Guest Post: Ambrose Evans-Pritchard & the City’s hard EU choices « naked capitalism

Wednesday, September 16, 2009

Guest Post: Ambrose Evans-Pritchard & the City’s hard EU choices

By Swedish Lex, an expert and advisor on EU regulatory and political affairs.

The City’s political clout in Brussels is waning as the UK’s financial industry model has gone from being the envy of the European peers to being a liability. Meanwhile, the EU will in the future probably be proposing new banking and financial services legislation that may be superficially marketed by decision-makers as striving to provide a clear cut with the existing Anglo-Saxon casino model. This guest post will discuss some of the fundamental choices that the City is facing, the most significant being whether or not to be advocating a UK withdrawal from the EU altogether.

The Telegraph’s prolific columnist Ambrose Evans-Pritchard is an astute observer of the financial crisis whose columns are well worth reading. In a recent comment in the Telegraph, “Does the EU club have a future?” he however falls for the temptation of regressing into state of EU-phobia that always works well with his UK home audience. His article is however not without merit as it demonstrates the deep doubt that Brits have as regards their country’s future EU membership, which is clearly illustrated by Evans-Pritchard’s closing remarks: “Since this unwelcome revolution is being forced upon us, perhaps it is time to end the long taboo and ask whether we must inevitably go along with it.”

While I disagree with most of what Evans-Pritchard writes in his column, I also realise that NC is not the appropriate forum for a battle-of-the-nerds-style dispute on European affairs. Suffice to say that I recommend reading another column in the Telegraph that I judge to be informative and balanced fairly, “What is this place called Europe,” by Adrian Michaels. Furthermore, Evans-Pritchard refers to a recent report by the Brussels based think tank Bruegel. Bruegel is a pro-European outfit that produces high quality papers and its most recent report is no exception. While Evans-Pritchard quotes from the Bruegel Report are correct, it deserves to be pointed out that Bruegel’s situation analysis of the current state of EU affairs is pretty damning but that its recommendations nevertheless are squarely in support of further European integration as a means to overcome existing problems.

A lot of the current excitement about the EU in Britain stems from the up-coming Irish referendum on the EU Lisbon Treaty. If the Irish vote yes on 2 October, which seems plausible but by no means is certain, the new Treaty should normally enter into force pretty soon thereafter. The new Treaty would grant the EU new powers in many policy areas and provide the Union with a new political impetus. It is reasonable to assume that EU integration would gain new momentum with the new Treaty in force, much to the chagrin of EU sceptics.

In parallel, the financial crisis has demonstrated that the current EU framework for banking and financial services regulation and, also, supervision is inadequately equipped to deal with the crisis. Both the underlying legislation and the supervisory structures need reform, which most probably will entail further EU integration. Work in this area has already started when the European Commission in the spring proposed a new EU structure for financial supervision that would lead to a blend of national and EU bodies and competencies with more powers brought up to the EU level. In addition, the European Commission earlier this year put forward proposals concerning hedge funds and private equity firms. These proposals, and other similar initiatives, have been severely criticised by the UK Government and by the City who have begun extensive campaigns to have them watered down.

The fact that a newly elected European Parliament took office in the summer carrying with it, it many cases, political pledges to rein in “casino capitalism” through EU policy initiatives constitutes another element that working against the City. For instance, the draftsperson on the proposed EU Directive on hedge funds and private equity is a French socialist who does not think that the EU Commission’s initial proposal goes far enough. We can thus be looking forward to an interesting set of exchanges in Brussels in the coming months. Another contributing factor that is working against the City is the fact that the EU Commission is being renewed and that it will have a new five-year political mandate that most probably will include new policy objectives, few of which are likely to be to the City’s liking. Lastly, both Germany and France are reported to be seeking the banking and financial services portfolio for their respective new EU Commissioners. The world view of the top EU banking official for the coming five years is thus likely to be considerably different from that hosted by policy-makers in Westminster and investors around Paternoster Square.

The chronic unease that most Brits feel towards European integration is thus likely to get worse, in particular if the Lisbon Treaty enters into force. British politics do of course reflect this fact and with national elections coming up on or before 3 June 2010, the political parties are seeking to position themselves on the issue of Europe in ways that will benefit them the most. The UK has already ratified the Lisbon Treaty through a vote in Parliament, despite calls for a national referendum to be organised, so the UK is thus barred from preventing the Lisbon Treaty entering into force. Paradoxically, however, the Lisbon Treaty contains a new provision that may come to play a significant role in UK politics and be regarded as a new opportunity by the EU-sceptics:

“Article 50
1. Any Member State may decide to withdraw from the Union in accordance with its own constitutional requirements.”

With the Lisbon Treaty in force, the road for leaving the EU has thus been cleared. The new Treaty that Evans-Pritchard describes as an “unwelcome revolution… being forced upon us” incidentally introduces an explicit right for Member States to leave the Club, should they wish to do so.

For the UK banking and financial services industry, Article 50 of the Treaty may become a tempting solution at a point in time when it finds itself stuck between a rock and a hard place. Outside the EU, the UK would be free of EU meddling and could transform itself into a new rainy Cayman Island right off the European mainland. It would be difficult, I believe, for UK politicians to resist calls from a UK referendum to leave the EU altogether, in particular as so many British politicians build their platforms on being lukewarm or hostile towards the EU. Under this scenario, a UK decision to leave the EU would be the logical conclusion of the EU moving towards further integration while the UK wants less or none of it.

However, significant parts of the UK economy rely on having full access to the EU’s Internal Market. The ownership of the leading companies based in Britain is generally spread thinly and across the globe. Those owners may have a thing or two to say about the UK retrenching and going it alone on the international scene, without guaranteed access to the EU markets on favorable terms and without any say in how future EU policies are shaped.

The Director General of the Confederation of British Industry addressed the issue of the UK Industry’s dependence on the EU and the malaise concerning further EU integration this way in a speech:

“Europe, and the European Union, are critical to the success of the British economy. In sheer trading terms, the single market is by far the UK’s biggest trading partner. Over 50 per cent of Britain’s exports go to the EU, more than three times those to the US. And although everyone is very properly preoccupied with the rapidly growing markets of China and India, the fact is that these markets today represent just about a fiftieth of our export and import markets compared to the EU.

It’s clear that British business has a real interest in the efficient workings of the EU, and that today’s governance arrangements are a long way short of perfect. It’s also clear that until the matter is resolved one way or another, the treaty debate is not going to go away. Europe’s leaders will just go on gazing at their navels, engaged in endless and irritable internal debates, and ignoring the big issues and opportunities that Europe is facing in the wider world today. So it would be good to get this out of the way, if it could be done on the right terms.”

The problem is however that Britain is not able to dictate the terms and has, by the way, failed to provide any viable alternatives to its European Partners.

Evans-Pritchard briefly touches on the what IF the UK was to leave the EU: “Let us be honest: UK withdrawal would be traumatic, altering the political chemistry of Europe in unpredictable ways”. I agree with this, a UK withdrawal would be traumatic – for the UK. The EU would be different and would not be able to claim to be speaking on behalf of the whole of Europe any more, but the Union would get over it. The UK was not part of the EU for the first 20 years of its existence and that was not problematic. The UK is not a member of the Euro-zone and its geographical position makes a withdrawal easy to execute in practice.

To conclude, if the Lisbon Treaty enters into force with more and deeper EU integration as result, much of which will concern the banking and financial services industries, it will be interesting to observe whether political momentum in the UK is created to leave the EU altogether. Should this be the case, the City will have a difficult choice to make. It could go either way, really.

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25 Comments:

Martin, the Netherlands says:

September 16, 2009 at 2:54 pm

Ah, good old Ambrose bashing those chaps on the wrong side of the Channel again! Lovely! Splendid chap. I’m sure he will mention in the next revision of his article that we drive on the wrong side of the road.

BigBadBank says:

September 16, 2009 at 3:23 pm

Rubbish. There is no “current excitement about the EU in Britain” – we have more important things to worry about.

Kevin de Bruxelles says:

September 16, 2009 at 3:28 pm

Kul att det äntligen är någon som fattar vad Europa handlar om på den här bloggen. Tusen tack Svensk Lag!

I think it would be best for Europe in the long run indeed if Britain (and Ireland) pulled out, but sadly I doubt this will happen. To me talk of this is just some weak Anglo Saxon jawboning. De Gaulle had it right forty years ago and Britain should have never been let in. Their admission has been a strategic disaster for Europe ever since and one can only imagine how much better the political architecture of Europe would be right now without all the compromises that had to be made to Britain over the years. Which is exactly why Britain will continue to stay in.

Diego says:

September 16, 2009 at 3:43 pm

Funny. You think the EU “would not be able to claim to be speaking on behalf of the whole of Europe any more”. Well, the reverse situation may be closer to the truth; until now, because of UK pressure, the EU could not speak with one voice on behalf of its member states. With a UK outside Europe, the EU could, for the very first time, speak on behalf of the whole of EU member states!

To some extent, the UK has behaved as “America’s Trojan donkey” inside the EU for the last 35 years. But let’s get three facts clear:

1. The UK may leave the EU, but Scotland would leave the UK and remain in the EU.

2. The UK needs the euro. The pound is not one of the two global reserve currencies: euro and dollar. So it is just slightly more protected against currency instability and financial meltdown than Iceland, as Willem Buiter has argued once and again.

3. The UK will never leave the EU. In fact, it will join the euro sooner than people think. You just need an Iceland-like meltdown (if you think it’s impossible, remember how people were in denial about this depression 2-3 years ago), or a reasonable government (admittedly, an unlikely event).

DownSouth says:

September 16, 2009 at 3:47 pm

Swedish Lex,

There are a couple of texts that, if you haven’t already read them, you might find enlightening insofar as they speak to the history of Great Britain’s business culture and give an idea as to what you’re up against trying to change that culture.

One is Aaron L. Friedberg’s The Weary Titan: Britain and the Experience of Relative Decline, 1895-1905 and more specifically the chapters titled “International Relations Theory,” “Economic Power” and “Financial Power.”

Here are a couple of passages from the book:

What reasons did contemporary British observers give for their superior material success? The nation’s citizens may well have thought of themselves as more vigorous, more inventive, more at harmony with the wishes of the almighty than any of their competitors. But judging by the outcome of some of the more important public debates of the period, most of them also believed that their good fortune resulted in the first instance from wise policy, in particular from the triumph of laissez-faire notions of political economy…

By the middle of the century, after a series of intense struggles that tended both to demonstrate and to increase the political power of the new middle classes, most existing government constraints on commerce and, in particular, on overseas trade had been removed. What had begun as a “purely utilitarian and piecemeal movement thriving on the mild modifications of import duties,” had become “a doctrinaire force making for complete freedom of trade, backed by a whole philosophy of commercial liberalism and a new popular faith in the virtues of free competitive enterprie”…

The first and most important component of the dominant financial orthodoxy was the belief that government ought to limit its interference in the economy to the greatest extent feasible.

Then fast-forward 40 years to George Orwell’s “England Your England.”

It follows that British democracy is less of a fraud than it sometimes appears. A foreign observer sees only the huge inequality of wealth, the unfair electoral system, the governing-class control over the Press, the radio, and education, and concludes that democracy is simply a polite name for dictatorship. But this ignores the considerable agreement that does unfortunately exist between the leaders and the led. However much we may hate to admit it, it is almost certain that between 1931 and 1940 the National Government represented the will of the mass of the people. It tolerated slums, unemployment, and a cowardly foreign policy. Yes, but so did public opinion. It was a stagnant period, and its natural leaders were mediocrities…

In whatever shape England emerges from the war, it will be deeply tinged with the characteristics that I have spoken of earlier… It needs some very great disaster, such as prolonged subjugation by a foreign enemy, to destroy a national culture.

But perhaps it was Arthur J. Balfour who summed it up best in a lecture he gave at Newnham College:

And when through an ancient and still powerful state there spreads a mood of deep discouragement, when the reaction against recurring ills grows feebler…when learning languishes, enterprise slackens, and vigour ebbs away, then…there is present some process of social degeneration, which we must perforce recognize, and which, pending a satisfactory analysis may conveniently be distinguished by the name of “decadence.”

AC says:

September 17, 2009 at 12:21 pm

“…What reasons did contemporary British observers give for their superior material success?…”

I wonder where British would have had been without the wealth and resources stolen, cheated, robbed or plundered from colonies and less fortunate countries.

A.S. says:

September 16, 2009 at 5:29 pm

It’s not only the UK which faces this decision. Nouriel Roubini made a passing comment recently, that in order for countries like Spain, Italy, and Ireland to regain competitive with Germany, they will either need prolonged wage deflation, or will need to leave the Euro.

Diego says:

September 16, 2009 at 5:52 pm

A.S., there’s no way you can leave the euro. It would be the mother of all financial crises in the euro-leaving country: its new currency would collapse immediately, and euro-denominated debt would explode.

Roubini may be right that wage deflation is necessary. But I can’t see what’s traumatic about it. The process is basically you fire everybody and you hire them again for 10% less money. This may take 2-3 years, but where’s the trauma?

Danny says:

September 16, 2009 at 7:32 pm

If britain pulls out of the EU (the european version of the soviet union) the banking elite will do to them what has happened to Ireland since they rejected the Lisbon treaty.

On February 17, 1950, James Warburg declared to the United States Senate: “We shall have World Government, whether or not we like it. The only question is whether World Government will be achieved by conquest or consent.”

Jon Livesey says:

September 16, 2009 at 9:06 pm

I am a little uncomfortable with guest posts that are anonymous. But apart from that, I think it is worth pointing out that the writer who identifies himself as “Swedish Lex” is a frequent poster to the Telegraph, and his comments there tend to be quite intemporate. Here is an example, from his first follow-up to AEP’s piece:

“Oh dear, The usual paranoia that the UK has towards the EU, on steroids. ”

Now, you can agree with AEP or not, but he is not paranoid. When he posts about the EU, he backs up what he says with facts. For example, the the article that “Swedish Lex” seems to have found so offensive, he quoted extensive statistics about the Euro area countries. In particular, he showed how Euro membership has allowed – in fact encouraged – some Euro area countries to run absurd current account deficits that they could never have afforded had they retained their own currencies.

Some people will say that it is an advantage for countries like Spain – current account deficit larger than that of the UK(!) – to run a deficit courtesy of a strong currency, but the other way of looking at this is that Euro member is turning out mainly to continue and exaggerate imbalances in the European economy. As members of the Euro, countries like Spain, italy and Ireland have been enabled to run large deficits despite their levels of productivity falling ever farther behind Germany.

There is a lot of enthusiasm for the Euro among those Governments which see it as removing the normal disciplines of a national currency, but this isn’t really so much different to the removal of discipline when Banks are not adequately regulated, or consumers are granted credit they cannot really afford. In other words, the Euro feels wonderful in the short term, as a Spain or an Italy borrow with the implied credit-worthiness of Germany, but in the long run it will be Spain and Italy that have to pay back their indebtedness, since Germany will not do it for them.

Finally, isn’t it a little paradoxical for so much animus to be directed at the UK, when in fact it is the UK which has retained its own national currency, and which pays its own bills – as well as paying about a hundred Billion in subsidies to other EU countries over the course of its membership of the EU.

If every Euro-area country behaved as the UK does, then the gradual build-up of imbalances which is currently disturbing the EU credit markets, not to mention the simply absurd bubble in newly built houses in places like Spain – most of which will eventually have to be demolished, would never have occurred.

The anonymous “Swedish Lex” is to some extent masquerading as a neutral observer in this article, but when you read what he has published elsewhere it becomes clear that he is motivated by a deep degree of anti-British sentiment, and that his enthusiasm for the EU is more to do with political integration than with economics.

Americans should remember that the initial impetus for the creation of the EU had a lot to do with European nostalgia for Empire, and its eagerness to build a super-state with the explicit purpose of challenging the US, and a common currency with the explicit aim of toppling the Dollar. If you like the Euro, please ask yourself why it is that Iran and China see the Euro as a weapon in their armoury.

Ambrosian says:

September 16, 2009 at 10:12 pm

Law is a fundamental issue for European integration.

Continental Europe follows the Napoleonic Code which only allows activities prescribed by statute. The UK (and N. America) takes a fundamentally different view, allowing all activities except those prohibited by statute.

Once you begin to understand how these apposite legal views are embedded in the cultural and commercial lives of both polities, you will realize that there will always be tensions between them.

Managing the tensions harmoniously or one polity steam-rollering the other is just part of the game of European politics.

xav says:

September 16, 2009 at 11:51 pm

The UK is and has always been a bankrupt country. In the 1970’s it even got bailed out by the IMF. Then in the 1980’s it joined the bubble party and started getting the illusion of being a wealthy nation flipping houses and borrowing money that they could not pay back.

Now the party is over and all the British are in for a rude awakening. We will see how they like the Euro once their currency crashes.

tgmac says:

September 17, 2009 at 2:42 am

The attitudes expressed in the comments, apart from one that I take to be from the UK, are largely simplistic and thus often display the superficial debate that takes place within Europe about the European project. Being from Ireland, I think all the talk about reform and regulation is just a tad too late for us. I also see the ability of Ireland to borrow massive amounts of Euros on the back of oligarchical finanical/developer bail-outs as detrimental to the social welfare of Ireland’s wage earners in the long run.

The French and Dutch rejected the notion of a pan-European political project. So the Euro Federalists came up with a Treaty that is difficult to read and, more importantly, is open to interpretation. The EU courts will have a big say in the future about how Europe is run and how much power will ultimately reside in Brussels. I, like any other human, can’t foresee the future but I wouldn’t be too surprised that many ordinary European citizens will become disillusioned with mandarins in Brussels, often influenced by lobbyists, directing most aspects of our lives.

Most Europeans are comfortable with trade integration and the introduction of rules that allow the smooth functioning of trade within Europe. Many, including myself, are happy with the Euro, although I’d reform the ECB and dramatically limit its functions.

As for debate on the Lisbon Treaty in Ireland. Well, the courts decided that national referenda need no longer require balanced input from both sides. Therefore, there has been no debate worth mentioning. We’ve received three govt printed documents telling us why Lisbon is good – or at least not bad. The latest pamphlet was actually attached to our polling cards!

I see Libson passing on the back of the disaster that has been perpetrated upon the Irish nation by Irish politicians and their cronies in banking and construction. The argument is that Irish now need the EU for economic recovery just as we needed Europe back in the 70’s for hand-outs. It may just get the marginal turn from no to yes required to get the treaty enacted. Fear and unstated promises of wealth are the modern equivalent of bread and circuses.

Our Taoiseach, Dáil leader, stated during the last referendum that he hadn’t read the treaty. Yet he wants to transfer power to Brussels. I’ll bet a € he still hasn’t read the damn treaty. He, like many power hungry individuals, just knows he wants more power for a select few. Political alienation is rife within many European nation states. This alienation, especially in the non-democratic manner in which the Lisbon Treaty was rammed through many parliments, may spread into the European project over time.

It’s a pity really. The European project has brought stability and a decent levels of prosperty to many nations in Europe. Countries like Germany, France and UK contributed large amounts of funds to assist economies like Ireland, Portugal and Poland to name a few. In return they created new export markets.

Now the superhuman, Masters of the Universe politicians want to assuage their egos by becoming players in the world stage, and make no mistake about it this Treaty has significant cluases about integration and enforced spending on national militaries.

We really never learn.

The EU (EEC etc.) was formed to integrate trade so as to make it illogical to wage war amongst ourselves in Europe. Fifty years later our politicos want to prove their macho bona fides as players on the world stage, and they want shiny new armies and weapons to back up their imposed power.

Swedish Lex says:

September 17, 2009 at 2:42 am

@ Kevin de Bruxelles

Väl bekomme!

@Diego
Good point.

@DownSouth.
Thanks , enriching as usual. By the way, did you see my question to you whether Arendt ever wrote extensively on the EU (EEC)?

@Jon Livesey

It is not true that I am a frequent poster to the Telegraph. I have only done so once and that was in relation to AEP’s column, which triggered me to write this column, which I am pleased that you have found.

It is not correct either to say that I masquerade as a neutral observer in my contribution. I already in the introduction declare that I disagree with most of what AEP’s has to say on the EU in his column. It is right there. As for the rest, I leave it to readers to judge the merits of my reasoning.

Your substantive comments concern the euro, which I find puzzling since that is not what my contribution is about. Why not leave the euro to the euro-states to deal with? It seems that the UK has more than it bargained for when it comes to dealing with its own currency. You also display what I assume to be ample doses of EU-grief, which is what I discussed in my contribution. My point is that if the majority of Brits are unhappy with things as they stand, it is highly likely that they will be more unhappy in the future. Had I been in the shoes of a British EU-sceptic, I would have been arguing for a UK exit. The Lisbon Treaty delivers that possibility on a plate.

@Ambrosian
Correct. But I doubt that business as usual will be possible in 5-10 years time, in particular if the Lisbon Treaty enters into force.

DownSouth says:

September 17, 2009 at 11:46 am

Swedish Lex,

I responded to your inquiry the other day but I suppose you missed it.

But no, Arendt was far more interested in that vitalistic concept called “freedom” and so most of here attention was focused on the un-free Soviet Union and the Eastern Bloc countries, especially Hungary and the revolution of 1956.

Vinny G. says:

September 17, 2009 at 2:43 am

The UK will unavoidably leave the EU, only to be immediately conquered and annexed by Germany…

Vinny G.

L233 says:

September 17, 2009 at 3:05 am

@Ambrosian
—
Continental Europe follows the Napoleonic Code which only allows activities prescribed by statute. The UK (and N. America) takes a fundamentally different view, allowing all activities except those prohibited by statute.
—

You got that backwards. The two law traditions are called Civil Law and Common Law. In Civil Law, everthing has to be codified. In Common Law, judges can actively develope the law.

In practice, this means that everything is allowed in Civil Law systems unless explicitly forbidden by law. In Common Law systems, on the other hand, judges can extend the reach of the law through court decisions.

A good example for this is computer crime. When it first became a larger issue in the late 1980s, many computer crimes in continental European countries went unpunished because there was not law explicitly outlawing it – “nulla poena sine lege”. In Common Law countries, courts were able to adapt existing laws and precendents and apply them to this new form of crime.

Vinny G. says:

September 17, 2009 at 3:09 am

To the Irish tgmac:

Let’s not get ahead of ourselves here, shall we? Without the EU, Ireland, along with places like Spain and Portugal, would still be Third World peasant societies (which they still are, in mentality). But let’s not give the UK any credit for that, since they had nothing to do with it.

Re. EU’s hopes to implement US-style militarism, let’s face it, that’s the only approach that works on the world scene. Any other approach, such as “soft power”, is utter nonsense, and hasn’t worked so far.

As far as Britain’s contributions to the EU, I am not sure what you are referring to, considering that by law, Britain always got back more than it put into the EU. It’s always been a parasitical EU member.

The fact is, Britain is a useless postmodern nation with a premodern legal and political system, a nation of brain-deal drunken losers, whose absence from the EU will be vigurously celebrated for many years to come.

Finally, you, as an Irish person, would do well not to align yourself with Britain, a nation that only brought grief to your country. Be Irish, will ya, show us that you have balls, and kick those Brits in the teeth while they’re down…

Vinny G.

tgmac says:

September 17, 2009 at 4:09 am

Vinny,

I don’t even know where to begin. Yes, Ireland benefited from the EU as did Spain and others from having access to our fishing. The Euro project is a two way street. Also, you might want to read up on how Ireland’s economy has been affected by internal corruption. Nearly forty years on, this corruption and cronyism is still endemic in our economy. We have only ourselves as a nation to blame. When viewed through this prism, your analysis may viewed to be a tad simplistic.

The EU project was enacted, originally anyway, as a means to integrate Europe’s economies and assure mutual coorperation rather than confrontation. Benefits accrue to any particular state in a complex manner and not by simple linear narratives.

As an ardent Irish Republican, I actually find your comments about the UK rather repugnant. Again, the opinion expressed is far too simplistic. I take people as they are and try not to make caricatured statements about a nation of 60 million+ people. We’ve had a stormy history and we are at odds over important issues. However, we are mature nations and peoples who will just have to pursue our agendas as best we can within the European Union framework. I have no desire to kick anyone in Europe.

Also, the debate is not limited to the UK or Ireland. It is not a fight between the UK and Europe. As stated previously, the French and Dutch rejected the constitutional framework of a Federal Europe. So this time around, the Federalist decided to do away with that democractic nonsense. Not encouraging for a new Federation. It’s also very telling that the German Constitutional court at Karlsruhe felt the need to state the supremecy of German courts over that of the EU courts in matters relating to constitutional supremacy.

It’s not really a simple equation (Lisbon = Good or Bad). It’s far more nuanced than many so-called experts on EU integration would lead us to believe.

Gerald Muller says:

September 17, 2009 at 5:07 am

Stating that the French disapproved European integration is somewhat east of truth. In fact the French disagreed mainly with Chirac at the times who sold the “Constitution” like the worst salesman ever.
I feel that the British have to choose between real economy, the little industry left on this island and the kind of hudge offshore hedge fund the financial “industry” has become. In fact, many US funds, as you all know operate from the City because there, they can do things that even the very laxist Timmy would not tolerate.
The UK must indeed make a choice: either hope that good old greed will continue as before and the hell with the rest, EU or even their own industry, or think twice what is better for the British people as against a very small rich and powerful minority.
I am not optimistic for my friends of yore.

Marc says:

September 17, 2009 at 5:34 am

I like to read AEP a lot. He is intelligent, funny, knowledgeable and often gives a new perspective. On matters european though, it is as if he looks to Europe through the Channeltunnel. And he keeps on seeing (and saying) the same thing. A lot of what he says is good stuff, but if he only could come though that tunnel to look at things from a different perspective, he might actually contribute something. Now, he is (sadly) ignored on Europe (at least outside splendid albion) because of his moaning and whining.

The predicament of the PIGS, or the Club Med Eurocountries as they are often referred to, is interesting. Before the Euro all economic crises were resolved through devaluation, giving the economies a breather and impoverishing the citizens. Much to the chagrin of the neighboring countries by the way. If you take away the devaluation option, that would leave three logical ways to improve the competitivity of the economy in the world.

- Credit/Debt. This is pretty much what all countries (China, US,…) are doing at the moment and the PIGS are at a huge disadvantage here, since they have accumulated so much debt in the past that they soon risk drowning in it. This is the fastest way to kick-start your economy.
- ‘Internal Devaluation’. Ok, so this is a new invention, piloted in Latvia. All economists are watching how it will turn out. Just how much misery can a population suffer before they revolt seems to be the key question. As the Greek have the most revolutionary credits to their name, I assume they will be rather unwilling to go down this path. We do not know yet how long internal devaluation takes.
- Increased productivity. Well, that was a no-brainer wasn’t it? I think this might take the longest, but it would also be the only true lasting correction.

richie rich says:

September 17, 2009 at 10:27 am

yeah right…the ECB (an agent of the EU) did such a great job in this crisis?…NOT!…While shadow boxing with a perceived inflation they stayed tight too long to the point where they were still raising rates in the summer of ‘08 into the biggest deflation ciisis since the great depression….the mother of all monetary policy errors….and now they keep the monetary spigot on full as inflation begins to rear its ugly head (as emphasized by the green shoots crowd)

The euro is a currency in training…it has failed its first big test…just ask the CB’s and those unemployed millions in Ireland and Club Med countries who have forfeited control of their economies to the DP swilling, fromage munching EU elite in Brussels

Swedish Lex says:

September 17, 2009 at 12:07 pm

@DownSouth

Thanks for the info re. Arendt

Vinny G. says:

September 17, 2009 at 12:50 pm

” tgmac:
sounds like you’re ready to pick up arms and fight to free Northern Ireland

As am American born and raised in Eastern Europe (which unfortunately is now being… let’s just say “subjugated” by the EU), I find your comments about the endemic corruption present in Ireland to be quite telling. Says a lot about the Ottoman mentality of Bruxelles. And, I live in Cook County (Chicago), by far the most corrupt part of America. Yet, the kind of corruption I observe in proud EU nations like France, Austria, and Britain, makes me cringe.

Finally, while nuances are important, the devil is in the details. Ireland, like much of Eastern Europe, suffered immensely at the hands of Britain, Russia, and the likes. I for one keep things simple and don’t trust such criminal and genocidal nations.

Vinny G.

Swedish Lex says:

September 18, 2009 at 5:47 am

Corretion. The EU Parliament’s draftsperson on the proposed hedge fund and private equity directive is not a French socialist. He is French, but centre-right.

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