December 9, 2011
Thanks to David Cameron, there will be no 27-member, EU-wide treaty deal establishing a fiscal compact.
He made clear that it was he who vetoed such a plan, saying that which was being discussed was not in the interest of the UK — that it would involve too much lack of sovereignty. The BBC quotes Nicolas Sarkozy as saying that Cameron had made unacceptable demands for regulatory exemptions that would protect the UK financial services industry. See, the rest of Europe wants a Tobin Tax (financial transactions tax) which would obviously hammer the banking center in London.
Furthermore, it would be insane for the UK to sign up for any austerity, fiscal pact. As we’ve pointed out, the UK’s fiscal situation bears no resemblance to those of the cash-strapped European nations.
Despite massive debts, the UK has no problem funding itself, as it controls its own currency. Agreeing to Merkel’s budget rules would be a suicidal decision. So really there was no choice at all.
Anyway, there’s still hope that the 17 EU countries that actually use the euro (the eurozone countries) will agree to something that can somehow have teeth and be binding.
And people still hope that if that does happen, then the ECB will come in and backstop the whole thing.
Despite the division – which will leave Britain out of the new pact, with the Czech Republic, Hungary and Sweden still weighing participation – Mario Draghi, the European Central Bank president, signalled his approval, a key vote of confidence that could allow the ECB to move more aggressively in eurozone bond markets.
“It’s going to be the basis for a good fiscal compact and more discipline in economic policy in the euro area members,” Mr Draghi said after nearly 10 hours of meetings that finally broke up at 5am local time.
We’re not quite sure what the basis is for thinking Draghi will now come to the rescue, seeing as just yesterday he explicitly said he had no plans for a quid-pro-quo (fiscal compact-in-exchange-for-bond buying).
This article was posted: Friday, December 9, 2011 at 4:45 am