Ironically Isolated

In 1588, Lord Howard of Effingham, with Sir Francis Drake as Vice Admiral, turned their badly outnumbered fleet to protect British shores from an attack from the massive Spanish Armada. Applying superior tactics and better-trained sailors, the Brits closed in for a most improbable kill: “With its superior maneuverability, the English fleet provoked Spanish fire while staying out of range. The English then closed, firing repeated and damaging broadsides into the enemy ships. This also enabled them to maintain a position to windward so that the heeling Armada hulls were exposed to damage below the water line. Many of the gunners were killed or wounded, and the Spanish ships had more priests on board than trained gunners, so the task of manning the cannons often fell to the regular foot soldiers on board, who did not know how to operate the complex cannons.” Wikipedia.

Their expansion into the New World and then Asia and Africa made England the most powerful nation on earth, dominating global sea lanes with an empire where the sun never set… until England gave up its colony in Hong Kong in 1984. During the tumultuous seventeen through nineteenth centuries, France and Spain may have continued their struggles against England, but England generally wound up on top. Before the United States came to Europe’s rescue in World War II, the United Kingdom was the global power. Indeed, it was Britain’s misfortune to have been required to defend its interests against German hegemony and/or conquest over the two biggest wars of the twentieth century, to sacrifice British lives, face German carpet bombing of its cities and decimating land, sea and air battles along the way… all to contain German expansionism and power.

The irony in all of this is that today, in the European Union, Britain’s role has been marginalized and her voice cut short… as Germany is now in the process of remaking Europe in her own image. Indeed, as German proposals for restructuring the treaties that hold the European Union together in order to fix the European economy, the austerity mandates (German’s save and do not spend what they do not have) and the proscription against pan-European financial instruments (Germany’s morbid fear of using its credibility effectively to underwrite instruments like Eurobonds or massive Central Bank purchases of sovereign debt from crumbling EU nations) are nothing more than making Europeans in general act like Germans and agree to “solutions” that appear to be in the best interests of Germany, and perhaps Germany alone.

“Many Europeans have been irritated by British Conservatives’ quiet satisfaction throughout the crisis with the decision not to join the euro (the United Kingdom ostentatiously kept its currency, the pound), particularly when juxtaposed with the panic over Britain’s inability to have any significant impact on Europe’s biggest crisis since the end of the cold war… ‘Germany is the unquestioned leader of Europe,’ said Charles Grant, director of the Center for European Reform. ‘France is definitely subordinate to Germany, and Britain has less influence than at any time I can recall.’” New York Times, December 7^th.

French President Nicolas Sarkozy, tripping all over himself to follow the German economic line set by German Chancellor Angela Merkel, has pretty much told the Brits to butt out of a currency realignment program that is totally wrapped around the Euro Zone nations. “[The French] have not been shy about expressing their frustration. Just six weeks ago, after [British Prime Minister David] Cameron tried to inject himself into talks about the euro, Mr. Sarkozy said bluntly, ‘You have lost a good opportunity to shut up.’ He later added: ‘We are sick of you criticizing us and telling us what to do. You say you hate the euro and now you want to interfere in our meetings.’” NY Times.

But David Cameron and the U.K. have a lot at risk, since London is still the financial capital of Europe, even if their currency is not the euro: “Of particular concern here is the health of Britain’s financial industry, a vital economic engine at a time of slowing growth and deep cuts in government spending, which is seen to be vulnerable to new [German-proposed] European regulations that could hurt British competitiveness in global markets… Despite all that is at stake, Prime Minister David Cameron’s coalition government looks doomed to be cast in the role of impotent bystander, torn between anti-Europe forces and European leaders’ moves toward greater fiscal integration on the Continent — with or without Britain…

“On [December 7^th], Mr. Cameron told a fractious Parliament that his main goal in [an upcoming meeting in] Brussels was to ‘seek safeguards for Britain’ and ‘protect our own national interest’ by resisting measures like [Germany’s] proposed financial transaction tax.” NY Times. But given the fact that England is not a Euro Zone EU member, clearly her voice borders on irrelevant… except to herself. As American Treasury Secretary, Tim Geithner, joins the various reform-driven EU discussions on the Continent, America’s influence threatens to eclipse that of Britain, simply because of the size of the U.S. economy and the necessity to coordinate economic policies that have such global implications.

On December 9^th, “The leaders of 23 European countries agreed … to bind their nations together in a pact to limit government spending and borrowing but failed to persuade Britain to sign up, dealing a blow to European unity… Leaders from 23 European Union countries said they would harmonize their fiscal policies by putting caps on government debt and deficits and slapping sanctions on nations that break the rules… But four of the EU's 27 member states [the U.K., the Czech Republic, Sweden and Hungary] declined to join the new treaty, chief among them Britain, whose leader, Prime Minister David Cameron, said it would run counter to British national interests. Cameron had insisted beforehand that he would sign up only if he could win special exemptions for London's crucial financial services industry from European regulations, such as a proposed financial transactions tax. The other countries, led by France and Germany, refused to grant that concession.” Los Angeles Times, December 9^th.

By the next morning, “Chancellor Angela Merkel of Germany persuaded every current member of the union except Britain to endorse a new agreement calling for tighter regional oversight of government spending. The accord, approved at a summit meeting in Brussels early on Friday, would allow the European Court of Justice to strike down a member’s laws if they violate fiscal discipline…

“The big loser in Brussels was Britain, which had endorsed the 1991 Maastricht Treaty on European integration but opted out of the new euro common currency to preserve its economic and monetary independence… Prime Minister David Cameron, a Conservative and self-acknowledged ‘euroskeptic,’ was isolated in his refusal to allow the German prescription of ‘more Europe’ — to give teeth to fiscal pledges underpinning the euro… Mr. Cameron was perceived as having made a poor gamble in opposing the push by Mrs. Merkel and President Nicolas Sarkozy of France, embittering relations and possibly damaging his standing at home.” NY Times, December 10^th. “Deutschland, Deutschland über alles…”

None of this augurs particularly well for the future of the European Union, but if that body were to fracture and dissolve, the largest economy that would adjust the most rapidly is not Germany, since it will feel the aftermath of having been a Euro Zone country, but England that has kept its currency more or less intact. There is no question that all the EU nations share grave economic consequences for actions anywhere on the Continent… the “recovery” in much of the rest of the world could easily be undone by an EU collapse… but England is slightly better off in her isolation. As Standard & Poor threatens to downgrade the credit ratings of all the Euro Zone nations that have not already been downgraded – including Germany – the turmoil that is European is of extreme consequence to us all.

I’m Peter Dekom, and this story gets increasingly complicated by the moment, and since affects our own economic future, it is simply too important to ignore.