The news overnight from Brussels is that the 17 euro countries, led in this particular respect by France, have refused to allow the UK to exclude itself from their emerging plans to regulate financial transactions. And this sticking point may well limit the influence of the UK on the development of the central Eurozone programme of fiscal harmonisation.
Cameron was certainly in a difficult position – primarily because as a proxy for the City and for US-sponsored ‘anglo-saxon capitalism’, he is under severe pressure to protect the financial services industry as it stands.
If early reports are accurate, Sarkozy is to be congratulated for keeping reform of the dysfunctional financialised economy at the centre of the argument. The UK Government have made their own position more difficult by taking too long to address financial services and banking reform. As a result the ‘red line’ in the UK’s position was blurred – Cameron could not be explicit about the nature of the exclusions he would require, and a general exemption was not acceptable to the Eurozone countries.
The situation now is messy. The 17 will want to use existing European institutions to draft, agree and implement a new inter-governmental treaty and the UK (and possibly Hungary) may well legally challenge this approach on the basis that these institutions serve the wider European Community including the dissidents.
The UK has made their bed – a comfortable bed for the financiers and bankers – and must now lie in it. Their most popular argument is that the UK depends (as it does) heavily on tax revenues from banking and finance. But there is surely an ethical position here – if the economy relies on criminal and unfair activity for its tax take, this must be addressed; if the financialised economy ‘tail’ is wagging the real economy dog some re-planning is in order. Not overnight, but as a matter of clear priority. (And the tax take is unsustainable anyway, as it is largely based on the profits of shadow banking.)
Cameron is difficult to read. His Eton-bred confidence may be the arrogance of a disconnected stooge of the establishment; or he may turn out to be a master of realpolitik, using the backbench pressure from anti-Europe little Englanders to force a necessary split giving an external impetus to financial and banking reform, and managing the resulting coalition tensions skilfully.
This prompt decision by the Eurozone countries has increased the likelihood of some tangible harmonisation plans emerging from Brussels this weekend, but there are many uncertainties ahead for them.
We live in interesting times.