English Channeling

In 2000, most of the European Union opted to abandon their currencies and throw in with the new kid on the block, the euro. It was a huge step towards the economic unification of the continent, one embraced with alacrity by most but rather completely rejected by Margaret Thatcher’s England. The British refused to put the pound sterling behind and accept the euro instead. By opting out of the new Eurozone, England also voluntarily reduced its clout within the European Union itself, taking one giant step backwards from the trends espoused by most of the rest of the EU.

London remains Europe’s financial capital, but there has been a constant struggle as the EU has tried to rein in the kind of “American-style” financial services for which British bankers are known. As the debt crisis slammed into Europe, many placed solid blame with UK’s financial community… although no one suggested that the profligate policies in the PIIGS nations (Portugal, Ireland, Italy, Greece and Spain) were not powerfully responsible as well. Some, however, suggested that the UK bankers’ embrace of debt at any cost was indeed a primary motivator of the overall demise.

Whatever else is said and done, the weakest PIIGS were linked into the same monetary system as the Nordic economic engines, most notably led by Germany. Unable to segregate and inflate a Greek or Spanish currency, the kinds of austerity measures demanded by the German led Eurozone in exchange for bailout loans has resulted in nothing more than massive and exceptionally painful cuts to those lesser economies. Unemployment there soared. The value of the euro has fallen. As France bit into its own economic issues and with the U.K. living in its own currency world, German power in the EU rose even as many lesser economies plummeted. The U.K.’s influence in the EU remained marginalized stemming from its rejection of the euro decades earlier.

With another conservative government in power in England, another Prime Minister (David Cameron) has called into question the value of Britain’s continued full participation as a member of the European Union. Cameron has proposed a national referendum in which British voters would decide whether further to reduce England’s role in the EU… or even to leave it altogether. “The pledge from the British prompted swift retorts from France and Germany, which said no member has the option of ‘cherry picking’ whatever European rules it wants to enforce. But it reflected a growing sense of unease, not only in Britain but across the Continent, that while the acute phase of the financial crisis has passed, the challenge to Europe’s mission and even its membership has not.” New York Times, January 23^rd.

The United States, fearing a dilution in Europe’s power on the global stage, has indicated support for England’s remaining in the EU. With several European nations taking an “every man for himself” stance, England has once again brought their dissatisfaction with the EU to the fore. The Pew Research Global Attitudes Project suggests that while 51% of those Brits polled may have supported the EU in 2011 that number has fallen to 45% today. That old maxim that all political issues are really local seems to be true all across a recession-infested continent.

“‘As pressure from the financial markets recedes and a sense of urgency lifts, the appetite for serious reform is melting away like butter in the sun,’ said Thomas Klau, head of the Paris office of the European Council on Foreign Relations. ‘Now that markets no longer hold a knife under leaders’ throats, they are slipping back into their normal mode, which is to manage their own immediate reality.’

“For Mr. Cameron, with elections coming in 2015, that means heading off a challenge from the hard-right, anti-Europe U.K. Independence Party, known as UKIP, while shoring up support for his government, which recently admitted that its unpopular austerity program would have to be extended to 2018, analysts said. He is also anxious to avoid the sort of ruinous intraparty split over Europe that bedeviled the prime ministerships of two of his Conservative predecessors, Margaret Thatcher and John Major.” NY Times.

The German obsession with controlling inflation, necessarily prioritizing austerity over growth, has not found joyful traction in the lesser-performing European countries. Should England withdraw from the EU, the big question is whether the Union itself can sustain. Would it break into factions? Continue without Britain? Would it revert to the individual nations? Would some other structure rise to replace it? And exactly how would such events impact global economic stability and our own rather feeble “recovery” here in the U.S.?

I’m Peter Dekom remind those of us on this side of the Atlantic that what happens “over there” very much impacts our daily lives.