UK Exiting the EU to Save Bankers?
I realize this probably isn't getting much airtime in the US, but the UK's lone veto of the unified Euro deal on Friday has been all anyone can talk about over here this weekend. First of all, let me clear something up: French president Nicolas Sarkozy did not snub British PM David Cameron by refusing to shake his hand after the veto. The French are far more obnoxious and obvious about their snubs than this. So that part of the story is much ado about nothing.
The much larger story is the ramifications of the move and the effect it will have on Britain's ongoing relations with their EU partners. It's no secret that it's been a pretty antagonistic arrangement that probably goes all the way back to Paris yielding the international date line to Greenwich in exchange for promises Britain never kept. But Friday's veto might be the diplomatic equivalent of your wife walking in on you with midget h****rs. There might be no coming back from this one.
The question in my mind is whether or not this was a smart move for Britain. On one hand, they've managed to insulate themselves from the meltdown in European sovereign debt and the downgrades to the various banking systems that went with it. On the other hand, can a population of 60 million really go it alone against the larger backdrop of a unified Europe? Cameron vetoed the deal in order to protect the British financial services industry from further regulation by Brussels. So on the surface the veto was good for bankers. But what's good for bankers is generally regarded as bad for Europe at the moment, so there was no way the deal was going to work in the first place.
"Politically speaking, when the banks are considered the enemy and the root of all the problems we have today, Cameron's arguments were the wrong arguments at the wrong time for the wrong people," the official said. "Politically, he was dead from the start."
Was this a smart move on Cameron's part? Can the UK survive on its own? As a Ron Paul supporter, I'm particularly interested in this experiment in isolationism. Is the British banking sector worth risking an all out trade war?
Combined EU nominal GDP is greater than the US and the UK represents 14% of that combination. You tell me.
Isolationism... as in bury your head in the sand and wish the world away?
And why doesn't Germany get some, or all, of the blame? Adopting a two-tier Euro bond would have been the rational thing to do.
123
345
I thought the UK was still going to be part of the common market, just wasn't keen on accepting the new deal?
Seems to me that Cameron is taking more shit than he deserves for making this move.
Correct me if I'm wrong Eddie, but it is my impression that the rest of the Euro zone has no mechanism to kick England out of the zone and any treaty change to insert such language would have to be approved by Great Briton. The main reason why GB is involved with the Eurozone at all is to have access to their markets. There is no reason for GB to agree to fiscal consolidation b/c of their decision not to join the common currency.
The key question then becomes: are the legal structures in place to deny England access to the Eurozone markets and if not, can they be implemented over and English veto? If the answer is no (as I suspect), then I would argue that Cameron made a shrewd move staying independent.
That is absolutely correct, there is no mechanism for ejecting errant members of either the EU or the Eurozone, and that is the crux of the problem. If the Eurozone had been able to give Greece the boot when it was proven they committed fraud to attain membership, few of the current problems would exist today (unless of course you're Greek).
It wasn't until the Lisbon Treaty in 2009 that a member nation could even voluntarily leave the Eurozone, much less get kicked out.
The problem for UK in the wake of Friday's move is that they are a big exporter to Europe (heavy equipment, etc...), and if Europe decides to go elsewhere for that stuff, it's gonna hurt. Europe is already not crazy about paying for things in pounds when most Europeans think the UK should be on the Euro anyway.
Completely agree with you. The sticking point in my mind is whether the rest of the EU actually has the power to "decide to go elsewhere" by shutting down the UK's unfettered access to the zone. I don't think they do. As long as the UK can keep that access, they are winning in my book.
Look at the GBP/EUR cross over the last week. The Eurocrats are all lambasting Cameron's move but the markets don't seem to be hating on the Queen. At the end of the day, talk is cheap. Until the rest of the zone can PROVE they have the ability retaliate against England I think the markets will continue to treat GB with (relative) approval.
Completely agree. The markets clearly reward those who manage to avoid the Ebola ward that the Eurozone has become.
the thing is, the UK is a giant piece of fkin shit, that is worthless without london.
and london is worthless without finance, cameron did not have much of a choice.
^^^ Short version
GB can't really make a good move for the immediate future. Whatever happens, it is, for the moment, tied to that the Eurozone. Considering cultural, political and economic similarities, I think Britain should return to focusing on the Commonwealth (especially since many of them are more healthier than any of the Eurozone).
What you guys are completely missing is this fact: This crisis has achieved the goals of the German elite (read: industrialists) of having central Europe under German economic control. They went to 2 world wars over this and the other tried to prevent this by dividing Germany into 2. When Germany reunited, the other European countries (read: France) were scared shitless, so they thought getting into a currency union with the Germans would stop the Germans from invading them again. This is completely backfired on them (I AM REALLY ENJOYING THIS AS I HATE EVERYTHING FRENCH WITH A PASSION) and power has shifted to Berlin. Don't be fooled by the joint Merkozy press conferences, Berlin is calling the shots here. Germany is in no hurry to get over this crisis: they seem to be enjoying the flow of power to Berlin. The Germans are over their WW2 guilt, and although they not Blitzkreiging Europe anymore, they will not shy away from power this time. The 60 years guilt fest is over.Think about it: Germany now calls the shot in Europe!
The Brits have not forgotten the war; Margaret Thatcher was very much opposed to German reunification. I think it is really shortsighted (judging the comments and the op eds in the NYT and the Economist) to call it misjudgement on the part of 10 downing street. Norway and Switzerland (with a bloated financial industry) are not in the EU, and they are doing fine. Commentators who say that Britain should have joined the Euro are idiots. How would that have worked out for the Brits. Losing the power to control your money is akin to losing sovereignty.
Britain will do just fine. Damn the continental Europeans. Britain's true ally is America. I think the 4 countries in Britain can start their applications to become states 51 through 54 (just kidding). Maybe we can have Anglophonic Union though. US, UK, Canada, Aus and NZ.
Eddie, I think it's time for you to come back home. The future does not look too good for Europe.
JamesHetfield, understand and agree with your rationale. However suggest treading lightly when discussing Norway. The Norwegians have the ability to tell the EU to piss off because of oil.
Britain wants the Euro to collapse.
Why? What possible rationale has the UK wanting the EUR to die?
Interestingly, was at a JBIC (Japan Bank of International Cooperation) dinner tonight. JBIC CEO was in EU over last few weeks and believes Cameron will be out soon. Germany has too much to lose if the Euro dies and the UK can't influence decisions in Brussels from outside.
Ut officia voluptate voluptate quasi sequi corrupti illo. Asperiores sunt quis eos neque culpa. A doloribus unde quo tenetur.
See All Comments - 100% Free
WSO depends on everyone being able to pitch in when they know something. Unlock with your email and get bonus: 6 financial modeling lessons free ($199 value)
or Unlock with your social account...