You
probably haven't been counting -- but I'm told that this week's meeting of EU
leaders in Brussels is the 19th they've had since the debt crisis exploded. And
as you'll have noticed, they haven't come up with a solution just yet.
In
fact, quite the opposite. The tensions are greater, the differences deeper, the
fears more profound than at any time since this whole wretched business began.
And some commentators are wondering if it's not merely the survival of the euro
that's at stake, but the survival of the European Union itself.
The
deal they announced late last night -- to allow eurozone rescue funds to be
used to prop up banks in trouble, without adding to a government's debt burden
-- is unlikely to do more than offer a few days' respite. All the evidence of
the past couple of years is that these mini-deals tend to be forgotten almost
as soon as they've been agreed.
I
remember for much of the 1990s traipsing around from EU capital to EU capital,
sitting in cavernous media centres at summit meeting after summit meeting, as
presidents and prime ministers drew up their master plan for a single currency
that would somehow work without either political or fiscal union.
They
gave the impression that they were driven by a deep conviction that political
will alone would see it through. And -- for a time -- it did. What they didn't
predict was that unlimited cheap credit in countries with weak economies would
lead to an epidemic of rash lending (remember all those admiring articles about
Ireland, the "Celtic tiger"?), which in turn would lead to a
spectacular bust.
So
now we are where we are. And no one -- not political leaders, nor central
bankers, nor economists -- can agree on where we should go from here.
Take
the idea of a European banking union, designed to coordinate banking regulation
and oversight. This is how an article in The Independent summed up the current
state of play: "Britain and Romania are in favour of a
banking union but will not join it. France, Austria, Belgium and Cyprus want
two tiers – one for the eurozone and one for the 27 EU nations. Others,
including Luxembourg, would only support the idea if all 27 join it, while the
Czech Republic, Denmark, Finland, Hungary, Lithuania, Netherlands and Sweden
are against the plan."
If you can find
a way through that little lot, there are several well-paid officials in
Brussels who would love to hear from you.
So what about
eurobonds, which would in effect pool eurozone debts (ie make Germany pay them
off)? In an uncharacteristically colourful phrase, the German chancellor Angela
Merkel has dismissed the idea outright: "Not as long as I'm alive."
Here's what she
suggests instead: "We need more Europe, we need not only a
monetary union, but we also need a so-called fiscal union, in other words more
joint budget policy … And we need most of all a political union, that means we
need to gradually give competencies to Europe and give Europe control."
The
German view can be summed up easily enough: "You don't get something for
nothing." If countries in trouble want help from Berlin, they'll have to
offer up a chunk of sovereignty. To put it crudely, if you can't run your
affairs without our help, fine, we'll run them for you.
Oh,
and just in case you were thinking "Thank God the UK never joined the
euro", along comes the banks' lending rate rigging scandal, described
yesterday in the London financial newspaper City AM as "a disastrous own
goal" for the City of London.
In
the words of the paper's editor, Allister Heath: "Barclays
and the entire banking industry have been badly damaged by the Libor
manipulation scandal – and this time it is entirely a crisis of their own
making … The City’s reputation as a trustworthy marketplace will take years to
recover."
So you have
moves in the eurozone to devise a system of greater oversight for banks and
other financial institutions. You have a London financial services industry
that makes a substantial contribution to the nation's wealth, now embroiled in
a series of scandals (you haven't forgotten the NatWest IT melt-down, have
you?) -- and a British prime minister who, because the UK is outside the
eurozone, may find it increasingly difficult to make his voice heard when these
things are discussed in Brussels.
At one time,
there was much talk of creating a "variable geometry" Europe, with
different nations opting in to different bits of the Union. John Major and
Douglas Hurd were great proponents of the idea -- and with the passage of time,
it may well look as if they were considerably more perceptive than their more
mainstream EU colleagues.
If you want me
to predict how this is all going to end, well, sorry, I can't. But I'm in good
company: the respected constitutional historian Vernon Bogdanor ended an
article in The Guardian yesterday with these words: "No one can predict
what convulsions the eurozone crisis will cause. But its political
ramifications are likely to prove both massive and fundamental."
Couldn't have
put it better myself.