11 December 2011

Britain's new defiance

The major story from the latest European Union crisis meeting in Brussels was not the fact that leaders announced yet another plan to save the floundering euro currency. It was the fact that Britain took an unprecedented stand against the plan, which would have severely threatened its national interests.

Britain is a member state of the EU but does not use the euro, and London is Europe's most important financial center (in fact, the second most important in the world after New York). When it became clear that the other leaders were planning treaty changes which would transfer critical powers from the elected national governments to the EU's unelected central authorities, British Prime Minister David Cameron presented some fairly modest demands to safeguard British interests (you can read them here). The other leaders refused, and so Cameron rejected the treaty changes. Since such changes require unanimous agreement of all 27 member countries, this was effectively a veto.

EU leaders and media reacted with an outpouring of bile against Cameron and Britain. The EU has long been suspicious of Britain, a country which was never enthusiastic about European unification and which has linguistic and cultural ties with the EU's rival, the United States (which is also its biggest export market). Now that suspicion has hardened into outright hostility and erupted into the open.

In fact, Cameron had little choice, and many Europeans probably don't support what their leaders are saying (background here and here). Those leaders are openly threatening to punish Britain, but:

Growing popular hostility to the EU across Europe might come to Britain's aid. Democratic obstacles to the Euro-Plus treaty are beginning to materialise in Ireland, the Netherlands, Austria, Romania and Denmark, while parliamentary opposition in Finland, Latvia and the Czech Republic may also sink the deal.

The EU is forging ahead with the planned deal by other means, but the gist of it is just more of the same austerity and obsession with deficits that are already destroying so many countries' economies. It doesn't address the real problems and assessments so far are negative. It won't save the euro or pull Europe out of its economic death spiral. Britain would do better to strengthen its ties with the US, where tried-and-true Keynesian stimulus policies are bringing at least modest recovery.

And the EU-British breach could well widen. The current British government is a coalition between the Conservative party and the much smaller Liberal Democratic party (somewhat similar to our libertarians). The "Lib Dems" are strongly pro-EU and have been vehemently critical of Cameron's stand. If the coalition fractures, it might force a new election, or an exasperated Cameron might order an election, as a British Prime Minister has the power to do. In that case, the Lib Dems would face a wipe-out. Their pro-EU and pro-immigration stances are very unpopular and their support has been sinking; in fact one poll today showed them falling behind the UKIP, a new party dedicated to getting Britain out of the EU, and this doesn't yet reflect public reaction to the EU's new hostility to Britain, which will likely boost UKIP support even further.

If a new election left the UKIP as the only party that could join the Conservatives to form a majority, or if the EU pushes ahead with measures that really threaten the British economy, withdrawal might become inevitable -- and once one country leaves, others whose economies face ruin under intensified austerity may follow.


Anonymous ExpatZ said...

You sound like a Tory.

Your proclamations of Europe's demise are premature and highly unlikely to materialize.

On the other hand Cameron has now seriously damaged the UK's relationship with the EU and the UK may very well find itself sidelined on most of the important decisions while still being legally obligated by agreements made without their input.

In short: Cameron blew it, and he did it in record time (somewhere in the neighbourhood of 4 hours to relegate himself and the UK to irrelevance).

The lack of understanding euroscpetics exhibit about the legal, immigration and trade issues involving the UK and the EU is astounding.

12 December, 2011 09:16  
Blogger Infidel753 said...

EZ: I don't think you read the posting very carefully; I notice you don't respond to any of the specific points I made in it. I'm a socialist and the main objection I have to the EU is the austerity policies it is imposing which are forcing countries already in recession to cut spending and jobs when exactly the opposite -- Keynesisn stimulus -- is needed.

As I indicated in the last two paragraphs, I'm well aware of the issue that the EU is now likely to make rules detrimental to Britain, without Britain's participation. That is, it will place Britain in a position where it can only protect its vital interests by leaving the EU altogether. Yes, that will give rise to some problems, but nothing like the problems which arise from staying in. For example, it will regain full control over policy areas such as immigration and fisheries, and will be able to keep the £15 billion a year it now pays to the EU.

As for the rest of the EU, this latest scheme is just more of the same anti-Keynesian austerity voodoo that the Republicans have been pushing in the US. It will just continue the same death spiral until those policies are reversed and the member countries can free themselves from the real cause of the economic crisis -- the euro common currency.

There's also the issue of the EU's destruction of democracy, but I covered that here.

12 December, 2011 12:15  
Anonymous Anonymous said...

i dont know that a common currency itself is necessarily the root problem, more so that the common currency as it stands now doesnt have a good mechanism for issuing debt by member nations - one cant run off a slab of (domestic) notes, they dont exist anymore if you took the euro.

i think the issue really is down to deeper problems in the structure than the fact people are using common notes. the ability to buy goods with the same note across borders is a good one. buying a loaf of bread with euro currency still works.

in good times it has looked like it works, the problem is when the stress comes on - and as it turns out this kind of stress is precisely the sort of thing that can break it.

in my ideal world that would be recognised and yes, instead of continuing with austerity - the stress - one makes moves to allow stimulation. if TPTB want to continue with a meaningful EU grouping thats what it will take - not necessarily dismantling the common currency but cutting those reliefs - the ability to raise soverign debts for stimulative policy purposes - back in.

the only other option is for the sovereigns to take that back themselves by leaving. the upset caused by that would be larger than the upset a rejigged EU accord would entail. so despite the elites bent for austerity, if they want to keep things together, realistically theres only a few things they can do.

dont think Cameron is much chop myself, but hes quite rightly identified things cant continue as they have been. something has gotta give.

i dont know how much spending power 15B gbp gives if one were to tip it all into stimulus actions but one suspects that kind of money used that way rather than for EU membership would be welcomed.

(personally i think the EU/ECB is playing with fire and theres a risk many will get burned - im half a world away in Oz and for all the strength of the domestic economy an EU cockup will definitely resonate here, and loudly.)

12 December, 2011 21:04  
Anonymous NickM said...

*"Liberal Democratic party (somewhat similar to our libertarians)"*

As a British libertarian you are dead wrong. They are nothing like that. I base my worldview on the likes of Smith and Locke and they are just another centre-left(ist) party. The Liberal Democrats (or before them the Liberals) haven't been truly liberal in my sense of being both economically and socially liberal for over a hundred years.

You are normally god on UK political analysis but not here.

13 December, 2011 17:51  
Blogger Infidel753 said...

Ms. Onymous: The common currency is a root cause of the crisis because it prevents countries in recession from using currency devaluation to regain competitiveness for their exports -- this is especially a factor in the case of Italy. This isn't just my opinion. Many analysts have said the same. The euro in the southern countries is estimated to be over-valued by about 30%. Clearly this is a big part of the problem.

Nick M: I know the analogy is far from perfect (and I'm no expert on the Lib Dems), but I'm trying to make things accessible to US readers as simply as possible. Also, US libertarians may not be as similar to British ones as they once were. The Lib Dems do share one trait with our libertarians, namely an ideological bias in favor of high immigration and de-emphasis on national sovereignty -- which, in both cases, dooms them to political irrelevance. Recall how, before the last election, the Lib Dems were doing almost as well in the polls as the Conservatives were, until Cameron started hammering away at their pro-immigration stance, and their support dropped off dramatically. Now, Cameron's patriotic stand in Brussels is supported by the British public 57%-to-14%, and the Lib Dems are polling behind the UKIP.

13 December, 2011 19:05  
Blogger Infidel753 said...

PS I acknowledge one other error. Traditionally in Britain the Prime Minister has had the power to call an election at any time, but I now read that in 2011 there was a change in the relevant law and this is no longer the case.

13 December, 2011 19:40  
Anonymous NickM said...

I apologise for the typos (I have a broken arm)but I hope you had a chuckle at me saying you were "god" on British politics. Anyway probably the closest we have to a libertarian party in the UK is LPUK which is four blokes who meet up in a pub every so often and argue the toss over Ayn Rand. It is embarrassing. They can pick technical nits in a way that would have put the People's Front of Judea to shame.

As to "in out or somewhere there about" and the EU and the UK it's very tricky. Control over fisheries would be nice. EU fishing rules are perverse in the extreme. You have to state what you are fishing for and if you get anything else it's got to go over the side so basically that's restaurants offering "catch of the day" and more importantly fish stocks. As would not subsidizing French farmers at an obscene level.

But the divorce would be a messy one. I take your point about remaining semi-married being the worst of all possible worlds. The best would be to be in a situation like Norway, Switzerland or Turkey which enjoy the trading benefits but don't have to put up with the rest of it.

The fundamental problem is that (frequently correctly)anyone against the EU is seen as "Eurosceptic" with the strong implication that they don't like Europe. It's a linguistic flaw which is pernicious because it equates "Europe" with the EU. It is entirely possible (I cite myself) to logically dislike the EU and be English and really like France and Spain and Holland and...

It's echoed in what ExpatZ said:

"Your proclamations of Europe's demise are premature and highly unlikely to materialize."

Expatz basically assumes (this is very common) that the EU=Europe. It does not. The EU is seculae of the two great wars of the last century. No Brit, Frog or Kraut fancies going through that again and we don't need a deranged and utterly undemocratic superstructure to prevent that. That free movement of goods, people and capital can happen without such a structure seems to escape many people.

The architects of the EU seem to suffer from USA-envy. They see America and they think we can be bigger than them if we form a super-state. Except this has nothing to do with the individuals on the ground does it? The EU-elite are very anti-American because they envy your nation's power. This is a failure of historical knowledge on their part. In this respect I greatly enjoyed your earlier post on what makes a Frenchman a Frenchman.

I shall pass over Keynes for I don't think that is the answer. For a start the money is gone. We're scrabbling down the back of the sofa for loose change. Italy has its sofa on EBay and the Greeks are sitting on the floor.

There is no EU solution in the Merkozian centripetal sense. The only solution is centrifugal yet maintaining free trade and movement.

14 December, 2011 07:13  
Blogger Infidel753 said...

Nick M: but I hope you had a chuckle at me saying you were "god" on British politics.

I did wonder:-)

But the divorce would be a messy one.

I just don't see how anything really gets resolved as long as the EU is still there. How can Britain get immigration back under real control with the EU constantly interfering? How can the PIIGS recover if they can't devalue and engage in temporary deficit spending? Obsessing about deficits when unemployment is this bad is like obsessing over water conservation when your house has caught fire.

It's a linguistic flaw which is pernicious because it equates "Europe" with the EU.

Yes, this is a rather Orwellian point of terminology I've often noticed -- equating the organization with Europe.

They see America and they think we can be bigger than them if we form a super-state.

That's pretty apparent. It seems very odd to me, though. If all the countries in all of North and South America formed a unified state, it would be bigger than the EU, but what would be the point? Those places are distinct countries and will never feel like one.

14 December, 2011 12:59  
Anonymous NickM said...

The problem with the PIIGS isn't a problem - it's a variety of them. The Greek government spent like fury. The Irish government didn't. Their problem is largely personal debt due to an insane housing bubble.

This is the fatal flaw of the Euro. One medicine is the last thing they need!

Immigration really isn't a big problem. If anything I'd make it easier. I have known enough really smart folk fecked over by the Home Office. We have problems but folk wanting to live here isn't one. When they start going the way is when I start worrying!

15 December, 2011 12:48  
Blogger Infidel753 said...

Well, of course I disagree about immigration, at least where a lot of the immigration to western European countries is concerned -- but whatever you think is the right policy there, surely it should be set by the elected government of each country, without meddling by the EU.

16 December, 2011 05:30  

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