Eurocrash: doubts amid the hubris
Friday 14 September 2012
 Despite the hubris in Die Welt (pictured above), some sections are waking up to its implications, and do not like what they see. Our friend Süddeutsche Zeitung is thus writing of the "dangerous double role" of the ECB. But what I found particularly interesting was an opinion piece in Handelsblatt by Dirk Heilmann. It talks in terms that I have not seen stated in quite such a manner, of "two schools of thought" colliding over the introduction of the single currency in the nineties. One school, he says, rests with so-called "Locomotiv theorists" who wanted to use the euro as the driving force for a political union of Europe, while the followers of the "coronation theory" would only have the euro as the conclusion of a political union. The latter school reject the idea of using "monetary union as the pacemaker of political union", dismissing this as putting the cart before the horse. Champion of the "coronators" was former Bundesbank board member Otmar Issing, who warned that the Locomotiv theory cannot work, even though its lead proponent, chancellor Helmut Kohl, seemed to be having his own way. In 2009, ten years after the introduction of the euro, writes Heilmann, the story seemed to be going quite well: the euro was strong, there was low inflation, and growth rates were high in many countries. The financial markets in the eurozone grew together. Greece and Portugal barely paid higher interest rates than Germany if they borrowed money from investors. Currently, though, with all the events that we have seen, the eurozone is still far from being an optimal currency area. It is "primarily political will that holds it together". Draghi and Merkel have in recent weeks made their message clear: the euro is to be saved at all costs - even if the rules need to be bent. And says Heilmann, whose piece is headed "Growing risks for Germany", the rescuers will not stop. They will defend the currency union with the second pillar – the fiscal union. The question, he concludes, is how much confidence will be left in the euro and the currency union. It should be said, though, that such doubts do not infect Mario Draghi, who is currently on top of the world. However, while Heilmann's views may be slow burn, such is the behaviour of Draghi that one might think that the word hubris had been invented specifically for him. COMMENT THREAD Richard North 14/09/2012 |
Eurocrash: referendum blues
Friday 14 September 2012
Shortly after it had been delivered, Bruno Waterfield picked up the implications of the Barroso speech, warning us that a referendum would be in the offing if a treaty went ahead.
However, while also now reported by the Daily Wail, a scenario painted by Bruno is of government lawyers supposedly looking at ways of having a referendum, and recommending that "Britain stays in the EU without joining a political union". Yet, according to government insiders who are considering the options, the situation is far more complex than either newspaper makes out.Any treaty which comes out of the process that is clearly under way is unlikely to see the light of day until 2016 at the earliest. But, when it is finalised, it is expected to create a political union for the eurozone members only. The UK will not be expected to join, and nor can she without first joining the single currency, which is not going to happen. Therefore, the problem confronting not the lawyers but the political strategists is how to present the treaty to the British public. On the face of it, with multiple opt-outs, it will not involve any significant transfer of power from the UK to Brussels. Therefore, despite confident assertions to the contrary, the so-called "referendum lock" may not apply, and a referendum may not be required on strictly legal grounds. However, public perception will be of the UK being shunted into an "inferior" position as part of the outer circle, with significantly reduced influence. Under such circumstances, a referendum would be difficult to avoid. Such an event, though, would pose the risk of blocking the ratification of a treaty which does not apply directly to the UK, with profound diplomatic consequences. Confronted with this problem, there is also the need to make promises in advance of the general election in order to "park" the EU as an issue. Thus, following an expected commission proposal for a new treaty before the euro elections, strategists are looking at the possibility of offering an in-out referendum as the price of giving the new treaty an easy passage through the ratification process. That now raises the possibility of a plebiscite some time after 2016, asking for public approval of Britain's new status within the EU. The thinking is that this could be framed in terms of Britain having gained some concessions during the treaty negotiations, in which case the government of the day will be supporting a "yes" vote. Bearing in mind that this could be after a Labour victory in the general election, we could have the Conservatives in opposition supporting a "no" vote, completely changing the electoral calculus. With so many ramifications, though, no decisions have yet been made. But, one thing is becoming clear. With the "colleagues" determined on a new treaty, the issue of Britain's continued membership of the EU is about to be thrown wide open in a way we haven't seen since 1975. All of a sudden, there is everything to play for. COMMENT THREAD Richard North 14/09/2012 |
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