The news today is dominated by the story of how David Cameron supposedly exercised a veto to prevent Britain becoming involved in the German proposed treaty to set up a fiscal union.
Media reporting is wrong. What happened was far more significant. Cameron did not wield a veto. Had he wielded a veto there would be no new treaty. Instead there will be a new treaty only Britain will not be involved in it.
This is so extraordinary that I can only assume that what happened is that Cameron sought to wield a veto but was told by the others that if he did his veto would be simply ignored. In other words Britain’s veto was overriden by the other EU states. To disguise Britain’s humiliation Cameron is presenting what happened as his decision even though it was one that was forced on him.
In other words Britain has to all intents and purposes been expelled from the inner councils of the EU. Whatever happens next it is difficult to believe that the other member states will ever let it back. Even if Britain were to elect a pro Europe Labour government it is doubtful that the other EU states would trust Britain’s long term commitment to Europe and the EU sufficiently ever to let it back. Given that this is so one has to wonder for how much longer Britain will remain a member of the EU.
This is all pretty momentous and its implications for Britain, Europe and the world will take some time to think out. I would however make just a few preliminary points.
1. The new EU treaty will not create a fiscal union. As I said in an earlier post, it merely re asserts the old Maastricht criteria in a far more stringent form. EU states are now given deadlines to bring their debt to GDP levels down to 60% and will supposedly be obliged to limit their budget deficits over the lifetime of an economic cycle to just 0.5% of GDP. All this is to be administered by the European Commission and enforced by the European Court of Justice.
Various commentators have correctly pointed out that this will impose unprecedented and indefinite austerity on Europe. No commentator has so far pointed out that what is being proposed is actually impossible. There is no possibility that the targets will be met. Italy has been running a primary budget surplus for years and yet its debt to GDP level is still 120%. How can it bring it down to 60% in anything like the kind of time frame that is being talked about? Yet that by law is what Italy is now be obliged to do. The same point can be made about all other EU states.
One has to wonder whether those involved in drawing up these targets have any idea what they are doing. What they are doing is planting a bomb under the European project. Not only will what is proposed fail but it also entirely fails to address or indeed show any understanding of the eurozone crisis, which is a banking not a sovereign debt crisis. At the same time by using laws and treaties to impose targets that cannot be met the European leaders are ensuring that those laws and treaties will be broken. Given that the EU system is ultimately no more than a web of laws and treaties creating arrangements that are bound to fail and which will result in those laws and treaties being broken all but guarantees that this web will unravel. The people of Europe will in the meantime have to pay the price.
2. Cameron has presented his attempted use of the veto as intended to protect the financial community based in the City of London. This is untrue. There is nothing in the treaty that would have threatened the financial community of the City of London in any serious way. The real reason for Cameron’s opposition is that he knows that the government and his leadership would not survive the inevitable backlash from euroskeptics.
3. I have always known that there was a possibility that Britain might leave or be ejected from the EU. The one thing I never expected is that it might happen under a government with Liberal Democrat ministers. Unless they now act that is the position the Liberal Democrats might now find themselves in.