the elephant in the room

As you may no doubt have gathered things did not go smoothly at last week’s summit for Britain, the treaty of which the main European countries were to ratify in order to ensure the stability of the Eurozone. The whole point was to provide fiscal stability to countries like beleaguered Greece, Italy and Portugal as well as assuage fears of debt by France and the potential collapse of the Eurozone caused by massive flow of sovereign debts, feared by Germany with the resulting flow of aid that would be needed from German creditors. The treaty was to create the institutional means of constructing European Stabilisation fund or ESF.

Instead we have Cameron refusing to sign the treaty, talk of Britain and its suspected alienation from Europe.  This was not meant to initially happen with several others countries prior to the meeting  suggesting a number of countries abstaining to the treaty.

It has been lauded by the right wing papers such as the Mail on Sunday considering it a blow for British sovereignty; whilst decried by left leaning papers such as the Guardian, arguing the treaty was taken of context and its effects on the city of London would be marginal and for the rest of the country being negligible; whilst further separating us from Europe and keeping us away from the negotiation table (http://www.guardian.co.uk/commentisfree/2011/dec/14/david-cameron-city-europe-law). More centrist papers like the Independent appear to be saying he did was best for his party and what he thought to be legitimate for national sovereignty, there is concern though that what Merkel and Sarkozy was doing was merely baiting a government that may be seen as somewhat cold to the idea of a federalised European state and opposed to any further loss of powers. (http://www.independent.co.uk/news/uk/politics/eurosceptics-welcome-uk-veto-6274577.html). 

Whilst this treaty may have been disadvantageous to Britain the ramification of this split could be  disastrous for  both the European and British economy.  So whilst gaining political capital his overall gambit plays risks with the economy.it can also be said Cameron’s hand was forced as much  by his own party as much as the likes of frau Merkel and Monsieur Sarkozy and to come back with a signature on something no one had agreed to as an  affront by members of his own party and he may have been thrown to the wolves if he hadn’t come back with anything but a resounding no (http://www.independent.co.uk/news/uk/politics/after-brussels-cameron-takes-refuge-in-his-country-retreat-6275522.html). 

There is however further questions whether Merkel and Sarkozy were playing politics as a time of economic and financial crisis and whether creating new institutions without electoral mandate or consensus amongst all the member countries sounds like political grandstanding, especially when you consider Sarkozy’s own weaker position in light of his countries own domestic problems i.e. persistently high youth unemployment and alienation from traditional social insurance. There is also doubt about such measure will work within a heterogeneous trading bloc with many economies that have yet to fulfil the issues of economic convergence needed for market harmonisation.

Furthermore he has sown doubt in countries like Sweden and Ireland questioning the idea of the European structural fund.  The political posturing of France and Germany doing nothing to improve the solvency of the likes of Italy and Greece. Meanwhile it appears at least in the eyes of certain newspapers Cameron has played his role well ,apparently sticking up for British interests (http://www.dailymail.co.uk/debate/article-2074298/Has-time-politicians-stupid-dishonest.html).

None withstanding the future of trade with the EU  or our international relations with major partners such as America , China or India who rely on our european connection , it has been taken so far as a resounding success.

There is however talk of the collapse of the Eurozone and with potentially the whole European project  being in jeopardy if the measures were to fail. it may be that Cameron  will be proven to be riding the tide of history i.e. Euro-scepticism and nation state retrenchment in European politics. If the  single currency falls through whilst disastrous for britain and Europe , it would  be remarkably prescient for a british prime minister to abstain prior to the latest failure of the Eurozone. However it may be that the eurozoen will collapse regardless of whether the treaty is ratified, the effects being with it the potential collapse of the euro and i think the questioning rather than collapse of the eu

The solution I feel is not simply to issue Eurobonds to failing debtors as all this does is package or create a derivative of bad debt,which  then needs to be subsidised by large creditor nations. The issue of debt is an elephant in the room too big to be simply moved from one to another.

Instead the problems that need to be solved are multiple and various those of ageing demographics and slowing birth rates  on social security and on healthcare issues of contributions necessary to maintain an increasingly costly welfare state ,high unemployment and with lack of income and taxation necessary to keep the system going as well as low growth and stagnating living standards. The biggest of which at the moment is one of growth with immediate concern being that of unemployment and contributions or taxation need to remain fiscally sound.

One such idea may  be to issue bonds to citizens; which alongside Eurobonds to pay off fiscal deficets would be used to pay off growth programmes and infrastructure capital spending, which increases the assets a state holds instead of increasing revenue spending which needs to be cut as it increases liabilities but unlike capital spending does not increase asset value. This would also which also in effect act as form of direct democracy ie shareholder democracy but thru a mutualised investment fund for capital spending and growth projects, providing direct stakeholder investment between european state and citizen much like mutualism (ie the ideas of joseph Proudhon) or co-operatism in anarchist or libertarian political economy. However it is both libertarian and socialist providing a need for growth and enhancing both equality and opportunity whilst also providing a medium through European institutions and local ones without being fully governed by the nation-state.

Whether europe surivives isnt the question but whether it can continue business as usual without the uk?