Staying out of the Eurozone was the best decision the last government was ever forced to take – now that the Germans are tightening the screw. The UK can look on with more than a hint of smugness as hoteliers report a surge in demand for ‘Staycations’ from holidaymakers who can afford to buy a small Greek island for the price of a fortnight in St. Ives.
We’ve already loaned some £30 billion to the International Monetary Fund to prop-up the Euro.
What a pity then that well over half the UK’s exports are to the Eurozone. No spending there means no sales from here – so although we’re not in the Euro it’s in our interests to promote a solution rather than just sit back and watch the currency implode. We’ve already loaned some £30 billion to the International Monetary Fund to prop-up the Euro and we can’t expect the Americans to join-in. They aren’t that interested in reviving a protectionist trade zone but are interested in exporting to countries off their West coast. So everyone in the EU is now looking to Germany – the largest Euro economy by far – to finance a solution.
But they might not get quite what they want. During the latest round of crisis talks between the Germans and the French the German Chancellor arrived at Paris airport for emergency talks with the new French President. She stepped off the plane to be confronted by a French immigration officer:
‘Name?’ he asked.
‘Angela Merkel’ she replied.
‘Nationality?’ he asked.
‘German’ she replied.
‘Occupation?’ he asked.
‘No, just here for some talks…’ she replied.
Cash is king at the moment, and the Germans are in no hurry to part with theirs except on their terms. The Bundesbank will only guarantee a bail-out of Spanish, Italian and Greek banks if it can control how the bail-out is spent. Ms. Merkel can’t lend direct to foreign banks because of the German constitution but she can lend to sovereign governments. But Europeans with a long memory don’t like the thought of Germans telling their government what to do so lots of very clever lawyers are now devising ways to overcome the problem. One suggestion is that all bank debts are pooled in a fiscal union to spread the pain across the Eurozone, but that is just not going to happen. Hardworking German voters don’t see why their taxes should bail-out of a bunch of ClubMed party animals and neither do voters in smaller economies like the Netherlands and Finland. Agree to give away a quarter of your tax revenues to subsidise Spain? I think not.
London dominates the EU’s financial services sector with 60% of EU financial exports channelled via London.
At the same time David Cameron has been fighting off the idea of a Financial Transactions Tax to boost the EU coffers. This was proposed by Merkel and others but, unsurprisingly the PM says it is out of the question. The UK wants to see the EU get well again but not at the cost of reduced competitiveness against New York and Tokyo. London dominates the EU’s financial services sector with 60% of EU financial exports channelled via London which makes a massive contribution to our tax base. HM Government accordingly supports financial services just like the Germans support their automotive sector and the French their agriculture. The British counter-proposal of an EU-led invasion of Argentina has not attracted support.
Of course the UK could have stepped-in and doubled it’s support via the IMF if it hadn’t bailed-out the Royal Bank of Scotland with £45 billion of taxpayers money. That thought probably occurred to some MP’s who sit on the toothless-but-influential Treasury Select Committee. They were looking forward to giving Hector Sants – Chief Executive of the Financial Services Authority – a good gumming later this summer when he was due to appear before them, after which he would be confirmed as Chief Exec. of the shiny new Prudential Regulatory Authority – the FSA’s replacement. They might have heard Lord Mandelson explain how regulatory authorities like the FSA were outwitted and governments blackmailed by banks which dumped massive bank losses onto their sovereign balance sheets. The inquisition would have been worth watching but sadly Sants got wind of it, bottled-out and tendered his resignation instead.
But HM government is not heartless. At the same time as sorting the Eurocrisis our Dave found time to keep in touch with his greener, cuddlier side by re-stating the government’s commitment to reduce litter and landfill by a ‘bag tax’ on single-use plastic bags. 5p per bag is now the norm in Wales and will be Northern Ireland from April next year. Quite how this would apply to the Markets industry I haven’t got a clue but neither has the government. However the Scots government is now consulting on the idea – and about time too. Thanks to global warming more and more sea turtles are visiting our shores and the Marine Conservation Society has shown how a discarded plastic bag often looks just like a juicy jellyfish to a hungry turtle, before killing them. I don’t know about that because there aren’t many beaches in Oxfordshire, but anything which reduces litter on the A34 sounds good to me.
But would you believe it – the bean counters at HM Treasury have knocked it on the head. A spokesperson said something like: ‘After the granny tax, pasty tax and fuel tax fiasco we don’t seem to have an appetite for plastic bags.’ They might not, but turtles do. That’s just typical. They think it’s more important to look after the Germans than the turtles.