The Unthinkable Becomes the New Norm!

UK……a better rating than Germany?

This week has been all about the euro, and efforts to rescue it from debts accumulated by most member states, some of which are technically bankrupt. Pending the result of yet another summit, markets were prepared to hold off judgement, although not the ratings agencies, who are warning of downgrades, whatever the outcome. Thus the UK could soon have a better rating than Germany, although the answer to this slight is to severely restrict their activities, as we have commented before.

No real detail……

Thus the story rolled on although by Thursday evening, the journalist on Newsnight was unable to provide any detail of the “deal”, despite the usual grilling by Paxman. Not that it stopped the disgracefully biased reporting by the BBC, but maybe that will change, because in the early hours of Friday morning, the UK finally took a stance against greater integration.

A poor standard of debate……

Needless to say, the Daily Mail, Sun, Express and the more swivel-eyed amongst the commentariat think Christmas has arrived early, and it is interesting to watch these people in full flow. I really thought that the standard of debate, in a globalised world, would be rather better than what I have seen, but it does produce a giggle, and goodness knows we could do with some of those.

Restrictions unachievable by most……

In so far as one can tell, the new treaty “will enshrine a new fiscal compact to enforce budgetary discipline”, a limit of 0.5% of GDP as an annual structural deficit, with automatic fines for Governments that breach a 3% ceiling, all to be administered by the European Court of Justice. They will have their work cut out, since these kinds of restrictions, in these economic circumstances are totally unachievable, by most of the 17 members.

Curing every illness with the same pill……

It is the financial equivalent to issuing every patient in a hospital with the same pill, no matter what their complaint. Thus, I just don’t see how this can hold together, especially when voters finally get their chance to give their verdict, with a choice between generational austerity, or of taking a chance.

Honestly, I am not making this up…….

Meanwhile, there is no stopping them. There is to be rapid deployment of the EFSF, although it has no money to speak of, a new 500 billion euro European Stability Mechanism, (ESM), and a plan to lend 200 billion euros to the IMF, who would then lend it to the ECB, since it cannot be seen to be propping up countries from its own coffers. Hope you are following this. And there is no agreement that the ESM will talk to the EFSF, which would increase their effectiveness, but this might be reviewed in March.

The cause of our ‘departure’……

The proximate cause of our “departure” was a plan, largely backed by the French to impose a Tobin tax, which is a charge on financial transactions. It is not known if this was to be a fixed amount, or ad valorum, but given that 80% of these things go through the City, (the other 20% through Frankfurt), it would have a huge impact on our economy, and therefore had to be vetoed. And it is just stupid, anyway, since it would drive all such activities offshore, to the benefit of none.

Both parties delighted……

Whether the French thought of this, or we suggested it to them as an excuse for a break, is not clear, but the result delights both parties. At least the Prime Minister avoided the chamber maid tactic, although he was accused of turning up to a wife swapping party without his wife, a quote reported to have come from a French Diplomat. Thus in one of the letters columns today “surely we would rather not associate too closely with disgusting people like these”, whilst another suggests that any chance of borrowing their aircraft carrier has diminished, somewhat, not that it has ever worked, and we only have a few museum bi planes to fly from it.

26 easier to organise than 27……?

26 are, in any case, easier to organise than 27. For the avoidance of doubt, that is 17 countries that are in the currency, and 10 outside it, who are nevertheless signed up to the European Union, and the 698 treaties etc that govern its conduct. Now, without the , UK, there are 17 plus 9. Some bright lawyer thinks that the whole apparatus of the EU can only be used for the 27, not 26, so they can’t meet in the present buildings, utilise the existing staff etc., which is just the sort of childish nonsense we all need in these very difficult times.

The reserve plan was to hire a giant big top, which comes cheap in winter, and then every country gets to be ringmaster for two weeks, but there was a problem; there always is. The solution was to get 27 to 26, easy when you think about it.

Refusing to board the Titanic……

So, there is to be a two speed Europe with the implication that we are in the slow lane and isolated, but only as much as somebody who refused to join the Titanic just before she sailed, according to Terry Smith, one of the more colourful characters in the City. Speed, of course, implies forward momentum, but I think that both the UK and Europe are probably back in recession already, a subject which I will return to very shortly.

Further danger lurks. The FT on Tuesday carried an advertisement for the sale of Admiralty Arch. OK, it has to be a totally dysfunctional building, albeit a bolt hole for politicians, but can you imagine the outrage if this was bought by, well, pretty much anybody?32 Smith Square, the former HQ of the Conservatives, is now the London base for the European Union, so anything could happen. Whoever placed the advert should think about withdrawing it, citing a need not to mindlessly increase unemployment numbers.

Think the unthinkable……

So, the unthinkable just keeps happening, as it has for a lot of this year, but I was struck by news that two ships collided early on Friday morning, 230 miles south west of Lands End, one of which sank, although with no loss of life, thankfully. This is within the Bay of Biscay, not for nothing known as a bay too far, but imagine the odds of this happening! It is a vast, desolate place, and even if you had planned it, it would never work.

We are all going to get used to the unthinkable being the new norm; as ever, those that adapt quickest will survive.

CDO

10^th December, 2011