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Markets and voters are increasingly refusing to obey the grand pronouncements issued by EU leaders at their ever-more-frequent crisis summits. Add to that the growing tensions between EU members, which go well beyond the isolation of Britain, and you have a formula for continuing confusion and disunity – rather than the decisive moment that so many commentators think they have witnessed.
The only relevance that last week’s debate had to the financial crisis is that investors were hoping that the announcement of a “fiscal compact” – involving much tougher supervision of national budgets in the future – might provide cover for the European Central Bank to buy Italian and Spanish bonds until the crack of doom, or at least until more private investors could be persuaded back into the market.
As ratification problems mount, against a background of economic stagnation or worse, last week’s clear picture of an isolated Britain and a Europe pushing towards unity will become much more blurred. For German fiscal hawks, the really important division now in Europe is between law-abiding northern European countries with sound economies and southern European countries that are viewed as corrupt and increasingly bankrupt. The Germans know that almost half the triple A rated countries in Europe are not in the single European currency. (These are Denmark, Norway, Sweden, Switzerland and Britain.) As for the triple A countries that do use the single currency, they have all just been placed on notice of a possible downgrade in their credit rating – a risk that is increasingly acute for France. If the Dutch, who are within the eurozone, join the Scandinavians and the British in refusing to join the new fiscal compact – German angst will only intensify.
As the Germans look anxiously towards northern Europe, so much of southern Europe is looking angrily at Germany. For although Britain provided a convenient lightning rod for much of the fear and rage in Europe, the economic crisis is provoking ill-feeling across the union. The French press spent the days before the summit agonising about “Germanophobia” in France, after a leading Socialist politician accused Mr Sarkozy of buckling to the Germans – and compared him to Édouard Daladier, the French leader who appeased Hitler in 1938. Such insults may seem mild before this crisis is over. And last week’s summit will be seen not as decisive, but as one act in a long-drawn out melodrama – that still threatens to turn into a tragedy.
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