Who Will Pay For The EU?

Eastern European countries gave a bleak assessment of their economic prospects yesterday with Hungary talking of 5m unemployed turning up in Western EU Countries looking for work and benefits. Though the remark was aimed at Germany, it is worth remembering that only Britain and Ireland have fully opened our borders up to accession countries.

The Times Headline today speaks of a New 'Iron Curtain' as a plea for €190bn from the West to the East of Europe was immediately rejected. The strength of the Union may soon be tested.

This is all very interesting. I wrote about the stability of the EURO recently and I pointed out that in the event of any crisis, it is likely that politics will supersede economics in any decisions that are made.

The impetus of any Eastern EU and any EURO bailout lies with Germany. The EU is based largely on German plans and finances. If a bailout is needed it will probably fall on the Germans to raise and guarantee the required capital. However, it is not clear to what extent the German people are willing to prop up the EU, and so it will be a rocky few months.

Germany has not yet ratified the Lisbon Constitutional Treaty, and a potential €uber-billion bailout will not help the German political classes force it through any quicker. In fact the dialogue has changed somewhat and some of those raising opposition to the Treaty are looking at the possibility of opt-outs and a break mechanism so as to limit the costs to the EUs biggest contributors. If a succession of Economies began to collapse in Eastern Europe the IMF may not have sufficient reserve to react.

Absent from all of this are Britain and France. France may make a token contribution if all others do, but Britain is getting deeper and deeper into debt through borrowing in an effort to kick-start the financial industry. Germany will not act alone if an Eastern EU bailout is needed, and no one else, including Britain will likely have much in the way of the funds to help. Personally I hope we are not asked, because I do not trust this government to overstretch yet further our increasingly fragile economy.

I would imagine any German led deal would require two conditions. Firstly the big contributors to the EU will need to stump up a share to make it easier to sell to the German people and secondly the Germans then may force some form of direct taxation on the people of the EU to guarantee The EU it's first direct revenues. The harmonising and central collection of VAT has been mooted in the past.

I wouldn't mind making a prediction, well a pushing a theory really. If we look at my previous post, and at the events of the weekend it looks more and more (to me) like we are seeing the first real tensions on EU membership. If the Eastern European Countries need a bailout then they may need to look to Russia or America, and the necessity and politics of any deal may preclude continued EU membership.

Likewise if Ireland's economy was to crash, they might find themselves required to act outside of the Central Banks economic rules, and if things get really bad may need to leave the EU altogether. There has always been a large proportion of people in the UK that would welcome much looser ties as well. So what could result is the formalisation of a Central European State and around the edges those exiting member nations may turn back to trade agreements, rather than Union membership. The umbrella of EFTA membership may allow for this to happen with as little pain as possible.

Those nations who have long yearned for their superstate will get their wishes and can have all the trappings of their Federalist dreams, they have a currency already, and all the buildings and courts are in place. They may even be prepared to help Italy and Spain as part of the deal. It could eventually be a win/win situation as those countries who look most in trouble are those where a dissenting voice to a Federal Europe are most heard, UK/Ireland, Scandinavia and Eastern Europe.

Is The Euro In Crisis?

There is some good debate going on over at the DT from Ambrose Evans-Pritchard, who asks if the Germans are ready to give up on the EURO here; and from Daniel Hannan who asks if the EURO will survive here.

The crux of the argument is that the Germans will have to make a financial commitment to prop up the EURO if it is to survive... this is of course not solely an economic argument with the politics and Maastrict laws being big factors.

Go read, all good stuff.

Ultimately, I feel the EU will put politics before the economics or existing treaties and laws. We know this, because this is exactly what it has always done in the past. So in my mind it is more a question of how long the Irish, Portuguese, the Greeks and the Spanish can hold on. To my knowledge none of these national governments is looking seriously at alternatives to the EURO. Italy seems to be making up the new acronym of PIIGS.

I really doubt that Spain, Portugal or Italy will be allowed to default on any debts or succeed from the financial union. I don't know enough about Greece to comment, but there has been public uprisings there so it will not be a straight forward fix. Greece, I feel will be better suited to recovery by taking national decisions, rather than trying to fit in to the EU's decisions. Ireland has friends in the UK and the US, so if they go first the EU might pass the buck to the IMF. I must however confess as I have done so before, don't bet the farm on my economic outlook.

I want to see an end to the EU integrationalism and the EURO crashing has long been the best hope for this; though I really do not want to see allied countries in financial dire straits. I got married in Ireland last year and I am sad to think of how this might affect the fantastic people there.

The UK economy is in trouble, but those of us who fought hard to retain economic independence are being proven right. It was the right decision because the economics were put before politics... let's hope the EU does the same.

Who Is Backing Gordon Brown?

Gordon Brown Quotes:

"at root our economy is better placed to weather the global storm than it was in
the seventies, the eighties and the nineties". – To North West of England
Business Leaders (see here.)

"It's a financial global recession everybody knows and started out of America,
we are having to deal with the fall out. We are better placed in Britain than we
have been in the past and are better placed that many other countries" – BBC
Interview (See here)

So, do people share your views Gordon?.....

What about Ed Balls? Well, let’s look at who he is first. He worked for the Financial Times as an economic leader writer (1990 – 1994), before going on to work for Gordon Brown in 1994 in the then Shadow Cabinet. After Labour won the 1997 election he worked for the then Chancellor (again, one Gordon Brown) in a position called “Chief Economic Advisor” where he allegedly earned the title “The most powerful unelected man in Britain”.

It would be fair to say then, that Ed Balls is intimate with Gordon Brown, familiar with the internal workings of the treasury department, the Government and of the national economic position.

Last night, Ed Ball told a Labour conference that these were "seismic events that are going to change the political landscape". He also said the current economic situation is "more extreme and more serious than that of the 1930s" (See here.)

Oh dear. That doesn’t sound very supportive of Mr Brown or this Labour Governments official position.

Ok, well let’s look at someone else then… how about Nikolas Sarkozy. Well again let’s look at who he is. He is the democratically elected President of France (means he won an election of the whole country, Gordon may not be familiar with this concept).

Any way, what did Mr Sarkozy have to say on Gordon Browns Economic competence? Surely as a European leader, he will look at what Gordon brown was quick to do, and follow his leadership.

"The British chose a recovery plan by boosting consumer spending, notably by
cutting VAT by two per cent. It is plain to see that it has brought absolutely
no progress. "

Doesn’t sound very supportive, maybe we should look at what else he said…

"The reason is simple: because it's in people's heads. If the consumer no
longer consumes, he won't change just because we add or subtract one VAT point,
it's because he's scared for his future, he's scared for his job and says to
himself: 'I must save, because bad times are coming'.

"In France, we chose investment because when we put France into debt by
taking money to invest, in return we have assets, infrastructure. When you put
your country into debt to pay for operating costs, you have nothing in return
for your debt and you ruin the country.

"If the English did that it's because they don't have any industry
left. Gordon Brown cannot do what I am doing with carmakers [giving them up to 6
billion euros]... in construction and other industries, because they haven't got
any left."

Oh dear. Well let’s look at the IMF then. They have effective control on the world’s supply of money, they must recognise that “Gordon Brown has not only saved the world….” Ooops, he didn’t mean to say that did he.

Anyway, the IMF know what they are talking about, they must agree that the UK is well positioned economically. They have a report here. Oh, I forgot, they placed the UK at the very bottom in their outlook of developed nations, and are predicting that the UK economy will shrink by 2.8% in 2009.

Ok, maybe these are too specific. How about House owners?

No, wait, house prices have fallen an average of £22,000 per house hold in the last year or so.
What about the Unions? They love Labour Prime Ministers.

Hmm, forgot, they though when Gordon Brown said “British Jobs for British Workers” he was going to do that. He didn’t thell them that the EU won’t let him.

Labour voters?

Well, admittedly they might be hard to find now, as only 28% of the electorate is considering voting for Labour.

Polly? Getting mixed signals from Pol. Best not disturb her today; she is getting a bit of a kicking today from her readers.

My Blogs readers… No, wait, this is getting embarrassing… I almost forgot, but 92% of them want Brown to resign.

What about Gordon Browns Cabinet, they must support him and his claims on the economy…

Let’s see, The Foreign Secretary? No, that’s David Miliband, he was going to run a campaign against Gordon Brown Last year. Nobody, not even Gordon Brown thinks David Miliband trusts Grodon Brown.

Jacqui Smith, the Home Secretary? Well she is supportive, but then again she is making massive amounts of money from the position Gordon put her in, she would have to back him, he is probably keeping a public enquiry from her door.

Jack Straw? haven’t heard from him in a while… hmmm, wonder where the Justice Secretary is?

Ed Balls? No, done that one already.

Labour MP’s. They will of course support their leader. They have to, it’s their job to, and they wouldn’t want to make dear Gordon cry again. Come to think of it, a lot of them will be out of a job soon, they are probably less happy..

I t seems I may am struggling to find a credible example of somebody who will back Gordon Brown’s economic policies, and actually for him to remain as Prime Minister. Is there anybody left that does?

Oh wait of course there is. I forgot, there is the BBC and the EU.

IMF Calls Time On Brown Economic Fantasy

4-Sep-08: Gordon Brown: "We are dealing, I think people will look back and say, with the first financial crisis of the new global age," he told the gathering of North West of England business leaders.

But, he added, "at root our economy is better placed to weather the global storm than it was in the seventies, the eighties and the nineties".

24-Oct-08: Gordon Brown: "It's a financial global recession everybody knows and started out of America, we are having to deal with the fall out. We are better placed in Britain than we have been in the past and are better placed that many other countries"

28-Jan-09: The IMF reveals that the following:

• Developed Economies will grow much less in 2009 that Developing Economies.
• World Economic Growth will be 0.5% (weakest since the second world war)
• Around 50 Million Jobs will disappear world wide in the next 2 years

Despite dire predictions for the US and the Eurozone, contracting 1.6% and 2% respectively the IMF points out that the UK Economy will contract by 2.8% in 2009. This means the IMF are predicting that the UK economy will be the worst performing of all developed economies.

The IMF have essentially set out figures which say that Mr Brown is either incompetent, a liar, or probably both.

IMF Report is here.

Perhaps Mr Brown can clarify for everybody how it is that if the UK is best placed of all economies to tackle this recession, why the IMF is predicting that the UK economy will contract faster and further than any other economy?

Perhaps Mr Brown can reveal what information he was referring to when he made misleading statements to the public regarding the state of our economy, particularly that it is "best placed". Was this Treasury information? I hope the opposition parties do not let this particular issue drop. Either somebody has given the PM very bad info, in which case this needs to be investigated; or the PM has told blatent lies and should be held to account for that.

Perhaps Mr Brown will now stop running around churning out ineffective initiatives for the purpose of attacking the Conservative Party and start looking at initiatives that will reduce the Governments debt and borrowing plans and put in place an actual economic rescue plan that will stimulate growth of the UK economy and reduce the public debt.