"Very Well, Alone...ish"

My Dear Fellow Europeans, don't worry I have not gone terminally Churchillian...yet!  However, I thought you should all see Low's famous cartoon which all we British hold close to our hearts at moments of stress with you lot! And, let's face it you can be just so tedious.  Your only saving grace is that you are NOT American...and only some of you are French (c'est une pleasanterie, Nicholas).  That would be all together too much. All best, Julian

Be Careful Europe. You May Get What You Wish For

Alphen. The Netherlands. 14 December. Yesterday in Strasbourg at the European Parliament European Parliamentarians made some of the most shocking and inappropriate attacks ever against one member-state - Britain. The leader of the European People’s Party warned of ‘punishing’ Britain and of ‘tanks and Kalashnikovs’. In the feeding frenzy of myth-making and scapegoating much of it using language that verged on the profoundly disrespectful to Britain and its people.  Indeed, this was unparliamentary language at its very worst, a clear attempt to create a new ‘narrative’ for a crisis entirely of the Eurozone’s own making by placing responsibility on to the British for the appalling failure of Eurozone leadership. 

This is a blame game.  Indeed, it is a blatant attempt to implicate a country that is not even a member of their benighted currency and which warned against its structural contradictions from the very outset. Even President Barroso joined in this stitch-up…and we all know who is behind him. How dare they?

Some talked of British ‘egotism’ and ‘nationalism’. These people would not have the freedoms they enjoy but for the sacrifice of the British people in both World War Two and the Cold War. Some talked of a lack of solidarity by Britain. These are the same people who for years have dodged their responsibilities for Europe’s security and defence and imposed its true cost on the British people. These are the same people who have dodged their responsibilities in Afghanistan forcing the British to do too much of the dying. These are the same people who wringed their hands over Libya as the British did what was necessary to prevent a massacre in Benghazi. How dare European parliamentarians lecture Britain about solidarity?

As for the Eurozone crisis the full extent of the Brussels stitch-up is only now becoming apparent. There was no need for a new treaty, only Chancellor Merkel wanted that and by demanding it she sought to make the crisis one of the EU at 27 rather than 17. It is in any case already falling apart validating once again British pragmatism.  What is more to the point is that having tried to make this a crisis 'owned'by all 27 neither Merkel nor Sarkozy were prepared to offer Britain the joint leadership role befitting Europe’s second or third largest economy and strongest military power. No, Britain was expected to subject itself formally to German and French leadership even though she is one of Europe’s Big Three.  That will never happen.  How dare they?

And now these same people pretend that the Euro-crisis is all of Britain’s doing because London failed to properly regulate the banks in the City, many of which are German and French et al. They conveniently forget Germany’s failure at the summit to offer any real leadership to solve the immediate crisis. They conveniently forget the chronic debt into which their national leaders have pitched almost all of the Eurozone countries. They conveniently forget that Britain is the second net contributor to the EU and that the British taxpayer has for years been transferring huge amounts of money to southern and eastern Europeans with little or no prospect of any benefit. They also fail to notice that Prime Minister Cameron is climbing rapidly in UK opinion polls for saying 'no' to the wrong treaty at the wrong time for the wrong reasons for Europe.

Last week I warned against Britain retreating from Brussels however seductive the vision of our standing defiantly on the White Cliffs of Dover shaking our fist and rekindling the defiance of 1940. “Very well, alone then” was, I suggested, neither a policy nor a strategy for Britain. After yesterday’s sham of a debate in the European Parliament, more redolent of a fascist show trial than a modern, tolerant democratic Europe, I am no longer so sure.

Be careful Europe. If you continue down this road of abusing, blaming and scapegoating Britain for your own lamentable failings you may indeed get what you appear to want. Britain out of the EU.

Julian Lindley-French

Where Next for Europe?

Alphen, the Netherlands.  12 December.  A senior French official privately likened Cameron's negotiating position at last week's European Summit to that of someone invited to a wife-swapping party who failed to bring the wife.  Very French.  A more accurate metaphor would be someone invited to a seemingly perfectly respectable dinner party who upon arrival is told to sell his wife as the price of entry as the hosts cannot afford the party they promised!  In fact the Merkozy ambush on Cameron simply confirmed what was already apparent; the marginalisation of Cameron had been prepared beforehand. So, where do we go from here? 

At least we now know the German-French plan of attack against Britain and the message all their surrogates in the satellite states have been instructed to peddle.  I have just been watching Dutch TV and the Dutch Finance Minister, Jan Kees de Jager, explain to the Dutch people (with a straight face) that the Euro crisis was caused by a lack of banking regulation.  He implied that the British were unreasonable because they resisted more growth-strangling Euro regulation on the banking sector which would have disproportionately damaged Britain for a crisis not of its making.  Cameron made a mistake last week because he opened the door to this kind of nonsense by justifying his stance too narrowly on the protection of the City of London (which is questionable) rather than the profoundly important strategic implications of what Germany and France were trying to do - entrench Europe in growth-free protectionism. 

Yes, deregulation of the banking sector together with a lack of proper oversight did indeed cause a crisis back in 2008 for which the British taxpayer is now paying a high price.  However, the Euro crisis is not a liquidity crisis, as President Sarkozy would have us all believe, but a structural debt crisis.  Debt that was caused by a combination of German exports to a Eurozone which offset the high cost of German production, excessive government borrowing by Eurozone members, the expectation by southern and eastern Europeans that northern and western European taxpayers would go on transferring wealth indefinitely and the exposure of Eurozone banks to said sovereign debt.  The banking crisis may have exacerbated the Eurozone crisis but the cause of it...certainly not.

What the British did last week was to reveal the true nature of the power politics at play. Eurozone-Plus negotiations will now begin on the details of a new intergovernmental treaty designed to impose stricter budget controls on member-states via the European Commission (and, by further extension, via Germany).  There are already signs of the acute political tensions and the sovereignty-crushing implications of what the 24 'others' in the Eurozone-Plus signed up to.  The Socialist contender in the French presidential elections has said that any changes should be delayed until after the elections in May 2012 and in any case he would re-negotiate the deal.  Denmark and Ireland are hinting strongly at the need for referenda before any such treaty change can be ratified which would further delay a 'solution' to the crisis, time the Euro simply does not have.   

Two things are now needed; a sound political strategy in London and a cool head in Berlin. Implicit in the position of Chancellor Merkel is in fact a realisation that no amount of financial engineering or European Central Bank bond purchases will help resolve the immediate crisis.  Greece, and maybe even Italy and a few others, will sooner of later have to fall out of the Euro, if of course the currency itself does not collapse.  Indeed, in Brussels Merkel carefully avoided any commitment that might have been seen as a serious attempt to save the Euro as currently configured.  Germany's objectives instead seem to be to create a structure that would a) prevent a similar crisis destroying a German-centric survivor currency; and b) limit the impact of the inevitable on the German taxpayer.

Following German logic what really matters now is that Europe recovers over time to become competitive globally.  This also implies a further set of questions about the role and extent of future transfers from the western European taxpayer to the rest in pursuit of such an end and whether or not said taxpayers are prepared any longer to maintain such an open-ended commitment. That is why this moment is both structural and strategic.  And here is the irony.  Critical to that game will be the relationship between London and Berlin.  Here Britain has a strong card to play because not only is the single market central to that mission, whilst the Euro is the cancer killing the European body economic, but Britain and Germany agree about the need for a competitive Europe. 

Therefore, if cool heads prevail London and Berlin can begin a dialogue of strategic equals that would not have been possible if Britain had been reduced to a kind of super-Belgium by signing up to a hopelessly flawed deal last week.  Britain is not Belgium - it is the world's fifth or sixth largest economy which many serious commentators worldwide believe is the only European economy likely to challenge Germany over the next twenty or thirty years or so precisely because of its greater openness to the world.  Indeed, had Britain signed up to the Brussels Botch it would have been subjected to the same sovereignty-crushing constraints as the other Eurozone-Plus members with the added 'bonus' of having London pay for much of the cost of 'fixing' a failed currency via a future financial transactions tax 85% of which would have been paid in London.  Fair or what?

Today Britain has preserved the strategic room of manouevre worthy of one Europe's Big Three and which Germany and France last week tried to deny it. When Berlin emerges from its funk it will realise it has to deal with Britain.  The French are unlikely to make that connection whilst lost in pre-election 'faux' anti-Britishness.  Indeed, a more sober Berlin will realise that a deal with Britain is much more likely to promote the kind of economic reforms and disciplines Germany knows full well Europe needs to compete in this world. 

The alternative for Berlin is a structural relationship with France which simply sucks Germany ever deeper into a protectionist, statist, indebted Europe which sooner or later will be overrun by the very forces of globalisation enshrined in the City of London.  The longer Europe puts off those reforms the more deadly the crisis that will eventually consume it...and the current malaise is only a ripple of that economic tsunami.  Hopefully by then Britain will have long before readied itself for the real world.

Cameron?  He must hold his nerve against those many siren voices that seek French and German approbation at any price.  To say that it is twenty-six versus one is ridiculous.  It is two of Europe's three strategic powers versus the third.  All Europeans matter, and should matter equally, but the nature of this crisis has demonstrated the extent to which some Europeans are more equal than others.

Where next for Europe?  Avoid French wife-swapping parties.

Julian Lindley-French