Wednesday, 14 December 2011

This isn’t about the UK any more

The markets have returned to panic mode today as their confidence in national governments to approve the new Eurozone financial consolidation treaty wavered. Ratification has hit some bumps in the road, with Finland’s prime minister expressing dissatisfaction with the transfer of authority over national budgets to the EU on Tuesday. In Ireland, the opposition parties seem keen to force a referendum on the issue even if the country’s legal services rule that one is not required.

The euro fell below $1.30 today, its lowest point in a year. Yields on Italian bonds widened to new highs. It’s a familiar pattern we’ve seen repeated several times now: markets rally upon news of a new European Council agreement, but then crash a few days later when they look at the details and realise it’s not as strong as they’d hoped. The UK's abandonment of Europe may have been the big story on Friday, but now the more important story sets in - the markets have not been satisfied.

But there seems to be some confusion in the British media though about what this all means vis-à-vis the UK’s decision to veto the attempt at treaty change on Friday. The Spectator has run a column from the Eurosceptic think tank Open Europe scolding the British media for describing the UK as isolated as a result of the 26 vs. 1 outcome last week. There isn’t really any such divide, Open Europe insists, because many other member states support the UK’s reticence. As evidence that all is not what it seems, they run through the list of objections to the new treaty being expressed in national capitals this week.

But this analysis is flawed on many levels. For one thing, it is equating apples with oranges. Several governments have said they can’t firmly commit to the new treaty until they consult with their parliaments not because they oppose the treaty, but because they didn’t have a mandate to agree to it on Friday. The Hungarians were particularly keen to stress this to journalists on Friday. They were angry that initial reports had suggested that Hungarian Prime Minister Viktor Orban had ‘rejected’ the treaty. Orban had only received a mandate from the Hungarian parliament to accept EU-27 treaty change. But when that route was blocked by the UK veto and they instead began devising a new 26-state treaty outside the EU instead (with everyone but the UK), a new mandate had to be obtained.

Treaty change vs. new treaty

The current debates raging on in national parliaments are about the new inter-governmental treaty, not the original EU treaty change than Cameron vetoed last week. Leaders like Orban would have accepted EU treaty change on the spot if the UK hadn’t vetoed it on Friday.

Another thing that makes the Spectator’s analysis highly dubious is that most of the objections they have cited are from opposition parties (particularly Socialists), who could naturally be counted on to rail against this change since they’re not the ones who have to pull the trigger, there is no political risk to themselves in taking populist stances. The article mentions the fact that Socialist presidential candidate Francois Hollande, who is ahead in the polls by roughly 18%, has said he would renegotiate the treaty if he was elected to remove the requirement that countries stay below a specific budget deficit threshold.

But what the article fails to mention is that Hollande isn’t objecting to the treaty outright, he’s objecting to the contents of the treaty – specifically that it is a conservative austerity-enforcing pact that abandons Keynesian notions of how economies should work in times of boom and bust. That’s where much of the opposition criticism has come from.

Cameron’s veto had little to do with the content of the treaty changes. In fact what the changes are calling for is the exact austerity model the Conservatives have been imposing on Britain. They essentially want to apply the Tories medicine to all of Europe. There’s really nothing that the Tories should philosophically object to in there, particularly since none of this budget oversight or loss of sovereignty would apply to the UK since it’s not in the euro.

The debate in the UK hasn’t been at all about the actual content of these changes – if it were then Labour would be fiercely opposing it and the Tories would be cheering it. Cameron vetoed treaty change because of bizarre domestic politics in Britain that could have seen his government collapse if he didn’t.

Trying to equate Socialists objecting to the content of a new Eurozone treaty with Conservatives vetoing EU treaty change simply because it came from Europe just doesn’t make sense. Whatever resistance this deal is now experiencing in national parliaments, it does not mean the UK suddenly has allies in Europe. In fact, it has nothing at all to do with the UK. Because the UK isn’t involved with this process any more. They took themselves out of the decision-making room last Friday. The national ratification process now has nothing to do with the UK, and vice versa.

And that, my friends, is called isolation.

1 comment:

Geoff said...

Can you please come back and get a job in the UK press so that I can actually read something sensible and level-headed about Europe rather than the rubbish I have to put up with at the moment? Please?!