There is much more in the way of European chatter taking place in that troubled part of the world. Discussions held at the Brussels summit on Friday saw the 27 countries of the EU attempting to forge an agreement in an effort to create what would effectively amount to a new financial arrangement. It ended with an agreement being hammered out that involved all but one member – Britain.
Of those, the 17 euro countries have agreed on a rather stern set of measures. And on the surface, they seem revolutionary. A ‘fiscal compact’ is on offer, binding members to abide by budget rules and suffer penalties if in breach. A few points too note: regulations involve a 0.5 percent of GDP on countries’ annual structural deficits, and ‘automatic consequences’ for countries whose public deficit exceeds 3 percent of GDP. While there will be no EU treaty as such, there will be a treaty between participating governments. The European Stability Mechanism would also be put into place as a permanent arrangement by July 2012. The fiscal policemen are well and truly in place.
Of those who were involved, troubling issues will remain about the issue of Franco-German control. Where will the ‘outer’ powers figure in this re-arrangement of European power? What will be the association between member states and other bodies in the EU, including the European Commission? These are questions that will only be answered in the long term.
The sole dissentient here was Britain. Prime Minister David Cameron came up with a rather feeble explanation. ‘We were offered a treaty that didn’t have proper safeguards for Britain, and I decided it was not right to sign that treaty.’ The safeguard sought was a protocol allowing Britain a veto on financial-services regulation. It was refused. Charlemagne, the ever perceptive commentator in The Economist, described Cameron’s response as affecting ‘Europe’s great divorce’. ‘So two decades to the day after the Maastricht Treaty was concluded, launching the process towards the single European currency, the EU’s tectonic plates have slipped momentously along the same fault line that has always divided it – the English Channel.’
Steven Erlanger and Stephen Castle reiterated the use of the plates metaphor in the New York Times, calling Friday ‘a day of historic, seemingly tectonic shifts in the architecture of Europe’. The putative victim in all of this is Britain. Germany and France become the central figures, with Britannia shut out. Labour leader Ed Miliband described the move as ‘the catastrophic decision to walk away.’ What Britain had done was abdicate from relevance, allowing ‘the 26 countries to make crucial decisions without us.’
There are two aspects of this Cameron’s decision. On the one hand, Cameron is right to be have reservations – most of the countries, both inside and outside the eurozone, have them. Britain, however, wishes to be special, having a special affinity with euro-skepticism. A valid point can be made about the erosion of member sovereignty. The emergence of a new style of ‘dictator’ – the technocrat – is not something to be cheery about. In the era of the Roman Republic, before the term ‘dictator’ went to seed at the hands of Julius Caesar and Lucius Cornelius Sulla, individuals like Cincinnatus were appointed by the Senate for brief periods to steer the state in times of emergency within a strict time frame, then retire back to the plough. One wonders how these current financial arrangements of financial imperialism will work.
There are also domestic hurdles to overcome in specific countries before the agreement will take effect. The Republic of Ireland requires a constitutionally mandated referendum over a transfer of powers to the EU. The Czech Republic, Sweden and Hungary have qualified their support by having to seek parliamentary approval. Nor does the arrangement say much on the stabilizing of the euro, generating money or cover the issue of joint-issued bonds.
The other aspect of Cameron’s decision is that it is potentially weakening. If one is in the mess, one can at least have a role in righting it. Britain, given its heavy involvement in finance, can hardly claim to be an immune and virtuous island separate from the chaos of the continent which is its greatest export market. A claim might well be made, as it has been by financial analyst Max Keiser, that London ‘is the world’s capital of fraud’, having been the conduit for the AIG, Lehman Brothers and Jon Corzine multi-billion dollar scandals. It is hard to see how not being part of a ‘European solution’, however problematic, can be in its interest. Europe’s problems will not go away, and Britain risks become an outvoted power, an appendage rather than a participant.