Ben Chu: This medicine alleviates the symptoms – but won't eradicate the disease

It was the banking sectors of countries such as Ireland and Spain that effectively destroyed their public finances

The big day was supposed to be Friday. But the eurozone's Big Two seem to have decided that the Brussels meeting at the end of the week will be nothing more than a rubber-stamping exercise. Angela Merkel and Nicolas Sarkozy announced yesterday that they had reached an agreement on how to stabilise the eurozone. It would seem that the job for the rest of Europe's leaders on Friday is simply to turn up and approve what they have cooked up.

The deal seems to bear a deeper German, rather than French, stamp. There will be treaty change for the 17 nations of the eurozone and a new regime to limit borrowing by member states – both central demands of Ms Merkel. There will be automatic fines for fiscally lax states and the European Court of Justice will verify national budgets. But there remains doubt about the extent to which the fiscal enforcement regime will be beefed up. The European Court will not, we were told yesterday, be able to veto budgets. And there is no detail on the size of the national fines so we cannot say how much of a deterrent these will be.

Yet there is an absurdity about this whole exercise. This is not a crisis driven by over-borrowing by states. Yes, the former Greek government spent too much and deceived its eurozone partners about its finances. But the governments of Ireland and Spain were running budget surpluses right up to the moment the roof fell in on them in 2008. It was the banking sectors of those countries – facilitated by profligate financial institutions in France and Germany – that were out of control and effectively destroyed their public finances. Ms Merkel's treaty changes will not address that fundamental flaw – and they will not help to alleviate the present crisis. As such, the German Chancellor is engaged in elaborate displacement activity.

There's also a potential danger to this deal. Ireland has a habit of holding referendums when EU treaties are changed. And the Irish public rejected the most recent two (Nice and Lisbon) at the first time of asking. A lost referendum in a member state at a time of severe austerity in parts of Europe could have politically explosive consequences. Ms Merkel's displacement activity might end up proving very costly indeed.

PROMOTED VIDEO
News
ebooksNow available in paperback
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Citifocus Ltd: Newly Qualified Accountants - Risk Mgmt

£Attractive Package: Citifocus Ltd: Prestigious financial institution seeks to...

Citifocus Ltd: Operational Risk Analyst

£Negotiable: Citifocus Ltd: Experienced operational risk professional with ban...

h2 Recruit Ltd: Business Development - Telecommunications - £50,000 OTE

£25000 per annum + £50,000 OTE: h2 Recruit Ltd: London, Reading , Southend, Al...

Recruitment Genius: Call Centre Agent - £22,000 OTE

£18000 - £22000 per annum: Recruitment Genius: As a Call Centre Agent you will...

Day In a Page

Homeless Veterans Christmas Appeal: Drifting and forgotten - turning lives around for ex-soldiers

Homeless Veterans Christmas Appeal: Turning lives around for ex-soldiers

Our partner charities help veterans on the brink – and get them back on their feet
Putin’s far-right ambition: Think-tank reveals how Russian President is wooing – and funding – populist parties across Europe to gain influence in the EU

Putin’s far-right ambition

Think-tank reveals how Russian President is wooing – and funding – populist parties across Europe to gain influence in the EU
Tove Jansson's Moominland: What was the inspiration for Finland's most famous family?

Escape to Moominland

What was the inspiration for Finland's most famous family?
Nightclubbing with Richard Young: The story behind his latest book of celebrity photographs

24-Hour party person

Photographer Richard Young has been snapping celebrities at play for 40 years. As his latest book is released, he reveals that it wasn’t all fun and games
Michelle Obama's school dinners: America’s children have a message for the First Lady

A taste for rebellion

US children have started an online protest against Michelle Obama’s drive for healthy school meals by posting photos of their lunches
Colouring books for adults: How the French are going crazy for Crayolas

Colouring books for adults

How the French are going crazy for Crayolas
Jack Thorne's play 'Hope': What would you do as a local politician faced with an impossible choice of cuts?

What would you do as a local politician faced with an impossible choice of cuts?

Playwright Jack Thorne's latest work 'Hope' poses the question to audiences
Ed Harcourt on Romeo Beckham and life as a court composer at Burberry

Call me Ed Mozart

Paloma Faith, Lana del Ray... Romeo Beckham. Ed Harcourt has proved that he can write for them all. But it took a personal crisis to turn him from indie star to writer-for-hire
10 best stocking fillers for foodies

Festive treats: 10 best stocking fillers for foodies

From boozy milk to wasabi, give the food-lover in your life some extra-special, unusual treats to wake up to on Christmas morning
Phil Hughes head injury: He had one weakness – it has come back to haunt him

Phil Hughes had one weakness – it has come back to haunt him

Prolific opener had world at his feet until Harmison and Flintoff bounced him
'I have an age of attraction that starts as low as four': How do you deal with a paedophile who has never committed a crime?

'I am a paedophile'

Is our approach to sex offenders helping to create more victims?
How bad do you have to be to lose a Home Office contract?

How bad do you have to be to lose a Home Office contract?

Serco given Yarl’s Wood immigration contract despite ‘vast failings’
Green Party on the march in Bristol: From a lost deposit to victory

From a lost deposit to victory

Green Party on the march in Bristol
Putting the grot right into Santa's grotto

Winter blunderlands

Putting the grot into grotto
'It just came to us, why not do it naked?' London's first nude free runner captured in breathtaking images across capital

'It just came to us, why not do it naked?'

London's first nude free runner captured in breathtaking images across capital