Catfish and Cod
Tuesday, July 15, 2003
Portents of the New Holy Roman Empire: II.
(Link path: King of the Blogs, London Telegraph)
Let's talk about France's real commitment to the EU.
Moves to formally consign the EU's stability and growth pact to the dustbin gathered pace yesterday as French president Jacques Chirac called for it to be suspended, brushing aside the rigid spending code established by treaty law to ensure the long-term survival of monetary union.
And whose idea were those rigid spending codes, hmmm?
Speaking in his annual Bastille Day interview, M Chirac demanded "provisional ways of easing" the pact in order to prevent the eurozone slipping further into an economic slump.
His comments follow moves by Italy's six-month presidency of the EU to kick-start the European economy with a "Soft Keynesian" package of public works schemes modelled on Franklin Roosevelt's New Deal of the 1930s. The money would be raised off-budget to evade the pact's deficit ceiling of 3pc of GDP.
Another indication that the EU spending rules are trash. France is right to want to pitch them overside. But then, why is my tone critical of France? Read on, my dears, read on:
The Italian finance minister, Giulio Tremonti, has proposed an extra Eu25 billion a year in EU spending on roads, trains, bridges and tunnels, much of it funded by the European Investment Bank, which is already the world's biggest lender.
"We are no longer in a banal economic cycle; we're facing a very different economic scenario," he said, calling for emergency counter-measures.
Very much in the spirit of European unity that we keep hearing about from Paris, right? Right?
France is already facing censure for its defiant breach of the spending rules. The French deficit was 3.1pc in 2002 and is almost certain to be over 3.5pc this year, and yet M Chirac has vowed to press ahead with tax cuts and costly plans to build a new aircraft carrier battle group and nuclear submarines.
So not only is Chirac pushing for a larger military, but he's willing to sacrifice European unity to do it! And there's more. Aircraft carriers and nuclear subs are not the tools necessary for peacekeeping, homeland defense, or force protection, the roles so cherished by EU boosters. They are for force projection, for asserting your power overseas, and ultimately for enforcing policy on the world.
If there are still any doubts that France wants to challenge the United States for leadership of the world, these moves should dispell them.
Germany is in even worse shape, facing three consecutive years over the deficit ceiling, but has tried harder to retrench in order to uphold the credibility of the rules - which it first imposed on everybody else as a condition for giving up the Deutschmark.
Oh yeah, that was who came up with this ridiculous idea. Turns out Germany doesn't like deficit ceilings any more than the next guy.
Portugal was the first eurozone state to break the limits after a disastrous credit boom turned to bust last year.
Everybody's breaking the spending quotas, you see. But most EU states are using their deficit spending to prop up the economy. France, on the other hand, considers its military more important.
Standard & Poor's warned last week that it would downgrade the credit rating of eurozone governments if fiscal discipline slipped any further. The agency said that states were behaving as if they were still sovereign borrowers, failing to recognise that default risk is much greater now they have given up power to issue currency.
Either the EU is a federal superstate, or it isn't. Europe can't have it both ways, not in the manner they've had it up until now. A deal must be made on powersharing between the European and national governments, or the whole charade will fall apart, and soon.
Most US states are obliged by law to run balanced budgets because history has shown how vulnerable they can be in a currency union where they no longer have an escape-valve.
And the states are really, really hurting right now because of it. As Europe and Israel said when we were attacked: Welcome to our problems, boys and girls.
Ernst Welteke, president of the German Bundesbank and a key member of the ECB board, has also warned that the stability pact is too lax rather than too strict, saying it was crucial to punish governments for any deviation before they backed themselves into a cul-de-sac.
Like I said, you can't have it both ways. Either the EU makes economic policy or the nations do. If both governments have one end of the rope, they will pull and pull until one side gives, or the rope falls apart.
The ECB said the eurozone's pensions "time-bomb" makes it doubly vulnerable to slippage in public finances, insisting that the only way to boost the region's economic speed limit is through reform of the labour markets.
Ahh, the elephant in the room. One of France's many delusions is the idea that its welfare state can go on forever. It can't, and neither can Europe's (nor America's). If the French government can't stop kowtowing to every labor movement in the streets, the French economy will go straight down the drain.
But France isn't thinking too hard about that right now: she's too busy asserting itself as a World Power (TM). And here's the danger to the EU. France is in the "inner circle" of nations that are strong Euro-boosters. The French government cajoles, pleads, bribes, and even threatens its fellow European governments into following EU dictates. Yet, a disturbing pattern is beginning to emerge. France, since she considers herself a World Power (TM), feels no need to follow those nasty EU dictates herself, and does whatever she pleases. After all, what's good for France is good for the world, right?
And then they accuse America of self-interest...