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.
- 1 Home Office says Nigerian asylum-seeker can’t be a lesbian as she’s got children
- 2 What happens to your body when you give up sugar?
- 3 Japanese island overrun with cats after population explodes
- 4 Apple and Google users being spied on for a decade because of 'Freak' security flaw
- 5 Have sex with your iPad thanks to the new sex toy no-one asked for
The City of the Monkey God: Archaeologists claim to have found city lost for 1,000 years in remote Honduran jungle
Japanese island overrun with cats after population explodes
Delhi bus rapist blames dead victim for attack because 'girls are responsible for rape'
Bubonic plague-carrying fleas found on New York City rats
London property boom built on dirty money
'Jihadi John': CAGE representative storms off Sky News accusing Kay Burley of Islamophobia
Durham Free School: 'Creationism taught at' free school facing closure
Nearly 100,000 of Britain's poorest children go hungry after parents' benefits are cut
Ukip would cut billions from Scottish budget to fund English tax cuts
End of the licence fee: BBC to back radical overhaul of how it is funded
Ukraine crisis: Top Chinese diplomat backs Putin and says West should 'abandon zero-sum mentality'
iJobs Money & Business
£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...
Voluntary post, reasonable expenses reimbursed: Reach Volunteering: Would you ...
£36,000 - £40,000: Christine McCleave: Are you looking for a new opportunity a...
£15000 - £18000 per annum: Recruitment Genius: This is a great opportunity for...