced. They also agreed that draft national budgets will be submitted to the EU before they are adopted by their national parliaments. These proposals agreed in the summit in Brussels, if adopted and faithfully implemented, will ensure that the eurozone’s fiscal house will be in order.
One question that needs to be answered is how is this going to be monitored and enforced? The Greek entry to the eurozone was governed by rules too, and the rules were entirely mooted by fraud, and the fraudsters got away without a scratch while the population in Europe and in Greece in particular have to suffer. How do you replace the bureaucrats that did this and how do you change the political system that put them in place? Where do you get the army of tax collectors and other officials needed to implement this thing even if the politicians on top are honest? I have seen no evidence of high-profile euro-optimists taking these sorts of questions seriously.

The op-ed also presents no awareness of the difficulty of national parliaments passing the agreement -- by all informed accounts it's already in serious trouble, and not just in Finland.

I would also like to see some sort of analysis supporting this underlying notion of crediting the EU for the peace in Europe. I see that asserted occasionally but I don't find it credible.
posted by Anything at 11:36 PM on December 16, 2011


Anything, there was an FT article yesterday [subscription/registration, sorry] which suggests that the proposed treaty's already been watered down. "Diplomats said several European Union countries are lining up in favour of a draft with only two elements: a “debt brake” obliging signatories to write debt and deficit limits into national constitutions; and a measure making EU sanctions against fiscal rule-breakers more automatic." I'm with you, my impression is that getting this passed, and enforced once it is passed, could be very difficult.

infini: that piece looks wildly optimistic to me: "the eurozone has massive fiscal discipline (but, OK, they did all violate the terms of the Stability and Growth Pact). But that's OK, because now they've got a new, tougher Treaty, that everyone will abide by (but OK, it might not actually pass)." Doesn't even mention, anywhere, that the Treaty is a medium/long-term solution to financial indiscipline, and doesn't do much to stop the problems now. And when we look around we see that Italy and Spain are still paying record yields on their bonds and that most of the eurozone is on negative credit watch.
posted by Infinite Jest at 3:06 AM on December 17, 2011


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