Britain and the Eurozone – A Political Nightmare

Politics Balloons

Image by Newfrontiers via Flickr

Now before I say anything else I just want to say one thing – the number of times I hear friends and family say ‘I don’t do politics’ and then proceed to complain about fuel prices, jobs, immigration, education and all manner of other issues, I have to tell you if you ‘don’t do politics’ how can you have the gall to complain about any of these things!? because you know what THAT IS POLITICS!!!

Yes, the price of fuel, availability of jobs, immigration, education and all the other things you sit there and moan about are POLITICS, so whether you believe it or not we ALL do politics!

It’s just that some of us (me) want to understand better the decisions our government makes on our behalf and in order to use our vote wisely when the time comes I think it is important for us to understand who would best serve our interests!

So I put it to you – don’t say you don’t do politics – unless you are willing to NEVER complain about any of these things, bet you can’t agree to that!

Anyway, for those of you who don’t know Britain’s Prime Minister David Cameron recently vetoed a revision of the Lisbon Treaty, a European Treaty that would have seen all 27 member states coming together to attempt to save the flailing European currency.

Instead now the 17 member states which use the Euro as their currency will have to go it alone and agree an intergovernmental deal on how to save the Euro outside the Treaty, with the support of any of the other EU Member states that see fit to join them – but not Britain.

So what does that mean for us in the UK? *I must state that this is just my own interpretation of the events that are still unfolding

I’m going to try to do this in a Question/Answer format to make it easier to follow…

What happened?

David Cameron, PM vetoed (refused to sign) an amendment to the Lisbon Treaty which was supported by the other 26 member States of the European Union.

What were the proposed amendments? Getting a straight answer to this is difficult but as best I can understand it they were changes related to financial regulation across all member states. A similar agreement the Stability and Growth Pact (SGP) 1997 imposed restrictions on budget deficits for member states with sanctions and fines for non-compliance, however it was not enforced fairly or rigidly. The new proposal incorporates elements of the SGP and a new Tax Policy – from what I can gather it is the Tax policy element which was the biggest concern to our PM.  So, there were 5 goals of the new Fiscal Integration reform proposal –

  • fostering competitiveness
  • fostering employment
  • contributing to the sustainability of public finances
  • reinforcing financial stability
  • tax policy coordination

The BBC also describes what the proposed amendments were –

The new accord will hold eurozone members to strict budgetary rules including:

  • a cap of 0.5% of GDP on countries’ annual structural deficits
  • “automatic consequences” for countries whose public deficit exceeds 3% of GDP
  • a requirement to submit their national budgets to the European Commission, which will have the power to request that they be revised

This means – Eurozone member countries are not allowed debt above 0.5% of their GDP (GDP is Gross Domestic Product – the market value of all final goods and services produced within a country in a given period) and will be ‘punished’ if they do. Considering that only 5 of the 27 countries have not already breached the constraints set out in the SGP which has not been applied fairly (France and Germany especially having leniencies not afforded to poorer countries!) this seems something impossible to apply fairly, given so many have already breached it and France and Germany have watered down the previous regulations to ‘waive’ their own violations – is it any wonder it feels like France and Germany are bullying weaker nations who might otherwise have backed Britain into agreeing to the treaty!?

What would the amendments mean?

The amendments would give powers to Europe over each member countries financial services, fiscal policy (Government finance policy) and taxation. Non-compliance with the criteria set out would result in sanctions and fines against the offending country.

The overall aim of the treaty is to save the Euro. France and Germany are fighting tooth and nail for this, and why wouldn’t they – its their currency! But we have our own currency to protect the Pound (GBP).

If the Euro crashes it affects global economy but none more so than the 17 eurozone countries that use it as their currency.

Why did David Cameron veto the amendments?

David Cameron wanted agreement to certain ‘safeguards’ for Britain in order to agree to sign the treaty amendments, however the European Government refuse to agree to these safeguards so Cameron vetoed the amendments.

What Safeguards did David Cameron want?

he wanted exemption from certain financial regulations, but finding out exactly ‘what’ these were is proving a difficult task. One thing seems to be the tax policy which would require the UK to fall in line with EU taxation regimes. Another seems to be contributions to a ‘bailout’ fund, and given that the UK already has huge budget deficits and debt itself funding the bailout of other countries seems to be an unhelpful approach to our own problems. The main thing that stands out is a desire to protect the City of London from excessive financial regulation enforced by the Eurozone. But a clear answer to exactly what safeguards were required is something that currently evades me :/

Who thinks David Cameron was wrong, and why?

There has been plenty of dispute over the decision the PM made. Well, Nick Clegg the Deputy PM initially seemed unwilling to criticise the decision, but after his pro-europe party kicked off at him he gave a statement about not agreeing with the PM’s decision – this has shown cracks in the coalition they are more divided over this than anything else, but this is only to be expected with Conservatives being more Eurosceptic and Liberal Democrats being pro-Europe…

Nick Clegg said:

“I’m bitterly disappointed by the outcome of last week’s summit, precisely because I think now there is a danger that the UK will be isolated and marginalised within the European Union,”

Then there’s Labour – their Leader Ed Milliband (they chose the wrong brother!) said:

“He has come back with a bad deal for Britain,” he told MPs. “Far from protecting our interests, he has left us without a voice.”

but the PM repeated asked Ed Milliband if he would have signed the treaty, and got no response! Later the Labour leaders aides confirmed

he would not have signed it as it stood – but would have stayed in the room and secured a better outcome.

What does this mean for the UK now?

Well, it is still unfolding and probably won’t be clear for a while yet. Talk of a ‘two-speed’ Europe and Britain being isolated from the rest of the EU seems to be unhealthy speculation.

As does the suggestion that this is the beginning of the end of Britain’s membership with many arguing that the decision means we are left without a voice – they use that example of how even our most avid eurosceptic Margaret Thatcher ‘always keep at seat at the table’ saying we are on route to losing this. This is not entirely true as new agreement will now have to be outside eurozone, true we wont have a seat at that table and what they do will impact on us, but it will impact the global economy not only ours, but we still have our seat in europe and while the eurosceptics see this as a step towards withdrawing completely I don’t believe this is the case, I think we will always keep our seat at the table, and have our voice, but having a voice means we have the right to say no to things that are not in our interests – and this treaty revision was not in our interests!

What caused all these problems in the first place?

The problem stems from nations overspending and living beyond their means which has led to huge amounts of personal and government debt. The average Briton has in excess of £33000 debt. And our national debt stands at over £900 billion.

Some of the biggest problems revolve around the debt issues and financial struggles in Greece, Italy, Spain, Portugal and Ireland. Banks going bust, being bailed out by governments and then governments being so indebted they turn to Europe to bail them out…
Final word
I hope this summary of the situation helps to explain it a bit better for others, compiling it certainly helped me get my head round it!
I plan to write a post about ‘Good and Bad Debt’ as it is clear that many people do not have a clear grasp on this financial skill.
If you want to learn how to manage your own finances better I found the Open University course You and Your Money really helpful 🙂
In the mean time I recommend people check out The Money Saving Expert for helpful advice on sorting out your own finances.
To understand how the Eurozone crisis came about I recommend watching ‘How the West went Bust’
And here are a few links to some helpful articles on the Eurozone situation:
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5 comments on “Britain and the Eurozone – A Political Nightmare

  1. Pingback: ROW80 The Penultimate Check-in | Day in the life of a Busy Gal…

  2. Thanks for this. Like a lot of people, I’ve found the explanations of what we refused to sign were as clear as mud. Quite a few of the voices who were saying this was an excellent/terrible decision didn’t seem to know either, and were merely reflecting whether they’re pro or anti EU.

    • Indeed it has not been explained very well in most places, it was difficult to put together this much detail and I really would have liked to explain it even better than this! yes, most opinion on the matter does not appear to be based on any factual information rather personal political preferences.

  3. very well put together – I agree it is too soon to be doom and glooming about our position – whatever happens I feel finaces of the country and world are going to get worse before they get better and maybe just maybe everyone will learn a few lessons about credit – I have noticed tho many people are learning about more economical ways of living soon my skills at ‘darning’ and ‘turning a heel’ will be much sought after:)

    I think he did right – find that diff. to admit as am not a tory but although I’m a lib. find I’m not entirley on Cleggs side on this – have given up almost on theses specifics of each parties as I like bits of each makes it confusing at elections!!! but those who say we are better off out (and I was one who never did approve of us going in) don’t seem to realize when they say europe will still trade with us that a bankrupt country cant trade with anyone! we are all so interlinked now the situation is very complicated – black and white are shades of grey

    thanks for putting it together so well

    enjoy your festivities and see you in the new year

    • Thanks Alberta, I’m glad you think I did a good job putting this together 🙂

      Yes, the whole world is in a financial mess currently and it looks like it may well get worse before it gets better – with or without EU interventions. People need to learn to manage their finances better and stop spending for spending sake, greed and showing off have been the ‘norm’ for far to long and we have all played our part in creating this mess with our ‘want more’ lifestyles – while never thinking about saving and being frugal!

      Yes, it was a no win situation but refusing to sign was the best thing he could do given the options. It is difficult to align with any single party nowadays as there are elements of each that I like/hate. I like the Conservative’s stance on Europe, but I don’t like how their Welfare Reform Bill seems to be only damaging those hardest hit and least able to do anything about it – but at the same time I agreed in principle that the benefits budget needs to be reigned in – it just appears that the application is not going to affect those we need it to (the lazy one’s who don’t want to work) only those who really need it (sick and disabled) :/ grey seems to be the order of the day – difficult to cope with for someone like me who live’s a black and white life! :S

      Hope the holidays are good and your hospital appointment goes well 🙂

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