It’s amazing the way the narrative of the European Union has changed over the last few days. For months economists have correctly predicted each successive domino which will fall if the leaders do not take decisive action and each time European leaders have failed. Greece, then Italy an now catastrophe is knocking at the door of France.
Yet, since the EU meeting where David Cameron vetoed changes to the EU treaty, the media is reporting that Britain is now locked out of EU decisions making as if the leaders of the EU have shown themselves capable of making decisions. As if the Euro area problems had been solved and the Euro become a beacon of stability.
The agreement by the leaders of the Euro areas last week intends to limit budget deficits by imposing penalties on governments which break the rules. Yet, to quote the Financial Times on the 6th December 2011:
“..which two countries first broke the rule that deficits should not go above 3 per cent of GDP? It was France and Germany, back in 2003. What’s more, the two then united to make sure that they wouldn’t face sanctions for doing so – effectively destroying the rules (known as the “growth and stability pact”) altogether.”
It is not surprising that sanctions were not imposed and will not be imposed in future when you consider the circumstances in which a country runs an excessive deficit. When a country is short of money they are unlikely to cough up more money in fines to the EU.
Last week the Euro area stood on a precipice waiting to drag the world into oblivion. This week the UK has supposedly been snubbed by the best club in the world and the Euro crisis has evaporated into thin air.
The reality is that the press love hyperbole. It is unlikely that the Euro crisis will be the end of civilisation. Probably the saga will just drag on and on for a few years until something else becomes more important. Equally it is unlikely that Europe will power ahead leaving the British behind.
It may not make such great headlines but gloomy mundanity is a more likely prediction for the immediate future.