Friday, 9 December 2011

Cameron starts and loses the second Battle of Britain, Brussels sprouts a new EU.

In following the ongoing euro / EU crisis it is clear there are several basic issues that are not being resolved.

The EU like the UK has a fundamental problem; it has too much money in circulation that isn’t underwritten by anything tangible. The governments standard solution has just been to print more money, effectively devaluing what’s already out there by the percentage of “new money” they print.

More printing will be in the pipeline as this week saw an apparent contradiction with most banks stating they’re now operating in the black. However, the banks are in worse shape as a group, by almost 10 billion euros since October. They claim they’re in profit, pay bonuses and yet lost billions in stress tests. It’s all down to how they are allowed to crunch numbers.

More immediately important is quantitative easing or QE, where more money is printed without more wealth being created. Put simply if the wealth backing the euro is valued at 100 billion, but they print 10 billion additional euros or 10% extra to “aid the banks” then very quickly the price of everything an individual buys will increase by 10%. The same amount of wealth backs more currency so the currency devalues.

The City and the banks get bailed, the average individual gets butchered.

This is the background that led to the Brussels summit this week, with Merkel and Sarkozy, now known as “Merkozy” in much of the EU, proposing massive changes to the Lisbon Treaty without any relevant fundamental democratic representation.

In its purest form the proposals were for an unelected body of European technocrats to be in charge of every national EU budget, starting with the 17 common currency nations, or soon to be former nations, but almost without doubt expanding to the entire EU in a relatively short time.

The need at the summit, driven by “Merkozy” was for a quick agreement to “save the euro”. They needed unanimous agreement to alter the Lisbon Treaty and fundamentally allow the EU to grab national sovereignty across the euro-zone. That is not too strong a statement because they who control the currency supply and spending ability control the nation.

Against this overwhelming need by mainland Europe’s euro zone nations to resolve an impending fiscal Armageddon, stood the apparently lone voice of David Cameron.

The UK PM went to the summit sworn to protect his paymasters, the City of London’s financial institutions, from more EU incursions. The inhabitants of “The City” are often the Conservative party’s largest donor’s year on year.

Cameron’s major promise to the City of London was to exempt it from the “Robin Hood Tax”, a proposed EU levy that will tax large interbank or financial transactions.

He also had to deal with his back-benchers ongoing rebellion against EU incursions into Westminster sovereignty; he would “repatriate” powers to Westminster. This is a rather hypocritical stance for someone sworn to prevent the same at Holyrood.

Cameron also said his first loyalty was to the survival of the euro, an obvious internal conflict of interest; and with unknown consequences at the time as no individual or national leader can have two masters. It would be interesting to watch whether unfolding events declare the PM was the City’s poodle, or leaned towards the EU.

Europe was on the verge of an agreement in Brussels on Thursday and Friday.

David Cameron then fought and lost for “The City”, his backbenchers, the euro and the UK.

This was a man who’d earlier described what was to take place as a chess match with 27 opponents and him not being very good at chess.

No other result should have been expected under these circumstances. As events emerged, they showed Cameron clearly lacks the ability to separate or prioritize national and international requirements from those of special interest groups in a world changing crisis situation.

This lack of leadership caused Cameron to dig in his heels, wield his veto and put concessions to the City of London ahead of the fate of the euro.

It was better to protect one business sector in one town against the common weal of an entire continent; this was how our European neighbours clearly interpreted the PM’s actions.

David Cameron lost, and he lost big. There was no other foreseeable outcome.

For most of the rest of Europe the UK’s actions are unforgivable. The EU's worst ever crisis and its perceived resolution were held to ransom so Cameron could please the City and his euro-phobic backbenchers.

David Cameron single handedly stopped the EU from following the German-inspired route of renegotiating the Lisbon Treaty to impose a decade of austerity on the euro-zone. The UK isn’t even in the euro-zone.

This also means the United Kingdom lost big because most of the 27 EU nations - the 17 euro-zone countries with at least another six joining them - are ignoring Cameron's objections and set to strike out on a separate treaty anyway.

There will be a two tier Europe, and the UK will be firmly on the lower level. This is an absurd national result from an individual who puts such an emphasis on “having a voice and being able to influence policy at the top table”.

The immediate downside of all this for the EU is that it will result in a weaker fiscal union in today’s euro-zone, there is no immediate treaty. The summit will underwhelm the markets, and fail to substantially shore up the currency. Much will depend on what happens before the new treaty between euro-zone and its allies is ready in March, a treaty the UK will not be party to.

Expect treaty exclusion to be only a part of the retribution for Cameron’s intransigence.

These were actions which were so un-required.

Cameron could have ratified rather than vetoed the proposals and made it pending a referendum on EU membership within the UK. We vote to stay in the EU the vote is ratified, we vote to leave and the vote remains ratified. The PM’s EU upheaval can only be viewed as a failed horse trading exercise on behalf of “The City” undertaken by an amateur poker player. Europe did not blink.

Despite playing his ultimate card, the veto, Cameron won nothing. He did not get his financial regulation exemptions and concessions. He repatriated no powers.

He has literally made a pariah of himself and all on this island, failed to achieve any of his key aims and shut the UK out of the negotiations on the future shape of Europe all in the name of the Great British national interest, or more specifically the City of London and her bankers.

Whether or not this summit has saved the euro remains to be seen, without David Cameron it might have, irrespective the summit in Brussels looks set to go down as a defining event. It will be remembered as the night the second battle of Britain was initiated and lost by a single man, signaling the end for the UK in Europe.

The Guardian quotes “There are senior experienced UK officials who believe this is a disaster for the British national interest”.

Michael Farage of UKIP was decidedly upbeat on the impending demise of the UK-EU relationship, making reference to probable repercussions.

How does the world view our supposedly top diplomat? The responses were typical but possibly the best response echoing many others was from “Der Spiegel” who took the position “Bye-bye Britain” and followed up in the article with “Europe Can Work Fine without the British”


  1. Yes C.R.A.P and Souter are one. I've pasted a post I did earlier in Newsnets Moore article.
    Hope you don't mind.

    # John Souter 2011-12-14 13:49
    The shoogly peg underlying Cameron's veto.

    It wasn't to pacify the party euro-sceptics that had Cameron playing the veto card -though he will be quite happy for that to be used as an excuse - It was the UK's exposure to debt and the cost of servicing it, that left him with so little wriggle room he couldn't allow any potential negotiation or change to tip the servicing of the debt any higher than it is now.

    Team Cameron and Osborne strategies and tactics depends on the UK being able to service its debts at circa 2.5% interest. A 1% plus variation, which may result in a team Europe approach, would see the UK in deep and odorous merde.

    In the league tables for 2009 on debt as a percentage of GDP the UK is second only to Japan and well above all the PIIGS currently hogging the limelight, including the Greek breed.

    Here are the figures.
    Government Debt - 197%
    Non Finance Business Debt - 95%
    Household Debt - 69%
    Finance Inst Debt- 110%
    JAPAN TOTAL - 471%

    UK No 2
    Government Debt - 59%
    Non Finance Business Debt - 110%
    Household Debt - 103%
    Finance Inst Debt - 194%
    UK Total - 471%

    It seems to me there is a strange dichotomy between the importance of the finance industry to the UK and the fact it is the largest contributor to the UK exposure to debt?

    The Household Debt factor is another indicator as to why they are desperate to keep UK interest rates and charges low and why the Bank of England will give banks money for nothing, print any quantity they want and would probably resort to inventing investors in order to balance supply with demand to maintain low interest charges. In the present situation, add 1% to mortgage rates and the M25 would be a camping ground.

    So I suppose in some weird way, he was looking after the UK Nations interest. Certainly those of its largest debtors and the security of the establishment by not exposing its failures.

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