Why the euro turkey is well and truly stuffed

Sunday, December 18, 2011
By Paul Martin

The coming break-up of the single currency makes Britain’s veto seem a mere sideshow

By Jeff Randall
19 Dec 2011

As George Osborne prepares his response to the Vickers report on banking reform (the Chancellor is expected to make a Commons statement this afternoon), there’s a growing sense in the City that while Britain upgrades its sprinkler system, a fireball has already engulfed our neighbours. Much-needed changes to UK financial legislation, recommended by Vickers, will be enacted by the end of the current parliament, with the overhaul completed by 2019. Nothing wrong with long-term planning, except that with the eurozone in disarray and sovereign defaults looking all but certain, even getting to next Christmas without a fresh banking crisis may prove a wish too far for Santa.

Those who had bet on a seasonal gift of salvation from this month’s Brussels summit have already lost their wager. With a gun to the head of monetary union, European ministers, in effect, invited bond markets to pull the trigger. Without a new mechanism for very large and permanent fiscal transfers – from the prudent to the profligate – the euro turkey is stuffed.

The sideshow of David Cameron’s veto will soon be upstaged by the single currency’s combustion and the immolation of its weaker members’ economies.

Confounded by the triumph of remorseless debt over political will, EU leaders have succumbed to collective delirium, promising that future government budgets will be “balanced or in surplus” and that annual structural deficits will “not exceed 0.5 per cent of nominal gross domestic product”.

There is not one chance in a million that this can be achieved by more than a handful of EU states. When fantasy masquerades as action, the end is nigh.

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