Ben Chu: Our economic fate is still chained to the Continent


Related Topics

Like a desperate exam student, Europe's leaders have responded not to the question they were actually asked, but the question they wanted to answer. And even that they got wrong.

The latest Brussels agreement commits 23 European Union members to strict new budget rules. Three other states might sign up. Only Britain has rejected the new "fiscal compact" outright, which is ironic considering that David Cameron and George Osborne usually love to trumpet their fiscal rectitude. The problem with what the EU produced is that government overspending was not the cause of the eurozone sovereign debt crisis. It was private businesses – especially giant continental banks – that were the undisciplined players in the boom years and which destroyed national finances. There is nothing in the Brussels agreement that addresses that glaring weakness in the single currency's structure.

And even if fiscal laxity by politicians had been responsible for driving the eurozone into this ditch, the promise that governments will henceforth keep public borrowing in check is an irrelevance to panicking investors today. What terrifies market participants is not the prospect of some future Greek prime minister going on a spending spree, but the possibility that their holdings of European government bonds and continental bank debt could be wiped out in the coming months due to a cascade of sovereign defaults. The question the markets are asking of European leaders is: what are you going to do to prevent those defaults? For 18 months they have received no satisfactory answer.

Strip away all the displacement activity and what is there in the Brussels agreement that actually addresses the crisis of market confidence? There is a pledge for member states to increase the resources of the International Monetary Fund by €200m. Some optimistic analysts have suggested that a beefed-up IMF, operating in tandem with the existing European bailout fund, might, at a stretch, be enough to cover the €1trillion financing needs of Spain and Italy over the next three years. But investors yesterday were unconvinced and sent the borrowing costs of Madrid and Rome up once again. And, of course, the European Central Bank still sits idle on the sidelines while European capitals burn.

And Britain? Yesterday's debate about our place in Europe's political architecture was largely irrelevant. Inside or outside the eurozone, signed up or not to any EU fiscal compact, the fact remains that our economic fate remains chained to that of the Continent. And after this week's summit of denial, that is not a happy place to be.

React Now

Latest stories from i100
Have you tried new the Independent Digital Edition apps?
iJobs Job Widget
iJobs General

Cover Supervisor

£75 - £90 per day + negotiable: Randstad Education Group: Are you a cover supe...

Marketing Manager - Leicestershire - £35,000

£30000 - £35000 per annum: Ashdown Group: Marketing Manager (CIM, B2B, MS Offi...

Marketing Executive (B2B and B2C) - Rugby, Warwickshire

£22000 - £25000 per annum: Ashdown Group: A highly successful organisation wit...

SEN Coordinator + Teacher (SENCO)

£1 per day: Randstad Education Leeds: Job Purpose To work closely with the he...

Day In a Page

Read Next
Piper Ryan Randall leads a pro-Scottish independence rally in the suburbs of Edinburgh  

i Editor's Letter: Britain survives, but change is afoot

Oliver Duff Oliver Duff
Some believe that David Cameron is to blame for allowing Alex Salmond a referendum  

Scottish referendum: So how about the English now being given a chance to split from England?

Mark Steel
Scottish referendum: The Yes vote was the love that dared speak its name, but it was not to be

Despite the result, this is the end of the status quo

Boyd Tonkin on the fall-out from the Scottish referendum
Manolo Blahnik: The high priest of heels talks flats, Englishness, and why he loves Mary Beard

Manolo Blahnik: Flats, Englishness, and Mary Beard

The shoe designer who has been dubbed 'the patron saint of the stiletto'
The Beatles biographer reveals exclusive original manuscripts of some of the best pop songs ever written

Scrambled eggs and LSD

Behind The Beatles' lyrics - thanks to Hunter Davis's original manuscript copies
'Normcore' fashion: Blending in is the new standing out in latest catwalk non-trend

'Normcore': Blending in is the new standing out

Just when fashion was in grave danger of running out of trends, it only went and invented the non-trend. Rebecca Gonsalves investigates
Dance’s new leading ladies fight back: How female vocalists are now writing their own hits

New leading ladies of dance fight back

How female vocalists are now writing their own hits
Mystery of the Ground Zero wedding photo

A shot in the dark

Mystery of the wedding photo from Ground Zero
His life, the universe and everything

His life, the universe and everything

New biography sheds light on comic genius of Douglas Adams
Save us from small screen superheroes

Save us from small screen superheroes

Shows like Agents of S.H.I.E.L.D are little more than marketing tools
Reach for the skies

Reach for the skies

From pools to football pitches, rooftop living is looking up
These are the 12 best hotel spas in the UK

12 best hotel spas in the UK

Some hotels go all out on facilities; others stand out for the sheer quality of treatments
These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

Widespread fear of Isis is producing strange bedfellows

Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
Topshop goes part Athena poster, part last spring Prada

Topshop goes part Athena poster, part last spring Prada

Shoppers don't come to Topshop for the unique
How to make a Lego masterpiece

How to make a Lego masterpiece

Toy breaks out of the nursery and heads for the gallery
Meet the ‘Endies’ – city dwellers who are too poor to have fun

Meet the ‘Endies’ – city dwellers who are too poor to have fun

Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

Ian Paisley’s decision to make peace with his IRA enemies

His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam