A bit of light relief

r 29, 2008

A bit of light relief

If there was any justice in this world, all you would have to do in the modern equivalent of a music hall is utter two words (or three): "The European Union". You could add, "foreign policy" and that should guarantee to bring the house down.

To illustrate the point you could do no better than refer to the latest development in the long-running farce of the EU Chad peace mission which, as werecorded earlier has been dogged by a shortage of helicopters.

One can never repeat often enough the details of this farce, where 27 member states, collectively setting themselves up to rival the United States as a "superpower" found it impossible to provide a mere six helicopters to support their humanitarian mission in Chad.

And still it goes on. Still unable to resolve the problem, they have hit on what they hope is the ultimate solution, one laden in irony. Despite the despite its dispute with Moscow over Georgia, the EU has – according toReuters - gone cap in hand to the Russians and asked to borrow four of its helicopters.

This would boost the number of helicopters available to the EU force by a third – which does not say much for the number already available, to help police an area of operations the size of France.

However, Cristina Gallach, a spokeswoman for EU foreign policy chief Javier Solana, is trying to put a brave face on it. She says the Chad mission was "not dependent on the Russian helicopters." Rather, they would "increase its range". She did concede, though, that the issue "showed the need for the EU to boost its own resources." Perceptive is this one. She should go far.

Meanwhile, ministers of the EU member states are planning to do what they do best - talk. They are meeting in Deauville, France to discuss a "longer-term Anglo-French plan" to upgrade Europe's helicopter fleet.

And yes, I know Winston Churchill said, "jaw-jaw is better than war-war," but the "colleagues" are turning this into an art form.

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Interesting

Is this right?

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In Europe but not ruled by …

The BBC website today helpfully publishes the full text of the government statement on the nationalisation of the Bradford & Bingley bank and the sale of parts of the business to Spanish banking giant Santander.

However, one has to read well into the document before bumping into the "elephant in the room" – the invisible partner of the quadupartite regulatory system that no one seems to want to acknowledge. But, the footprints are there, with the statement reading:

It is the Government's current intention to seek state aid approval from the European Commission to extend these guarantee arrangements as part of the restructuring of Bradford & Bingley.

The current status of the deal is confirmed by Reuters which reports the EU commission saying it had been in touch with British authorities over a rescue plan, "and expected them to notify the EU executive of state aid in the course of Monday".

The agency cites Jonathan Todd, spokesman for EU competition commissioner Neelie Kroes, who states: "We've been in very close touch with the UK authorities throughout the weekend ... Our understanding is that the UK authorities will notify rescue aid to us today."

A similar process is in hand with the rescue of the Fortis Bank. The Forbesagency, relying on a Reuters feed, is reporting that EU competition commissioner Neelie Kroes have been consulted on the Fortis rescue and had been "close touch with the Belgian government all weekend."

Again Jonathan Todd is cited. He says: "We will look at any state aid involved as a matter of urgency," with the report adding: "Under EU rules, rescue aid must be limited to six months and to the minimum required to ensure the company's survival." That report concludes: "How the EU regulator handles the case will depend on whether the governments buy shares at the market price or inject new capital into the bank."

Back in the UK, a merger between Northern Rock and B&B is one of the suggestion being considered as a way of resolving this bit of the financial crisis, although the invisible elephant looms here as well, although you will have to read about it on CNN.

More of its role is articulated in local media, rather than the UK nationals, with MEP Martin Callanan saying: "I wouldn't like to see Northern Rock disadvantaged by whatever they do and never forget we are still waiting for the results of the investigation by the European Commission into state aid for Northern Rock."

He adds: "And presumably if Bradford and Bingley was rolled into Northern Rock, that would make it even more difficult to win approval. We are already facing huge job cuts in the North East and potentially this could make the situation even worse."

Northern Rock itself is already bumping up against restrictions imposed by the invisible elephant. The Times reports that more than £1 billion of savings has flooded into the bank in the past two weeks resulting from the government guarantees underpinning Northern Rock. These have been encouraging savers to move their cash.

But, we are also told, "the influx has pushed the bank close to the caps imposed by European competition laws which restrict its ability to compete with the banking industry for customer deposits." Northern Rock, the paper says, "has agreed" to hold no more than £17.6 billion in customer deposits – equivalent to 1.5 percent of all savings held in British institutions.

That is an interesting way of putting it. It is rather like me driving down a motorway with a police car following and my "agreeing" to drive at 70 mph.

Anyhow, this has not stopped the Conservatives playing their games, which have developed over the weekend.

Wannabe chancellor George Osborne has now declared that he is willing to talk "constructively" with his opposite number Alistair Darling on ways to protect banks and taxpayers. But, he says, B&B's fate was due to the "clear failure" of the regulatory system "established by Gordon Brown."

Osborne adds that the Conservatives had proposed a "much better way" of dealing with the crisis, the idea of giving the Bank of England enhanced powers to step in early and run troubled banks while trying to negotiate a private sale of assets.

If he wasn't a bit busy, Neelie Kroes's spokesman, Jonathan Todd, might have a thing or two to say about that – in private at least. But Osborne could save him the trouble by reading up EU state aid rules, starting with this short piece.

But then, since he seems to believe we are "in Europe but not ruled by Europe," Osborne probably thinks he does not need to read anything at all.

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This might explain some things

On the whole I find economics either very hard to understand or something that is just a matter of common sense. As a consequence, I try not to write about it and this posting will not give you my (somewhat inadequate) opinions on what is going on.

Instinctively, I side with those people here and in America who are against the famous bail-out plan, which has undergone some minor restructuring. I am against nationalization of banks and more government interference in business.

Politicians, in my opinion, know very little about anything, even politics. They are full of envy of those who do know things and can do them. When they look at people in the City or on Wall Street playing around (as it seems to those in the Westminster bubble or within the Beltway) with billions of pounds or dollars, their hands start itching. Without understanding anything about financial matters they want to move in there and play with those billions themselves. What usually happens is a disaster.

Therefore, I have been quite interested to read ever more references to the Clinton-era Community Reinvestment Act and the pressure that banks and mortgage companies have been under to ensure that people who could not afford to buy their own homes should, nevertheless, be allowed to do so on loans they could never repay. It seems that the people who pushed this insane measures through are largely behind the bail-out now. Interesting.

An article on American Thinker gives a good summary; there are links and postings on Michelle Malkin's blog (she is, needless to say, vehemently against the bail-out); numerous references on Instapundit (Glenn Reynolds is less vehement but also sceptical); links and comments on the seriously non-vehement Volokh Conspiracy.

Make what you will of it all.