Good news from Brussels?

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.

Graham Barnes

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4 Replies to “Good news from Brussels?”

  1. My reading of the treaty provisions is that european turkeys just voted for a ferociously deflationary christmas and new year.

    Can someone explain to me how, exactly, those countries in the eurozone that cannot hope to compete against Germany are going to pay for their import surpluses. They have borrowed so far – at low rates of interest from German and French banks which are highly leveraged, undercapitalised and now very unstable. But there comes a point where that is no longer possible – and so how are these countries supposed to pay, and roll over their debts in a new higher interest environment?

    The answer, according to this Treaty and the politicians who gathered in Brussels is by more “discipline”, by new rules imposed by european treaty.

    And how are they going to pay for the deficits they clock up when they find they have been affected by the fraud perpetrated by US banks?

    And can someone tell me what this Treaty does to get growth going again given we have reached the limits to economic growth – as witness the current oil price? And if there is to be no growth how, pray, are the new higher rates of interest in the european financial system to be paid for?

    In my view they are not going to be paid for – but that will not stop politicians posturing and agreeing treaties which will impose austerity programmes on debtor countries – austerity programmes that will create the sort of downward debt deflationary spirals that have already started in Greece, Italy, Spain….

    The differences with Britain are not the real story here in my view – although in the official narratives the politicians will seek to pass the blame “to Britain”.

    It may be true that Cameron has been defending the interests of the City of London – and that in all of this there is a sub theme about financial regulation and the refusal of the city of London to bow to european finance regulation.

    This would not surprise when you know the history of the London as a financial centre after world war two. The City of London had no future after the end of empire and resurrected itself by creating a disreputable and shameful network of tax havens and secrecy jurisdictions in which international finance could operate with minimal or no regulation, without paying taxes, and where it could launder money for international crime syndicates. No doubt it was those disgraceful arrangements that Cameron was defending.

    But without painting in the rest of what is going the main story is not being told – that europes politicians are voting for more austerity and debt slavery for their citizens, ignoring the deeper need to prepare our societies for energy descent and a contraction that is equitable to all.

  2. Brian’s comment reminds us that my original post can be seen as tantamount to welcoming the fact that one of the passengers in the first class lounge on the Titanic has been found cheating at cards and the other passengers seem minded to redress matters.

    He is right to remind us of the bigger picture. My problem is in imagining how our clearly understood narrative of the dysfunctional nature of existing financial and banking systems can ever take hold with decision makers. Brian I think is more optimistic about the ability of grassroots actions to influence events, and I hope he is right. Perhaps misguidedly I still look for glimmerings of hope from within the political establishment. So if the Eurozone introduces a Tobyn tax for example – which targets high frequency trading rather than financial transactions that support the real economy – I will be glad.

  3. A very good metaphor Graham.

    In fact I’m not that optimistic about the ability of grass roots action to influence events – partly because developing meaningful projects takes years and events are proceeding faster than that – also because mass movements are very slow at absorbing complex messages and being able to respond to them. It takes time to accumulate alternative power and policy networks by becoming well resourced, well informed, well connected, well represented, well protected and well communicated

    It is more that I have no hope whatsoever that mainstream establishment politics will yield anything but futility and largely pointless pain.

  4. I’m of two minds about this. Brian makes an important point about the folly of imposing still more austerity on European countries rather than planning for the transition away from a growth-based economy. It’s also worth remembering that the debt crisis actually has its roots in reckless lending practices by private banks rather than reckless spending by states. So by constraining state spending still further, the new Eurozone-plus rules are missing the point dangerously – even if they’re doing so in order to try and calm the bond markets.

    However I’m unsure about the Titanic analogy that Graham made, because in reality the role played by the City of London in the world economy goes well beyond fleecing a few well-heeled companions in first class. As Nicholas Shaxson points out in his book Treasure Islands, the City bears considerable responsibility for the poverty of Africa and the instability of many other parts of the world including Russia. And we mustn’t forget that those very same European and American private banks whose actions triggered the debt problem acted in cahoots with the City.

    Moreover, the course that our “Titanic” is taking is at least partially determined by the actions of the City. So I think the pressure to reform the City and other offshore havens is appropriate and very welcome, and I hope its momentum continues to build. It’s just a pity – to put it mildly – that energy descent isn’t being given the direct attention it so badly needs.

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