Brussels (and Durban)

The EU summit is mostly over. A seven-page statement by the leaders of the countries using the euro outlines the solution: there will be a new treaty involving all the EU member states except the UK and Hungary, with the Poles Swedes (thanks for correction) and Czechs going away to think about it. (Edited to add: the Hungarians are with the Swedes and Czechs, apparently.) Participating states will enshrine a commitment to balance their budgets at “constitutional or equivalent” level. This will certainly mean a referendum on Ireland, which could be simply on balanced budgets but much more likely on the deal as a whole. This will all take some time (though the conclusions optimistically speak of signing the new treaty “in March or at an earlier date”). In the short term more money is to be made available to the existing and planned bailout mechanisms. It’s pretty much what Chancellor Merkkel and President Sarkozy were looking for; we will see in the course of the day if the markets are convinced (though the form is that immediate reaction to these things tends to be positive before buyer’s remorse sets in).

It’s a lousy outcome for the British, who are now locked outside the doors of the next stage of European integration. It’s not quite equivalent to 1955, when the UK walking out of the Messina conference which set up the EU thus ensuring that the structures would be set up without Britain. But Anton La Guardia had a point when he said on Twitter that “at least Cameron cannot be accused of being Chamberlain. He has no piece of paper to bring home”.

On 18 November Cameron met with Merkel in Berlin, and set out his price for signing up to a new treaty: i) Britain should be allowed to revert to its opt-out from the social chapter (as the previous Conservative government did), ii) unanimity should be brought back for decisions concerning financial services, and iii) any new system should include an “emergency brake” which non Euro Area member states could apply if and when they felt that decisions by the Euro Area threatened the integrity of the EU as such. There was never any chance of getting Germany (or indeed most other EU member states) to agree to these: the first two walked back previous British commitments, and the third potentially allowed states outside the euro to control the behaviour of states using the euro. So the other states went ahead without Cameron, joined in sulking outside by Orbán with Nečas and Tusk Reinfeldt (thanks for correction) making up their minds.

I do wonder if Cameron deliberately set an unrealistic negotiating position in the certain knowledge that he would therefore return home with no treaty to sign, and thus avoid the embarrassment of either debating whether or not to have a referendum on the new treaty (or indeed holding the referendum and losing it). British journalists will no doubt concentrate on regurgitating the spin both from Cameron and the eurosceptics, but they are all marginal to the real process now. It is not so much a two-speed Europe as a one-speed Europe with stragglers, Britain being the largest of the later category.

Meanwhile, almost ten thousand kilometres away, the EU, the Alliance of Small Island States, and the Least Developed Countries are pushing in Durban for a new climate deal to include continuation of the Kyoto Protocol, more money to deal with climate change, and an agreed mandate to negotiate very quickly a new legally-binding agreement on carbon emissions by all the big players. They have another day to negotiate. This is where the action really is, in a sense; the euro crisis is only about money, while the Durban talks are about saving the world.

  • Cynic2

    That rather depends on one’s assessment of whether this agreement will work. All they have done is allow France and Germany to efefctiovely create a new inner core subordinate to Paris and Berlin. It hasnt solved the Euro’s problems – it has craeted a vehicle that amy solve them.

    But then what happens when the Franco German alliance start to impose their barnd of medicine on the rest of the Zone?

    Does anyone really believe that the Italians and Greeks will sudedenly pay taxes and adopt a love of the rule of law? Will the people pf those countries who so recently escaped the clutches of totalitarian rule welcome this once they euphoria that ”something has been done” evaporates and they realise that they are now subordinate to French economic interests? That economic and social policy are now decided elsewhere and the freedom of maooeuvre of ‘their Government’ will be decdied by politicians whom they dont elect and, above all, faceless bureaucrats?

    I fear that Europe is in for a riough time. I expect tos ee substantial social and political unrest and teh rise in some countries of nationalist parties and groups now opposed to the entire Europen process

    And whither Ireland? After 90 years of independence its political class – not its people – haved voted away that independece and welded it into a Europen Super State in which it will have a limited voice.

    This makes British rule in Ireland pre 1922 look benign and democratic!

  • Zig70

    Interesting to here Joan Burton berate Adams for welfare payment levels in NI. All those things are controlled from London. Lots would prefer more local control.
    The markets will talk it up then down then up again. stuck in a cycle of short selling. Need to bring back the uptick rule at the very least

  • Alanbrooke

    I fail to see how this is a lousy outcome for the british. They are in a club they should never have joined which is bad for both the UK and those states who want to integrate further. The UK will more likely move to a relationship similar to Norway or Switzerland and both sides will be better for it.

  • Johnny Boy

    Time will tell. In the short term this will play well with UK voters I would guess, but could damage perception abroad. No doubt Britain will be painted as the bogeyman over the euro troubles, and it all doesn’t look very statemanlike; shooting down a potential solution in Europes time of need.

  • Drumlins Rock

    Don’t be writting your reviews of the performance just yet, the lady of excessive calorie intake is merely ambling onto the stage.

    Remember it was Labour who signed away much of Britians veto powers with Lisbon leaving Cameron with a weak hand, but the financial services regulations are a direct attack, verging on sactions, against the UK economy, he is right to take a stand.

    With regards two teir Europe, there is a third one, Merkozia, comprised of the area under their direct control, not just France & Germany, but Greece & Italy the puppet regimes, with Spain, Portugal & Ireland having no choice but to fall into line, how many of the rest are also secretly under their control? Certainly the people of Europe are not so keen when actually asked, remember France and Holland rejecting Nice?

    As for Durban, I hope it ends up the usual farce.

  • thethoughtfulone

    “the euro crisis is only about money, while the Durban talks are about saving the world.”

    That’s assuming that the climate change undoubtably taking place is affected in some way by human activity (a huge and contentious debate in itself!), otherwise we’re just passengers anyway.

    The really interesting thing for us in the EU debate is that it’s not impossible that before long our north/south border may take on a completely new significance. It could hardly be as free and open (aka “non-existant) as it is now if the UK were to leave the EU and it would then become the UK’s only land border with a completely different state (or whatever the new fiscally united, German controlled EU refers to itself as). That in turn would rattle a lot of cages if the border was being seen to be strenghtened again, no matter what the reason.

  • OneNI

    Nicholas save me the trouble of having to find out – were you one of those telling us 5/10 years ago that it would be disasterous for the UK not to be in the Euro?

  • It’s not the Poles and the Czechs who are “thinking about it”, it’s the Swedes and the Czechs.

    http://www.bbc.co.uk/news/world-16104089

  • thethoughtfulone

    Irish government saying already that they may need a referendum on the treaty change.

    So it would appear that they’re actually “thinking about it” as well.

    How many of the others the same in actual fact!

  • DoppiaVu

    “This is where the action really is, in a sense; the euro crisis is only about money, while the Durban talks are about saving the world”

    Well…yes and no.

    The moment the western economies crashed, climate change dropped way down the priority list. Goverments, and the public that vote for them, value jobs over carbon emissions. This will remain the case until the global economy is sorted. So being pragmatic, fixing the Euro zone (and the various other problems facing western economies) is a pre-requisite for re-focussing upon climate change.

  • ayeYerMa

    Nicholas is a Europhile and a southerner, so is unlikely to have British interests at heart; of course a foreign Europhile is going to want to blame the failure of the egomaniacal EU project on someone else.

    This is a great day. It is all over. EFTA here we come!

  • ayeYerMa

    Johnny Boy, if that is indeed the European attitude, then it truly shows how ungrateful the EU egomaniacs are for the £billions that the British have already pumped into the Eurocratic monster, not only in the latest rounds of bailouts but also over the years. That would truly vindicate any decision to get the hell out.

  • Harry Flashman

    Someone in Ireland is bound to take this to the Supreme Court if there is no referendum on it, I reckon the Irish government will realise they will have to put it to a referendum anyway.

    I am happy to puts odds on as to how the Irish electorate will vote when they’re finally given a chance to tell the Euro-elite what they think of them.

    I suspect Britain won’t be as “isolated” as the BBC and Guardian are shrieking they are.

    A few other European populations might also like to give Britain a bit of support if asked in a free and fair referendum.

    Don’t listen to the Euro-propagandists, they’ve got the wind up their skirts right now and I for one am enjoying their discomfiture. Hell rub it up ’em.

  • Johnny Boy

    Is Rep. Ireland not already in a situation where its books are open to scrutiny by the eu and their budgets similarly proof-read?

  • Mainland Ulsterman

    I’ll wait to see what the deal really is, haven’t got my head around it yet in full – but my instinct is that Cameron has screwed up big-time for Britain.

    We like to pretend diplomacy and relationships with other countries are soft things and what matters are the hard business realities. But I fear this decision to insist on British exceptionalism at the EU’s hour of need will be used and used again against us. As a French official put it, we turned up at a wife-swapping party without the Mrs.

    And for what? It will not only hugely undermine our ability to negotiate politically in future with our EU partners but could also hit Britain economically. I need to hear the economic arguments either way but I’ll take a lot of persuading that hacking off our main trading partners to this degree is going to good for us. Interdependent world and all that.

  • thethoughtfulone

    “As a French official put it, we turned up at a wife-swapping party without the Mrs.”

    Well there’s quotes all over the place to support your argument whichever way you want it, another one was “David Cameron seems isolated in the same way as someone who wouldn’t get on the Titanic for fear of it sinking”.

    I think Cameron has done the right thing, probably for the wrong reasons admittedly, but the right thing nonetheless.

  • Cynic2,

    I don’t recall pre-1922 Ireland nominating a member of the UK’s executive branch, or Irish government minsters voting on important decisions, but maybe my memory is at fault.

    Alanbrooke,

    We may differ about the virtues of the outcome. But surely you agree that a negotiation process which the British government participates in, which ends with an agreement that not only takes no account at all of British interests, but actually locks the British out of future negotiations, isn’t exactly a win for Britain?

    Johnny Boy,

    I wouldn’t worry about Britain’s gaining a reputation as a bogeyman. Most in the EU can see that the source of their problems lies closer to home.

    DR,

    I’m afraid you are simply wrong on financial services. This was not a new proposal, as you seem to think; they became subject to QMV under the Nice Treaty back in 2002, with the full support of the City at the time. I’m not even aware that the City was particularly pressing for the reintroduction of unanimity in this area. Are you?

    OneNI,

    I can’t remember. I don’t think so; it was pretty clear to me that the UK was not going to join so it never seemed to me worth investing much effort in caring whether it did.

    Andrew,

    Thanks for the correction. That will teach me to post before my second coffee.

    tto/Harry Flashman,

    It seems pretty clear to me that an Irish referendum will be necessary, but it’s not clear whether it will just be on the balanced budget proposal (which surely would not be a tough sell) or on the new Treaty as a whole (which I agree might be tougher). I have no detailed knowledge of the other countries’ constitutional requirements, but my gut feeling is that we will see more referendums this time round.

    Ayeyerma,

    It’s very courageous to post personal comments – particularly inaccurate personal comments – when you are doing so anonymously.

    Climate change deniers,

    If, on the basis of your detailed expertise, you think you know better than the vast majority of actual scientists who are actually working on this issue, that’s your privilege; just don’t expect me to take you seriously on anything else!

  • DoppiaVu

    Mainland Ulsterman – whilst I absolutely agree with your points, at the same time I think Cameron actually did the best he could given the cards he was dealt.

    The real problem was his back-benchers who seem to be so cut off from the realities of what the Euro crisis could do to us all that they chose this moment to advance their xenophobic ideology. P!ssing off your main trading partner in the depths of a global recession is beyond stupid.

    Prior to which,the UK was in a relatively priviliged position – we were able to have our voice heard on Euro matters whilst still able to retain our own sovereign currency. I fear our influence will now decine, just when we need it most.

    Unfortunately, I don’t think Cameron had too many choices going into this.

  • Cynic2

    “I don’t recall pre-1922 Ireland nominating a member of the UK’s executive branch, or Irish government minsters voting on important decisions, but maybe my memory is at fault”

    You are absoluetley right but Ireland is but a pimple (as we mights ay in Ballymena a beeling pimple) on the backside of Europe and your vote counts for little, though you may influence. Furthermore you now have o submit your budget for ‘scrutiny’ and will face contraol measures if your demur from the advice given. In effect you no longer control your state., You have joined a new state

  • Cynic2

    “A referrendum will be necessary”

    That’s great – but the Irish Government has signed. Commited itself. Irrevocably it seems.At that point the sovreignty was signed away.

    I dont criticise this. I think there was no choice. But its vital this isnt fudged. I watched the Frech Finance Minister on TV 3 days ago assuring the French that this new arranegment does not mean any loss of sovreignty or control. Thats total nonsense. If that were so why would they be doing it. Fiscal union is fiscal union. Ireland has to now play by the rules and those rules will be set in Berlin and Paris – for the advantage of whom do you think?

  • Cynic2,

    Nothing has been signed except a statement.

  • DoppiaVu

    Read the document and didn’t see any reference to harmonising corporation tax across the Euro area, although maybe that’s what the references to fiscal harmonisation were about.

    If that were proposed, would that be put to a referendum in ROI?

  • iluvni

    “Considering the absence of unanimity among the EU Member States, they decided to
    adopt them through an international agreement to be signed in March or at an earlier date. The
    objective remains to incorporate these provisions into the treaties of the Union as soon as possible”

    http://consilium.europa.eu/uedocs/cms_d … 126658.pdf

    Seems to me that Cameron has achieved nothing whatsover given any agreements, banking or otherwise, between the 17 are to be incorporated into the existing treaties asap.
    He’s deceived the country yet again.
    .

  • thethoughtfulone

    “Read the document and didn’t see any reference to harmonising corporation tax across the Euro area,”

    That was a proposal at the start of the negotiations but had to be dropped as time wore on. I would suggest that would have been too bitter a pill for the Irish to swallow.

    If approved would have been interesting though!!!!!

  • Greenflag

    ‘@ mainland ulsterman ,

    ‘but my instinct is that Cameron has screwed up big-time for Britain.’

    Mine too . The Swedes and Czechs and now I believe the Hungarians are still hedging . Of the 27 EU countries -23 have signed up . Cameron had no choice as he knows that part of this new deal going forward is the probability of new financial transaction taxes which the City of London is averse to as is Wall St . Cameron has thus voted to defend the very interests who have been largely responsible for much of the financial and monetary chaos that has been let loose on the world since the USA under the former Federal Reserve Chairman Alan Greenspan decided to ‘deregulate ‘ the financial services sector .

    Merkel & Sarkozy seem to be about real reform in the banking sector and not as with the USA merely tinkering around the edges for fear of ‘upsetting’ the international bond traders i.e the market . This will take time and as we all know the ‘market ‘doesn’t do time .

    The Swedes went through their own financial mayhem in the early 1990’s and were forced to enact legislation which curbed the ability of the then Swedish banks to ‘corrupt’ the real economy . Perhaps that’s why the Swedes are fence sitting . If what the Germans and French are attempting to ‘reform ‘ the Eurozone in a manner similar to what the Swedes have accomplished then perhaps a brighter day will dawn for the Eurozone .

    The Irish Gov did’nt have much choice either . March 2012 seems a long time away for a ‘final ‘solution but then this particular fiscal monetary currency imbroglio has been a running sore now for more than three years .

    Mrs Thatcher created ‘services ‘ Britain with the destruction of the mining and manufacturing sectors -All that’s left is the City of London .Cameron’s decision will lead to an increasing gap between Brittania Superior (England south of a line from the Bristol Channel to the Wash ) and Brittania Inferior ( Scotland , Wales , Northern Ireland and the North of England )

    While London will retain it’s lead in the financial services sector in the immediate future .Longer term if this ‘euro reform ‘is seen to work and the dollar continues it’s relative decline and the Chinese and other emerging giants end up dealing ever more in Euros then the UK’s power to arbitrage etc will be continually weakening. In those circumstances Scottish ‘monetary ‘ future will become pro -euro thus hastening a break up of the political union.

    The City of London ‘rules ‘OK’- even if thats a K.O for the longer term interests of British living standards .

    And thats not good news for Ireland either the Republic or NI .

  • thethoughtfulone

    “Seems to me that Cameron has achieved nothing whatsover”

    What he has achieved is keeping us out of the unholy mess that will surely develop in the EU over the coming days and weeks when the populations of the compliant countries realise what they’re being roped in to.

    We’re looking at a long drawn out raft of referendums at best, widespread civil unrest leading to even greater financial meltdown at worst. We’ll still be affected surely, as will just about every other nation who does business with Europe, but at least it will be minimised and the UK will still be seen as a safer bet for investment and keeping borrowing costs low. A crucial factor given the precarious state our economy.

  • Alias

    What you always see with these agreements is the governments of member states with a eurosceptic base claiming that they’re just a little bit pregnant or even a little less pregnant. However, the sceince only goes one way: at the end of the process, a baby (a single European state) will emerge.

  • Hungary has bottled it:
    http://euobserver.com/19/114576

    I think politically Cameron had absolutlely no choice, he would have been bbqued alive by his own party never mind the tabloids and quite possibly the majority of the nation. Least worst of two pretty lousy options.

  • Alanbrooke

    Nicholas Whyte

    quite the reverse. UK europhiles pedal the dream that being on the inside means influence – it doesn’t because Europe is going in a direction the UK doesn’t want to go in. It can only ever slow the speed of travel but not the direction. The UK and Europe are simply recognising that there is a difference in views and its irreconcilable.

    Furthermore I would contend that the new EU will not be an easy place to live. Previously the menage a trois between France, Germany and UK kept a semblance of a balance of power in the instituitions that is now gone. Germany is the dominant power and there is no coalition which will block her if she wants her way. Given time and when the media have cooled down France will be seen as the loser since it has no EU ally to stand up to Germany.

  • Mainland Ulsterman

    DoppiaVu,
    You’re right that he didn’t have many choices – and he was always likely to do this. There was another way open to him, which was to be to support closer European integration – the ways things are going anyway – while looking out for Britain’s interests within that tent. We were not being asked to adopt the euro here; we have the option of keeping the pound and signing up to the new deal. All we had to wear was the transaction tax on the City.

    He was never going to do this, for Conservative ideological and internal party reasons. But that’s what he should have done, in the British national interest. I think he put the City of London’s interests before the country’s interests – again. Don’t tell me they are inseparable any more. The days of pawning the country to keep the City booming should be over.

    But you always knew the Tories tough words about the City were a thin veneer – they were never going to go against their rich, clever (but not clever enough to be any use to the rest of us) mates.

  • Alanbrooke

    Greenflag

    the biggest fall in UK manufacturing and the largest expansion of UK financial services happened under Tony Blair.

  • On the proposals for harmonising corporation tax or alternatively a financial transaction tax, there’s certainly nothing explicit in the document, though it is known that Merkel and Sarkozy both favour both of those measures.

    They may be implicit in para 7: “we will continue to work on how to further deepen fiscal integration so as to better reflect our degree of interdependence. These issues will be part of the report of the President of the European Council in cooperation with the President of the Commission and the President of the Eurogroup in March 2012.”

    But it may be significant that neither harmonising corporation tax or a financial transaction tax is explicitly referenced in the document, despite Merkel and Sarkozy pushing for it, which suggests that there was no agreement on introducing either. I think it is also significant that the dossier was handed to the rather careful Van Rompuy, rather than to Barroso who is a vigorous supporter of both measures.

  • Johnny Boy

    Mainland Ulsterman

    How are the Europeans going to keep any financial sector going to pay the transaction tax, when the institutions can just move elsewhere?

  • JB,

    Some outfits, such as hedge funds, will be able to move elsewhere, but not all of the financial sector has this option. People still need mortgages and pension plans.

  • Reader

    Andrew Gallagher: Nothing has been signed except a statement.
    Because Cameron wouldn’t play ball, it’s not a treaty change, so there doesn’t have to be a RoI Referendum unless the Irish Government gets scared of the electorate. (Which seems quite likely, admittedly).
    What I’m interested in observing is whether the continentals will still go for the transaction tax among themselved now that Cameron has ruled out the UK being the primary contributor. If Merkozy presented a draft Treaty to Cameron without the transaction tax, he may actually cave in.

  • Obelisk

    In the longer term this is just another step in the United Kingdom’s decline in relation to the world around it. In terms of relative economic clout and military strength, which are the usual hallmarks of power, downwards is the way to go, especially to the unstoppable rise of the Eastern Powers.

    I’m not saying David Cameron was wrong in what he did, or that his actions are the cause of what is coming their way, just that no matter what happens, Britain’s importance in the world is likely to fade.

    The other European powers are also declining and their response has been this slow creep but now accelerating creep towards Federalism, because if they come together they will have influence. I would guess that those countries who refuse to join the Euro will eventually be politely but firmly asked to leave the European Union, though they’ll likely retain the free trade perks the British are so fond of (though it might just be the English at that point).

    So in fifty years, the United Kingdom (or Greater England) should be a relatively prosperous state in a friendly relationship with the European Union next door.It should be part of a free trade area, and hopefully an area that allows free movement of people as a legacy of it’s previous membership.

    On the world stage though Britain won’t be in the top tier of powers. The UN Security Council will look very different. The US will be there, so will Russia and China. India should have a permanent seat, and if there is any justice in the world so will Brazil. The French seat is long gone, replaced by the European delegate. Amongst those great powers, if Britain is retaining it’s seat due to a war fought over a century previously will be seen as an anachronism.

    But those are the long term consequences in my opinion. They are pretty much unavoidable. Britain has done what is best for Britain, I would like to see if she can accept the long term consequences of being the Thailand of Europe.

    After all, in the greater scheme of things, who listens to Thailand?

  • Johnny Boy

    True Andrew, but what propostion of the total output of the financial sector is accounted for by those traditional banking activities?

  • DoppiaVu

    Its a truly sickening, but we are reliant upon the money-grubbing financial sector to get us out of the mess that they got us into.

    However, I do think that the banks’ ability to relocate is not as easy as some suggest. If you look at City workers, they are predominantly white English, from the head guys right down to the graduate analysts. If talent is as mobile as is suggested, how come the City is so predominantly white English? Surely the City would be truly multi-cultural, a melting pot for talent drawn from across the globe?

  • Johnny Boy

    It’s a good point DoppiaVu, but money talks and I would suggest if they thought they could improve their bottom line, their opereations would immediatly start to move elsewhere. It might start off slowly but the process would accelerate.

  • DV,

    No, we are reliant on politicians to get us out of the mess that they got us into.

  • Greenflag

    @Alanbroke.

    ‘the biggest fall in UK manufacturing and the largest expansion of UK financial services happened under Tony Blair.’

    Perhaps but the ‘rot ‘ set in -in the wake of Thatcher’s right wing revanchism i.e the much hyped services ‘future ‘ and a property owning democracy etc .

    It doesn’t much matter anyway now .

    The crude truth is that Europe i.e 26 of 27 EU members trust Angel Merkel’s determination to resolve this particular crisis more so than they trust Mr Cameron or his backers in the City of London .

    Whether of course Merkel & Sarkozy reach March 12 with a new ‘Euro’ is still debateable of course but the alternatives don’t look practical at this point . There are of course many interests around the globe who might prefer to see the Euro implode as that would reduce any near term rival to the USA dollar as an alternative currency of last resort .

    Then there all of those 100 plus ‘crown colonies ‘ or ‘tax havens ‘ scattered around the planet from the Cayman’s to the Channel Islands (not even members of the European Union ) in which rich Britons and others can stash their loot either gainfully or illegally obtained ‘safe ‘ from the Chancellor or the ECB .

    A future as a kind of offshore Switzerland beckons under the Tories . I guess those who can’t find a job in the City or in the public sector or in the Army can always try their luck at making cuckoo clocks or go into the watch making business 🙁

    Cameron has saved the ‘City ‘ at least temporarily and assuaged his financial backers . As for the people of Britain -well currency sovereignty as the soup de jour in the Big Society may not be enough to keep Cool Britannia ‘warm . in the upcoming economic winter .

    Cameron is no Obama when it comes to foreign policy .But then we all knew that from the beginning anyway !

  • Greenflag

    @ DV & AG

    I’ts a truly sickening, but we are reliant upon the money-grubbing financial sector to get us out of the mess that they got us into.

    ‘we are reliant on politicians to get us out of the mess that they got us into.’

    You are both correct . However the ‘banksters ‘ occupy Congress (USA), Westminster (UK ) , Dail (Ireland) and who knows what they are up to in Berlin or Paris ? We do know that the German & French banks are still very much overleveraged and ‘hiding ‘ losses and potential losses .

    The horrible truth is that our ‘politicians ‘ are winging this bird hoping it will land somewhere safe with their political skins intacto 🙁

  • DoppiaVu

    @ AG & GF

    In a lovely piece of symetry, I find myself going back to my comment of 11.24 this AM, where I said that Carbon reduction would be taking a back seat until the economy had recovered.

    I think that reform of the financial sector will also take a back seat until the economy has recovered (in the UK at least). And if it does happen, it won’t be a Tory government that does it.

    I was thinking that there are strange parallels between financial services industry right now and the Union movement back in the early-mid 80’s. The UK economy in the early 80’s was pretty crap too, yet Thatcher chose to take on an expensive and risky battle against the unions, the miners being the battle we most remember. As we all know, she won in the end. And what was it that won it for her: i) preparation (stockpiles of foreign coal meant that British coal wasn’t needed for while) and ii) determination (bloody-mindedness, perhaps).

    So who’s prepared to take on the financial services industry? It will have to be someone who can do the preparation (breaking up the banking/investment arms of banks would be a good start, plus bringing new players into the market). It will also need to be someone who shares Thatcher’s fanatical zeal and bloody mindedness.

    I don’t see anyone like that in British politics at the moment.

  • DoppiaVu

    symmetry. doh

  • Alanbrooke

    GF

    the 26 go forward not in unison but in fear, they’re a bicycle display team and if the momentum stops they’ll all fall off. Germany’s on the bottom pedalling and Ireland’s 4 rows up on the top.

    The UK will be forced to scale down services from their bubble levels and go back to some good old fashioned value added activities like manufacturing, which is probably good news as the migrating Irish can still pop home and see their family at weekends.

  • Greenflag

    Doppia Vu,

    ‘I think that reform of the financial sector will also take a back seat until the economy has recovered (in the UK at least).’

    Probably true and not just of the UK but also the USA and Ireland . Problem being that the fire brigade (root and branch reform ) will arrive just in time to see the last roof beam fall on the ashes of gutted ‘real ‘ economies which may take a decade or more to recover .

    ‘So who’s prepared to take on the financial services industry? ‘

    As of now there isn’t anybody -not in the UK not in the USA not in Ireland at least among the mainstream political parties . The Occupy Wall St movement is in it’s infancy and has yet to put forward a coherent practical alternative to the status quo which is not working for increasing numbers of the western world’s ‘middle ‘classes.

    An interesting parallel you draw above with the UK economy of the 1980’s and I can see that there is some truth in that but what is most different is that while the ‘unions’ or some of them could be accused at the time of being too powerful or influential prior to Thatcher’s time they had nothing like the power over government then in the UK which the financial sector has now -and the latter not just of the UK but the USA and virtually the entire western world bar perhaps Sweden .

    ‘I don’t see anyone like that in British politics at the moment.’

    Neither do I mores the pity -nor in the USA nor in Ireland where AIB has just today told the government that they are not passing on interest reductions to their customers .

    So it looks to me like we’ll have to wait for a systemic wide collapse or a political revolution before the British & American politicians are forced into taking on the ‘banks ‘who at one time were considered to be too big to fail and who have now in some instances become even bigger and thus more destabilising to the real economy in the absence of effective oversight and regulation .

  • Greenflag

    Alanbrooke,

    ‘The UK will be forced to scale down services from their bubble levels and go back to some good old fashioned value added activities like manufacturing’

    Scaling down services yes but a return to good old fashioned value added activities like manufacturing probably not .It’s not the 1970’s or 1920’s anymore .The Americans have outsourced most of their manufacturing to China and elsewhere and the Germans have retained a significant portion of their manufacturing base while now also heavily into Poland , other parts of Eastern Europe and even China . British ‘manufacturing ‘ has been decimated . There may be a few niche areas which can be built up but nothing like on a scale that would make a ‘huge ‘ difference to British economic prospects .

    As for Ireland – we’ll have to adapt to the probability of an increase in corporation tax rates over time in any new ‘euro ‘deal ‘ . As long as we don’t follow the British example of the 1960’s and 1970’s of forever devaluing the pound in the hope that it would raise competitiveness and reduce the cost of goods to export markets . While it did that to some extent it also made British industry of the time complacent about having to improve efficencies and productivity -why would they need to- when the Treasury would sooner or later ‘devalue ‘ the pound to save the ‘battle ‘ but lose the war 🙁

    Looking at the bigger picture the Agricultural Revolution lasted all of 3,000 years before most the earth was brought under ‘modern ‘ farming control . The Industrial Revolution lasted 300 years with perhaps another 50 to go in parts of the world’s emerging giant economies . Although many developing countries are bypassing ‘industrial ‘ development as a strategy for economic and social development .

    The current Information Computer based technological revolution has been about 30 years underway and has now probably peaked at least in the sense of a limiting factor determined by the laws of physics .

    In it’s wake the ICBTR is leaving behind the bi polar world of the 1950-1990 period and the unipolar world of 1990-2010 . A world financial system which in essence still owes it’s origination to the those earlier world orders will not be up to accomodating the new world economic order . It seems that the western world’s politicians have yet to accept that fact and David Cameron even in the smaller context of the European Union is just another case in point.

  • Cynic2

    Time to go, I fear. Poor Europe

  • Alias

    “I do wonder if Cameron deliberately set an unrealistic negotiating position in the certain knowledge that he would therefore return home with no treaty to sign, and thus avoid the embarrassment of either debating whether or not to have a referendum on the new treaty (or indeed holding the referendum and losing it).” – Nicholas Whyte

    He’s not that smart. Besides, he doesn’t have a veto. The European Council would decide if a treaty is needed by qualified majority voting and it would then go to an IGC, so he couldn’t block anything even if he wanted to.

    The reason question is not why Cameron didn’t want a new treaty but why the others didn’t.

  • Cynic2

    Alias

    French self interest?

  • Comrade Stalin

    Alanbrooke:

    The UK will more likely move to a relationship similar to Norway or Switzerland and both sides will be better for it.

    You mean, move to a situation where the UK’s access to European markets is governed by regulations it has no say over ?

    Precisely how is this a better outcome for the City or the UK as a whole ?

    The UK will be forced to scale down services from their bubble levels

    Nothing to do with Europe or the Eurozone.

    and go back to some good old fashioned value added activities like manufacturing,

    Nothing to do with Europe or the Eurozone either, but several decades of bad government and bad industrial relations culminating with that well-known Europhile Margaret Thatcher wielding the knife.

    which is probably good news as the migrating Irish can still pop home and see their family at weekends.

    Throwing up barriers to trade and the mobility of labour throttles economic activity. Always has.

  • Cynic2

    “You mean, move to a situation where the UK’s access to European markets is governed by regulations it has no say over ? ”

    We are still in nthe EU. They cant do that. If they do then we walk away but as we are net contributirs that leaves a hole in EU finances that the rest will have to pay. It also leaves us in amuch better competitive position not tied to the EU bandwagon and its Brussels kleptocracy

    But that will not ahve to happen. EU states will soon tire of franco-german hegemony and start to rebel. If the political classs dont the people will.

    I think that the European statesmen and women have managed to convert a financial crisis into a slow burn constitutional one. The EU wont exist in 10 years time. then the real fun will start

  • Comrade Stalin

    We are still in nthe EU. They cant do that.

    I was replying to a person who seemed to argue that we should leave.

    If they do then we walk away but as we are net contributirs that leaves a hole in EU finances that the rest will have to pay.

    UK net contributions to the EU are expected to average £6.5bn for the next few years.

    Against the UK’s annual government budget of £711bn, this subvention is less than 1%. It’s also not a kick in the backside away from the UK government’s net subvention to NI.

    On what basis are you arguing that the governments of the EU are going to lose sleep over this ?

    It also leaves us in amuch better competitive position not tied to the EU bandwagon and its Brussels kleptocracy

    Exactly how is the UK in a better competitive position by giving away any say in how trade with its largest trading bloc is regulated ?

  • Alanbrooke

    CS

    The UK and Ireland indeed export all over the world. US, China, India etc. in all these places we have no control regulation yet export. The trade off between so called inner circle and the heap of legislation loaded on top no longer pays. The idea that we should restrict our views to the 400 million in Europe and not the 6 billion elsewhere in the world is introspection in the extreme.

    As for the Thatcher argument, as I pointed out elsewhere the biggest decline in UK manufacturing and the biggest expansion of Casino bnaking took place under Blair.

  • Comrade Stalin

    The UK and Ireland indeed export all over the world.

    Indeed..

    US

    14.3%

    China

    3.2%.

    India etc

    So small I can’t find numbers.

    in all these places we have no control regulation yet export.

    About 60% of UK exports go to the EU. It should be self evident that removing barriers to trade with the EU should be an obvious foreign policy and economic priority (it was, after all, self evident decades ago).

  • Comrade Stalin

    As for the Thatcher argument, as I pointed out elsewhere the biggest decline in UK manufacturing and the biggest expansion of Casino bnaking took place under Blair.

    It wasn’t a dig at Thatcher, it was a dig at Thatcherism, the implementation of which Blair continued with during his time in office. Thatcherism holds that there is no future in manufacturing and she oversaw the realignment of the economy towards services – especially financial services, which is why New Labour were as in thrall to the City as she was.

  • Alanbrooke

    Big chunks of UK exports are re-exported via Rotterdam but recorded as EU exports. UK exports about 40-45% to EU, of which Ireland is a major destination. Since joing the CE the UK has had an increasing balance of trade deficit with the rest of Europe, being at the centre of Euope hasn’t stopped that. Furthermore other trade agreements such as EEA have as much effect on trade as being in the EU.