Friday, December 9, 2011

David Cameron: The Biggest Loser

     In analyzing the deal what is clear is that Britain's Prime Minister came out of the talks the biggest loser. Not clear that there are many winners but he definitely didn't win.

     I mean it depends how you look at it. In a sense he and Britain win for not being on the Euro for having it's very own lender of last resort in the Bank of England and it's own pound.

     Of course even here, Britain loses in a way and largely because of Cameron's illusionary belief that Britain has "an unsustainable debt crisis" due to its deficit,

     Many who are supposed to know something about the world don't get it. So for example, this week's Economist can say, "he (British Chancellor George Osborne) was right to act in 2010 to make an early start in cutting the deficit. Left untackled, the budget deficit, which at 11.2% of GDP in 2009-10 was larger than those of almost all other rich countries, would soon have undermined confidence in the government's ability to serve its public debt. The faith is all the more important because of Britain's outsize banking sector." (pg. 16, Dec 3-9).

    It would not have soon undermined any "confidence in the government's ability to serve its public debt" as Britain has its own currency, can print its own money and the bond market have clearly shown no fear of its deficit-same with the U.S. The dividing line as should be painfully obvious by now is not between deficit and surplus countries but between Euro and non-Euro countries-those who print their own currency have seen no spike in bonds-the MMTers would say the bondholders don't matter anyway as they don't "lend money" to the government as long as it has a fiat currency system.

   So Britain wins by not being on the Euro but loses because it has acted as if it does with Euro austerity that only slows down the economy-Euro or no.

    Now Britain lost another one as Cameron's attempts to get tough and dictate to the EU what today's deal would look like fell flat. A few months ago French Prime Minister said quite bluntly for Cameron to in effect shut up. Cameron has bee shut up now as it was the only one of the 27 countries to fight today's agreement.

   "Napoleon dreamed of it, de Gaulle fought for it, but Nicolas Sarkozy may have achieved it — a Europe of Nations with France in the cockpit and Britain on the sidelines."

     "The French president emerged as one of the big winners of a European Union summit on Friday which ended with up to 26 member states agreeing to move forward in economic integration around the euro zone, and Britain alone in staying out. "

     "Of course this is not just a long-standing desire, but a long-standing goal of French politics...because in the French tradition Britain never really belonged to the European Union, dating back to de Gaulle," said a senior EU official who attended the summit, referring to the French president's veto of British entry in 1963 and again in 1967. "

      "By obstructing the wish of the other EU members to amend the bloc's governing Lisbon treaty to allow closer fiscal union among the 17-nation single currency area, British Prime Minister David Cameron managed to unite Europe against him."

       "He may be feted by Eurosceptics at home, but he emerged as the biggest diplomatic loser of the summit, leading his country into an isolation that all his predecessors sought to avoid."

       "For centuries, a basic principle of British diplomacy was to maintain a balance of power on the European mainland forming shifting alliances with the main continental powers."

        "Cameron not only failed to win a blanket veto right over EU financial services legislation. The illusion of leading a group of 10 non-euro member states like Sweden and Poland, committed to a more liberal, open economy, crumbled as his supposed allies threw in their lot with the euro zone."

         Which is not to say that anyone really is winning here. But Britain has left itself out on a limb politically while getting it wrong at home fiscally. Cameron seems to always achieve the worst of all worlds. There are some who make the most of the hand that their dealt. Cameron hasn't even had the worst hand but he's played it about as bad as he could have.

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