A failure of British diplomacy, and eurozone sanity

Are you reading a blog out of step with what intelligent folks round the world feel? We all think this from time to time, before deciding either (a) I don’t care what the rest of the world thinks or (b) No. With Slog readers, all you need to do is replace the ‘or’ with an ‘and’.

For me, watching David Cameron going in to bat against the Brussels-Paris-Berlin Axis Powers yesterday was (I’d imagine) what democrats felt in 1941 watching the Nazis take on the Soviets: one sort of hoped they’d wipe each other out. So you could say that my view of Cameron as a pillock who needed teaching a lesson – and that of the eurostocracy as a phalanx of pillocks who will never learn any lesson – is somewhat dark, and perhaps even destructive.

Well, here’s a round-up of today’s verdicts:

‘The euro zone has agreed to take a big leap forward in economic integration, but failed to deliver a convincing answer to investors worried about its ability to tackle threatening debt crises in Italy and Spain.

As a result, the deal clinched by European leaders in the early morning hours of Friday seems unlikely to ease the intense financial pressures that have plagued the currency bloc for over two years. Nor will it dispel concerns that the euro area could eventually break apart, with one or more countries exiting despite the catastrophic consequences that would entail.

With Britain, the EU’s third biggest economy, opting out of the fiscal process, questions about the cohesiveness of the wider bloc will also be posed’. (Reuters)

‘While European Central Bank President Mario Draghi hailed the accord struck at all-night talks in Brussels, investors urged him to expand his crisis-fighting arsenal to ensure debt- addled nations can pay their bills. Italian and Spanish bonds fell even as the ECB was said to be buying them in the market.

“The leaders have now defined the end point they want to reach in terms of fiscal governance, but it’s a long way to go there,” Thomas Mayer, Frankfurt-based chief economist at Deutsche Bank AG, told Bloomberg Television. “We’ll probably see more near-term tension and that will probably then trigger a more hands-on intervention by the ECB.”’ (Bloomberg)

‘According to a person in the room, the summit opened with German Chancellor Angela Merkel emphasizing her opposition to a plan that had broad support among other countries—giving a banking license to the European Stability Mechanism, its future bailout fund. That move, which was included in a leaked draft communique of the meeting’s expected conclusions, would allow the bailout fund to borrow from the ECB…[thus]…There was no agreement by the close of the first day on whether to turn the ESM into a bank, although the discussion on the issue was expected to continue later Friday.

Other parts of the deal being negotiated include lifting a €500 billion ($671 billion) cap on total lending from the euro zone’s sovereign bailout funds, as part of efforts to build a stronger fire wall around larger troubled economies in the euro zone. Doing so could provide up to €700 billion in lending for Italy or Spain and for bank recapitalizations across the euro zone. Ms. Merkel also made plain her resistance to that idea, said the person present…..Although Mr. Draghi didn’t rule out central banks providing money to the IMF for its general purposes, he said that if the funds are simply used to help euro-zone countries, “we do not think this is compatible with the treaty”….[there was] disappointment in financial markets over the ECB chief’s remarks.” (Wall St Journal)

‘Euro zone members agreed to a treaty that requires stricter fiscal discipline, but efforts to get unanimity among the members of the European Union failed….Twenty years after the Maastricht Treaty, which was designed not just to integrate Europe but to contain the might of a united Germany, Berlin had effectively united Europe under its control, with Britain all but shut out. .’ (New York Times)

Perhaps, however, the oddest comment of the day came from Wolfgang Munchau in the Financial Times. The world’s most europhile German opined that while

‘So we have two crises now. A still-unresolved eurozone crisis and a crisis of the European Union. Of the two, the latter is potentially the more serious one. The eurozone may, or may not, break up. The EU almost certainly will. The decision by the eurozone countries to go outside the legal framework of the EU and to set up the core of a fiscal union in a multilateral treaty will eventually produce this split.’

on the other hand

‘….the eurozone nevertheless made an important political statement. It will not allow outsiders to stand in the way when it needs to act.’

Oh dear. Oh dear oh dear oh dear. Herr Munchau seems a little confused here: he seems to be arguing that, while the EU clowns have set up a situation in which everything will f**k up bigtime, it is good that Die Britischen have been pushed out of the way when the Reich needs to act. There is more than a little of the German scorched earth syndrome in that petulant analysis.

Anyway, overall we can see that The Slog appears not be be bonkers. Rather, the overriding view of the business community media appears to be that the Merkozy juggernaut steams onwards down to Hell…..regardless of being utterly and completely wrong. I sense that Herr Schauble senses this. I’d just love to know what his next move might be.

Related: Why Britain needs to get away from the closed-shop eurozoners