After heated negotiations and a jolly good dinner, the Eurozone countries have agreed a “banking union.” This essentially entails creation of a Eurozone banking regulator, and a €500 billion rescue fund. Three key issues emerge.
1. Germany
Angela Merkel has been playing hard to get throughout the process of creating this “banking union.” This is no surprise: after all the political wrangling, dealing, backstabbing and conniving, it remains the task of the German public to put their hands in their pockets to pay for all this largesse. Merkel is very aware of the fact that German voters are, ahem, “displeased” at the thought of bailing out the P.I.I.G.S. until the cows come home. At what point will the Germans lose their bottle and refuse to continue to do this? Elections loom next year for Frau Merkel, so one is willing to bet that she is going to play hard ball.
2. France
The motor for much of this has been France, initially driven by Nicolas Sarkozy but now driven by Chauffeur Hollande. He has the luxury of extolling the virtues of this union quite simply because he has no looming election: he entered office this year. French voters are not going to be footing the bill – yet – so politically he can present himself as The Great Saviour of the European project. Hollande has afforded himself this luxury that his German counterpart cannot, despite the fact that the economic policies he has begun to enforce upon his own people are already causing the French economy to stall. The situation has arrived now where an inept French tail is wagging a grumpy German Rottweiler (Valerie, perhaps?).
3. Britain
What does Britain have to do with this you might ask? Well, that is an interesting conundrum. This is technically a matter for the Eurozone. Britain, however, and its economy will most definitely be affected by this decision, mainly because its economy is tied to the the Eurozone by its membership of the European Union. Britain finds herself in a situation where it is politically impotent, and economically vulnerable.
In those circumstances, will the Eurozone, sensing weakness and having dragooned its members into a single banking regulation system, now turn its guns on the City of London, and try to impose its will. The UK needs to think carefully about its position, it is in grave danger of being sucked into the oncoming storm, and trashing one of its last remaining world class industries: the financial sector worth 14% of GDP.
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The Eurozone now sits precariously upon the edge of ruin. A war of words and political manoeuvres is being waged, without any real public awareness of this. French victory will lay the foundations of a European super state, with financial control centralised in Brussels. German victory will see the P.I.I.G.S. ground slowly to death under the heel of the German jack-boot of austerity and high interest rates.
This great question is one the German electorate will soon have to decide. Not for the first time does the fate of Europe hang upon the result of a German election.
Edmund Greaves is co-editor of The Libertarian Press. He also writes travel articles at the www.curiousenglishman.com
Filed under: Economics, European Union Tagged: banking union, EU 
