In answering to Charles Tannock’s (rightful) advice ensuring that we are “not blinded to reality by praising what is good when its obviously so even if emanating from the EU”, it is worthwhile focusing on Gordon Brown and Alistair Darling’s rescue plan and their supposed replication of the British model within a grander pan-European plan. After all, it sounds very good, does it not? Right now, Brown is being painted in the European media as a knight in shining armour. So, we must have some concerns for the plans, both the British package and also the trillion-euro pan-European plan. They are a big deal – and the Opposition is obliged to say something about it all (even if we are in agreement). So, here we go:
This is a massive gamble for taxpayers, both British and European. On the pan-European £1.17 trillion plan, I would suggest that the spending spree amounting to £1.17 trillion may turn out to be the biggest historic gamble of taxpayers’ money in recent European history. There are no guarantees it will work. There are no guarantees on future returns for eurozone Governments. There are certainly no guarantees that it will bring about more long-term good than harm in the global financial system. I am sure that the £1.17 trillion injection will be a welcome contribution to a pot which has so far proved to be bottomless.
Did Brown save the day for Europe? On Gordon Brown’s supposed EU model, I think Gordon Brown and David Miliband’s suggestion that Europe has borrowed the British rescue model of tackling insolvency through liquidity injections, tackling funding through recapitalisation and tackling confidence through wholesale guarantees, means very little. Germany’s salvaging of Hypo Real Estate, the Dutch-Belgian rescue of Fortis and the French-Belgian rescue of Dexia have already been propped up along those lines. If anyone needs thanking right now, it is possibly France’s finance minister, Christine Lagarde. There is no proof in the success of Brown’s model in Britain, so we shall have to see if it is sufficient for Europe.
The one-size-fits-all eurozone approach appears unachievable. On Chancellor Angela Merkel’s claim in Paris that ‘we need a common approach in Europe but we must be able to adapt to each national situation in a flexible way’ is unachievable. The European Union and its 15-member eurozone have always followed an all-or-nothing approach according to a one-size-fits-all European solution. It has broken down in the face of reality.
Saving the reflexive British economy is different from rescuing the eurozone. On EMU, we might say that the failure of the EU's rigid economic and monetary union will become one of the most striking issues of the entire financial crisis since at its heart, Europe has always been wrong to assert that a singly harmonised and regulated European economic landscape with one single currency will work. It is the doomed economic environment upon which the European banking system rests, particularly for the eurozone 15. Consumers, taxpayers and voters across Europe are now paying the price.
Europe has declared it is a bottomless financial pit, so we should treat it as one (i.e. with caution). Regarding Gordon Brown’s initial proposals, Gordon Brown’s push to set up a European-wide funding plan, despite the flop at last Tuesday’s meeting in Luxembourg for a common banking rescue plan, and despite the collapse of the Growth and Stability Pact criteria in the Paris summit on the previous Saturday (which effectively means a collapse of eurozone financial standards), is to condemn Britain to further troughs in the financial crisis. That puts the European Union at fault and I do not even know if Brown’s approach is the right one. It may be a first.
As for EU regulation in the crisis, you know my view: that the European Union is grossly (but not singularly) at fault in the financial crisis. For example, we only have to talk of the Takeover Code and Market Abuse Directive – as Mervyn King has done – to see that they were to blame for the confusion in a potential takeover of Northern Rock. Again, politicians who have begun discussing ‘mark-to-market’ accounting rules used by all banks to value their assets have their basis in the EU Capital Requirements Directive. The last thing that Member States want is an even tighter stranglehold within the EU which is about to leave them to perish in the winter of their discontent.
