A fortnight ago the Europeans said that they were on the verge of sorting out the debt crisis but now expectations are being down played.
Unless there is a major breakthrough today, to quote Private John Frazer from Dad’s Army, ‘we’re doomed, we’re doomed.’
In politics you can hype up proposals, under deliver later and usually get away with it. Why? Because the average voters memory span is just slightly longer than that of a goldfish.
Not so, when you’re dealing with economic issues. Financial Institutions make fortunes on the prediction game. Consequently, they weigh and balance every word uttered on financial and economic policy.
For European leaders to reassure that they’re on the verge of producing a master plan to sort out the crisis and then not deliver, courts disaster. The disappointment felt by the market, almost certainly, will make a bad situation a whole lot worse.
Unless today’s Euro zone summit meetings produce a plan with two elements it will have failed. One element, actual wads of cash in large enough numbers to convince the market that there is enough firepower to deal with the crisis. This on its own will buy time.
But to solve the problem a viable long-term solution that creates a healthy economic Europe, is necessary.
If either element is missing from the final communiquÃ© the crisis will continue unabated and Europe will face a deep and long recession. If there are only warm words expect the worse.
Greece will default on its loans, banks will take a hit, some will sink, and there will be a domino effect. Trade throughout Europe will grind to a halt.
Only a believable plan will do to settle the market once and for all.
What should that plan be? Forget the finances, the only long term solution to the crisis is a single economic authority for the whole of the euro zone.
There are seventeen democratic countries in the Euro zone and each has an economic minister, consequently you have seventeen different economic policies to run one single currency. Result -chaos.
To sort it out there needs to be one creditable economic policy. This can only happen with political union. Yes, a Federal Europe.
Now if today’s European summit doesn’t lay the road map for such a State, the markets will react accordingly. Yes, more misery for the citizens of the continent.
If, against all expectations, the seventeen decide to take that quantum leap forward and pool their sovereignty and move towards a Federal Europe, what then for the ten refuseniks outside the euro currency, of which the UK is, of course, one.
Can the European Union go on with a single Federal State of seventeen countries at its core? The answer is likely to be, no.
The EU that we know and love it will have changed so much that it’ll no longer be functional. A new relationship with the ten will have to be negotiated.
New negotiations. What an opportunity for those eighty-one that voted against Mr. Cameron on Monday to make mischief. They might yet see their dream come true and the UK out of Europe. Alas, England can again refuse to be part of the game. Wales and Scotland would have to forge their own destiny, maybe.
What can be predicted is that Europe will dominate the political debate, awhile yet.