By: Dr. Mike Campbell
On Friday, David Cameron confused himself with Winston Churchill and now Britain again stands alone against “fortress Europe”. Whilst Churchill’s leadership of wartime Britain in standing alone in resistance to Nazi-ruled Europe was truly heroic and inspiring, Cameron’s position seems more in keeping with King Canute than his Conservative predecessor. 26 of the EU’s 27 members agreed to move towards fiscal union to ensure that a future Eurozone crisis can be averted.
The deal hopes to boost global confidence in the Euro and its long term future – something that David Cameron is at pains to claim he is fully behind – by providing tighter budget coordination within the EU. States would be required to adhere to budget deficit limits or face automatic penalties (and, presumably, the wrath of the rest of the group). They will also boost the IMF’s coffers by €200 billion to enable it to help out in any future bailout of a Eurozone state, if needed.
The Bridge too Far for David Cameron was additional financial services regulation that would have an impact on the City as the leading financial centre in Europe. The group were not prepared to grant the UK an opt out and so Cameron blocked unanimity at the summit. The move has caused a split within the ruling coalition in the UK. The junior partner, the much more Eurocentric Liberal Democrats, felt that Cameron should have remained in discussions longer and found some middle ground with Britain’s EU partners (all of them, as it turns out…). Curiously, the British position is that the financial regulations did not go far enough and would restrict the UK’s ability to deal with the problem. The UK was also implacably opposed to a so-called “Tobin Tax” which would levy a 0.1% charge on all EU financial transactions.
Ratings Agency Moody’s has followed Standard and Poor’s in stating that the Summit meeting does not provide decisive action on solving the current Eurozone crisis and that consequently, Eurozone credit ratings are to be reviewed next year. Markets fell on the news and the Euro lost ground against other major currencies.