Franco-German squared circle (simplified reconstruction)

Why we should be apart from the EU, not a part of it

The FT (paywalled) says Greece is heading for selective default, and Sarkozy has dropped his plan for a levy on eurobanks. It adds as follows….if you can follow this:

‘The deal paves the way for a German-backed initiative for more direct measures to get private holders of Greek bonds to help pay for the bail-out. According to a version of the plan circulated by the European Commission on Wednesday evening, all owners of Greek bonds that come due in the next eight years will be urged to swap their holdings for new bonds that do not mature for another 30 years. Other plans, however, including a French-backed bond rollover plan, are believed to still be on the table.’

Right. Anything under the counter then? Who knows – but this is the Reuters version:

‘German Chancellor Angela Merkel and French President Nicolas Sarkozy say they have struck a deal on a new package for Athens, but did not release any details….[but]….on arrival in Brussels for the crucial summit, Merkel told reporters, “I expect that we will be able to seal a new Greece program. This is an important signal. And with this program we want to grasp the problems by their root.”

But will you be looking for root and branch reform? Or just sealing plans rolling over on the table? Or were you both under the table by the time this accord was reached? Bloomberg says these two things at the same time:

‘Euro-region governments may guarantee Greek bonds to make it easier for Trichet’s ECB to accept a default of the indebted nation after months of opposition to such a move…..If these guarantees are very short-term, maybe just for a few days, just to tide them over a short selective default, then taxpayers’ exposure will be limited…..[but]…..Germany may back common euro bonds in the currency zone at a future point, though legal rules bar such a move now…’

So presumably, Merkel will declare a State of Emergency in Berlin and change the BundesRepublik’s constitution, while Brussels works on ze new master plan for an EU run from Berlin where these things don’t happen any more. That’s assuming that the French don’t table another bond bonus-ball rollover, and there isn’t a massive bankruptcy during the very short-term, maybe just for a few days, just to tide them over a short selective default period part during which the German constitution will be in cryogenic suspension.

This truly is the most insane, contradictory load of bollocks I’ve heard since Hank Paulson said that only $780 billion stood between normality and the vapourisation of the planet. But – and this is something about which all Britons should go cross-eyed in a farrago of confusion and frustration – our very own Chancellor Mr Gideon Osborne has this to say:

“We see the potential for a set of economic events that could be as damaging as 2008…the idea of eurozone bonds is worthy of serious consideration. I recognise that enthusiasm for greater eurozone integration turns British policy on its head, but the remorseless logic of monetary union is greater fiscal union.”

While we will all be grateful for the Draper clarifying this point, The Slog feels obliged to ask a simple question: if we are going to stand idly by pretending that what’s under discussion here is purely fiscal, and thus wait until a new EU emerges in which we can’t get any advantages of controlled eurozone membership (but we do get all the rules that go with it) why on Earth are we in the bloody EU, and yet standing on the sidelines while ‘a set of economic events that could be as damaging as 2008’ are taking shape?

There is almost (but not quite) as little sense to EU debt policy as there is to Camerlot EU membership policy. What a cheering thought that is, as we await financial Armageddon of a wet Thursday afternoon.