Eurocrash: politics in the driving seat

05/06/2012

… nothing less than a European Parliament and a European government which really do exercise legislative and executive power within the Federation.

These remarks were held to have triggered the process which led eventually to the constitutional convention which produced the draft convention which eventually morphed into the Lisbon Treaty – thus giving the man some claim to paternal rights.

Thus, when the man is reported in the German press as saying that "Europe is now on the precipice", it is still, after all this time, a significant event.

And when he talks of "chaos, fire and avalanches" and a global economic crisis, such as those now living have never experienced, then calling for Europe to "summon up the courage to build a fiscal union with a common budget and uniform tax policy and guarantee the public debt", this is no ordinary politician talking.

In the wake of Merkel, he is also saying that, if the euro fails, the EU will fall apart. Greece threatens to sink into chaos and then the incipient run on the banks in Spain, Italy and France "will trigger an avalanche that buries Europe". Without the euro, Europe will disappear from the political world stage.

Briefly mentioned in the Telegraph and then in the Guardian, neither do his intervention justice, failing to convey the effect he will have.

The Guardian is particularly poor, playing catch-up after the weekend, its current story telling us that the EU is "edging towards a controversial new blueprint for a federalised eurozone". But, instead of dating it from the May meeting in Brussels, it has Paris and Brussels responding to "Spain's pleas for an EU rescue of its beleaguered banks".

But, from this paper and others, we are getting news of diverse meetings, suggesting that the tempo is increasing. In particular, we have Barroso meeting Merkel and French foreign minister Pierre Moscovici making a pilgrimage to Brussels, where he said eurozone bailout funds should be used to inject cash into collapsing banks.

Since such direct payments are impossible under existing rules, this is de facto support for a new treaty, somewhat reinforced when Moscovici added that France wanted the European Council at the end of the month to set up a "eurozone banking union". Spiegel is also talking up the need for Spanish bank recapitalisation, and has Merkel pressurising Spain to accept bailout money, rejecting the idea of a "bailout lite". Spain, on the other hand, believes that the EU commission could take a plan for bank aid to the European Council on 28-29 June.

With every passing hour, therefore, the idea that we are in for another treaty round seems to be firming up, even to the extent that it is being played down by the EU commission. Contradicting Welt, spokeswoman, Pia Ahrenkilde-Hansen said: "There is no master plan".

The notion, we are told, was also rubbished in Berlin – but not ruled out. "We are talking about several years and certainly not a solution that we are thinking about in the current problematic situation," said Merkel's spokesman – something again we already knew.

Bringing this right up to press, we have Merkel in Berlin, prior to meeting with Barroso declaring that she is open to establishing a European banking authority. She says she will discuss with Barroso, "what extent we have to put systemically (important) banks under a specific European oversight".

So far, there has been no public response from any senior UK political figures, but we expect them to be behind the curve on this. Much weight is being given to Soros, particularly by the Daily Mail, even if he too seems to be behind the curve when it comes to political developments.

Politics, rather than economics, is currently in the driving seat, even if the market will have the final say.

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