Treading in Mr Lamont’s footsteps – image by scatterkeir via Flickr
Through all the travails, indeed through the slow motion train crash of the collapse of the Euro, the EU integration juggernaut is grinding on.
The European Commission is now proposing what the BBC calls “an EU-wide banking union”.
This plan includes:
- A single EU regulator to oversee banks across the whole of the EU.
- A new bank bailout fund, financed by a tax on financial institutions.
- An EU-wide deposit guarantee scheme to protect savers.
The BBC says
But the UK government has indicated its reluctance to sign up to closer EU ties.
It prefers a body that only covers banks in the 17-member eurozone.
Yeah right. “Reluctance.” The negotiations have already begun:
However [the UK government] would support a strengthened single market in financial services for all 27 EU states.
A “strengthened single market”. I guess that means more European regulation of our banks.
The BBC fatuously comments that
This would also remove the possibility of one set of taxpayers, for example, in Germany, having to bail out savers in another country such as Spain.
which is completely untrue, since for example if the new fund has to bail out banks in Spain, then the banks in Germany would in effect be paying via that levy. The only difference would be that the bailout would be co-ordinated by European bureaucrats instead of European politicians.
In any case, none of this would explain how to stop a systematic debt problem that afflicts all countries.
The problem is DEBT. And that means the problem is our politicians. The answer though, is not to take power from them and give it to the likes of European Commission President Jose Manuel Barroso. The answer is instead to change the politicians.
No matter. This is all light relief. This whole proposal is so far off into fantasy-land as to call into question the sanity of the European Commissioners.
The pressure on the Euro itself is not abating. The latest bailout, of the banks in Spain, ended up being as much as €100 billion. It unravelled within hours, with Spanish 10-year bond yields reaching 6.8%. In other words, the markets believe there is a high risk that loans to the Spanish government will not be repaid – or not in Euros, anyway.
The whole Southern part of Europe – Greece, Italy, Spain, Portugal – is right now where Britain stood just before “Black Wednesday”, when the country fell out of the Exchange Rate Mechanism. Remember Chancellor Norman Lamont telling everyone that Britain’s commitment to continuing in the ERM was unshakeable? Remember his telling us all how essential it was for the credibility of our country’s economy that we stayed in? Remember all the great and the good loudly telling us that leaving would be a disaster and a humiliation for Britain?
Remember Mr Lamont’s bumping up interest rates on Black Wednesday to 12% and then within hours to 15%, to try and defend the pound against the wall of market speculation that Britain would leave the ERM?
And remember that just hours later he was forced to capitulate and announce Britain’s withdrawal anyway?
Here is how Wikipedia describes that day:
The UK’s prime minister and cabinet members tried vehemently to prop up a sinking pound, and withdrawal from the monetary system the country had joined two years prior was the last resort. [John] Major raised interest rates to 10 percent and authorised the spending of billions of pounds to buy up the sterling being frantically sold on the currency markets but the measures failed to prevent the pound falling lower than its minimum level in the ERM.
The Treasury took the decision to defend Sterling’s position, believing that to devalue would be to promote inflation. On 16 September the British government announced a rise in the base interest rate from an already high 10 to 12 percent in order to tempt speculators to buy pounds. Despite this and a promise later the same day to raise base rates again to 15 percent, dealers kept selling pounds, convinced that the government would not stick with its promise. By 19:00 that evening, Norman Lamont, then Chancellor, announced Britain would leave the ERM and rates would remain at the new level of 12 percent (however, on the next day interest rate was back on 10%). It was later revealed that the decision to withdraw had been agreed at an emergency meeting during the day between Norman Lamont, Prime Minister John Major, Foreign Secretary Douglas Hurd, President of the Board of Trade Michael Heseltine and Home Secretary Kenneth Clarke (the latter three all being strong pro-Europeans as well as senior Cabinet Ministers), and that the interest rate hike to 15 percent had only been a temporary measure to prevent a rout in the pound that afternoon.
Disaster! Calamity! Er – no. That day was followed by a surge of economic growth and the resolution of the economic slump that had afflicted the country for a couple of years.
If the Southern European countries whose economies are being destroyed by the Euro – Spain, Italy, Portugal, Greece – don’t leave the Euro, then Europe itself will face a bleak future. Their leaders ought to understand that this isn’t going to stop. This is not a question of getting through the next week, or the next month. The financial and economic pressure will be as great or greater in a week, or a month, or a year, or a decade. Sooner or later their citizens will decide they’ve had enough and hang them from the nearest lamp-posts.
Of course Britain could have a referendum and withdraw from the whole sorry business of the EU. In fact, that scenario is looking increasingly possible. We could watch from the sidelines as Europe rips itself apart. But we are intimately involved – partly just for historic and geographical reasons, and partly due to the disastrous misjudgements of a series of British leaders. Even though we might escape the worst of the pain, collapse in Europe would hurt us very badly.
Some leadership from David Cameron would not go amiss. He ought to be urging those Southern European leaders to go for broke and make plans to leave the Euro. But of course he won’t. Leadership and Mr Cameron do not go together. He and his mate George Osborne will just sit on the sidelines hoping it’s all going to go away. After all, they might get a kicking from their European masters if they do otherwise.