With new large cracks appearing in the Eurozone hull and with the ships’ embattled crew given little more than paper and words to patch the holes up it does increasingly appear that barring miracles the end game for the good ship ‘Euroland’ could already now be being played out. In its present form and by the day it does increasingly look that the European single currency in its present form is doomed. With officers on the ‘Euroland’ bridge doing little more than arguing style as they await instructions from the ops room deep down in the smoke ridden heart of the ship and with the rudder stuck fast in ‘ever decreasing circles’ mode together with rather too many unqualified ‘captains’ arguing the toss over what to do next and what new key message they might agree to put to the hard working crew in the hope of avoiding mutiny we may conclude that even if this once proud ship can survive for a little while longer yet and even possibly make it back into the dock for repairs the medium and longer term plan for the ship will definitely need to be seriously rethought.
As we stand now we look at the good ship ‘Euroland’ and see absolutely no communication between ‘fore and aft’. Mainly because of bureaurocracy let alone ridiculous health and safety rules we are left uncertain as to the level of real and permanent damage already sustained and as to whether the much damaged ship is even repairable at all. No one at this stage can be sure of how many more hits this badly designed ship can take. Sadly this is not the 42,000 ton battleship Tirpitz that we are talking about (a reference to the German battleship sunk by RAF Lancaster bombers of 9 and 617 Squadron exactly 67 years ago this week) it is a ‘single currency’ ship that we speak and one that in the opinion of many should never have been allowed to get anywhere near ‘main gate’.
The good ship ‘Euroland’ with its crew of Brussels based bureaucrats is though a ship that is ‘owned’ by seventeen of a total twenty-seven that have signed themselves up to be members of the European Union. They must all be allowed their say on its future provided that markets haven’t completely sunk it first. Put it another way if you will – this is a single currency ‘ship’ that impacts directly on the day to day lives of no less than 320 million people right across Europe plus very many millions of others indirectly.
For some the Euro was even seen as a passport to eventual full EU economic and political union but despite the cries of the French and maybe the Germans too I do now believe more than a handful of EU states are clinging on to that particular bad dream. But if the demise, collapse or maybe change in construction and membership of the Euro currency is to be taken as a probably near certainty over the coming weeks and months the deeper question is whether the fate of the Euro will lead to the break-up of the European Union?
With the Euro now headed for ‘intensive care’ and with two of the largest founding member nations [Germany and France] seemingly holding hands as they pray for whatever it is that they want we in the UK are left to give more thought to the irrevocable damage that a collapse of the single currency dream will have done to the credibility and survival of the European Union. Yesterday various EU knives were pointed in the direction of British Prime Minister David Cameron in response to the negative approach by Britain to implementation of a transaction tax across Europe. The official UK view is apparently that a ‘Tobin’ tax would only be acceptable if implemented on a global scale. We may well prefer to believe that it might have been far better for Mr. Cameron to completely dismiss the idea of ‘Tobin tax implementation without any caveats but we need to remember that as long as we remain a part of the EU we have no choice but to play the political game of bargaining. The reality is that the whole issue of a European transaction tax is a red herring – it won’t happen because the political climate is wrong. There are more pressing things to be getting on with and I sense more climbing down from its pedestal to come from the EU and its commissioners over coming weeks. With Athens and Rome burning and Spain and France being lined up as more fuel to burn the attempted imposition of an unnecessary financial transaction tax is clearly unreasonable to the point of being ridiculous. Equities are already subject to stamp duty in the UK but I would add that the net cost of collecting the pittance we are talking about is also unwarranted on the amount that it would probably raise.
Clearly the Coalition Government is in no mood for being seen suggesting that Britain might soon walk away from the EU but the fear deep in Europe is that Britain will use the current period of weakness to its advantage. That advantage would not only to be to attempt to block more EU based legislation but to push to have more power directed back from the EU to individual member states. I wish but with Mr. Cameron soon headed for Berlin facing the wrath of Angela Merkel for what he has already said we shouldn’t expect any change of heart in the official attitude and approach of Britain toward the EU any time soon. Patience and eventually all will I am sure be well……
Howard Wheeldon is the Senior Strategist at BGC Partners