Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Politics : President Barack Obama -- Ignore unavailable to you. Want to Upgrade?

To: Mac Con Ulaidh who wrote (75948)	5/28/2010 11:36:50 AM
From: ChinuSFO	Read Replies (2) \| Respond to of 149317

Interesting comparison between the British and the Germans vis-a-vis Eurozone. ================================== Merkel has joined Thatcher in Europe's corner shop By Philip Stephens Published: May 28 2010 03:00 \| Last updated: May 28 2010 03:00 Angela Merkel has begun to sound awfully like Margaret Thatcher. Germany has caught the British disease. If the affliction keeps hold, Europe is doomed. The European Union has learnt to live with Britain's bean-counting. It will not survive a German decision to play the same zero-sum game. The international investors who have put the eurozone under siege are placing two mutually supportive bets. One is about economics - the hard numbers of budget deficits, debt-to-GDP ratios and subprime sovereign debt. The other is about politics - intangible, but ultimately more important things like leadership and political will. The first of the bets says that on any reasonable assumptions Greece will not be able to pay down its debts; and that Spain and Portugal could well find themselves in the same predicament. One or more of these countries will see the effort to put their economic houses in order tip them into deflation traps where austerity becomes self-defeating. That certainly seems to be the case with Greece, where the numbers suggest that it will be impossible to avoid restructuring its debt. On the other hand, the impact of a default on the global financial system looks pretty scary. A banking-turned-sovereign debt crisis could yet end up as another banking crisis. The second bet speaks to the absence of leadership in the continent's capitals. Crudely speaking, the markets are calculating that governments lack the shared political commitment to underwrite the stability of the single currency. Sure, eurozone leaders have agreed to set up a €750bn liquidity fund to prop up the weaker members; and the European Central Bank has sacrificed ideological purity in an effort to reassure bond investors. Each step in the euro's defence, however, had been preceded by prevarication and followed by recriminations. The effect has been to leave a question mark over the long-term future of monetary union. On one level, the argument now is about whether governments are ready to accept much tighter co-ordination of economic policies within the eurozone. Some call this political, others economic union. Some (mostly Germany) want a tough new regime to punish the profligate. Others retort that the countries that have accumulated large external surpluses (mostly Germany again) must do their share to rebalance the European economy. It seems obvious enough that effective management of the euro will in future require greater mutual interference in national economic policymaking. The precise nature and balance of these measures, however, will be irrelevant unless they reflect a more fundamental presumption of shared interest. The euro has a future only for as long as investors believe the commitment of governments is unassailable. Here we come to the British disease. For the four decades of its membership Britain has been the Union's most uncomfortable and awkward member. There are plenty of explanations: history, geography and culture among them. Half a century after the sun set on empire, the British still struggle to see themselves as a European rather than global power. They are reluctant to abandon what they imagine to be a privileged relationship with the US. And they are arrogantly hopeless at learning foreign languages. The misperception that has done most to hamper British engagement with its European partners, however, has been a belief that the advantages and disadvantages of membership can be calculated on an abacus. Add up how much cash the government hands over to Brussels; calculate what it gets back and, hey presto, the benefits, or rather costs, are there for all to see. It is not like that at all in real life. The EU's value to Britain is as multiplier of influence. But the rot set in during the early 1980s when the then Mrs Thatcher waved her handbag at fellow European leaders and demanded "her money" back. Britain was not prepared to pay the wages of cossetted French farmers or lazy Italian wine growers. As it happens, Britain's contributions to the Brussels budget were excessive. But the manner in which Mrs Thatcher pursued a rebate replaced serious discussion about Europe with a discourse centred solely around pounds and pence. The then prime minister forgot that a few years earlier she herself had argued that the principal benefit for Britain from EU membership was the chance to leverage its influence in the world. Instead, the British debate assumed Europe was a zero-sum game: anything gained by Brussels had been subtracted from Westminster. Mrs Thatcher spoke the language of the small shopkeeper from her native Lincolnshire. Ms Merkel, as determined as was Britain's Iron Lady that Germany should no longer pick up Europe's bills, has her own exemplar of the virtues of provincial thrift. The financial institutions and governments that have got themselves into a financial mess should have heeded the advice of a "Swabian housewife". The headlines in the tabloid Bild newspaper raging at Greek profligacy and demanding that Germany gets its money (and its Deutschmark) back are familiar to anyone who has ever glanced at the anti-European invective of Britain's Sun newspaper. The anger in Berlin, of course, glosses over the fact that Germany was among the first to flout the growth and stability pact, or that German banks were among the most eager buyers of subprime debt. It forgets also the huge advantages - economic and political - Germany derives from its place in the Union. But this is what happens when governments seek to draw sharp dividing lines between their national and European interests. The mindset instilled by Mrs Thatcher has left Britain a semi-detached member of the Union: ever reluctant about, and often opting out of, further integration. David Cameron's new government has nothing interesting or constructive to say about Europe. To be fair, Ms Merkel does occasionally raise her eyes from the anti-European invective of the tabloids to make the broader case for German engagement. But the effort is defensive and half-hearted. The lesson from Britain is that once the debate about Europe is framed in terms of entries in the ledger of a corner shop, the battle is lost. No wonder the markets are betting against the euro ft.com