“We jumped into a rowboat… next to a supertanker” said David Milliband, former U.K. foreign minister under Labor, criticizing the posture taken by the Conservative PM in Brussels today.
Britain vetoed the 27-nation agreement today and the other 26 member nations had to reach an accord outside the framework of the E.U. Effective yes but it is not the same.
At the center of the British dissent is banking. The financial sector is a large portion of the U.K. GDP – larger than in Germany or France – and U.K. banking laws are modeled after their American counterparts, cut-throat and unregulated. The banking sector in continental Europe is more regulated and as long as anybody could do as they pleased, the U.K. would go along. But the treaty proposed today, and adopted by the other 26, imposes supra-nationals controls which would affect the U.K. financial sector. British banks would be subjected to the stricter Franco-German norms that are the model in Europe. Thereof the British veto.
But those supranational controls are the only way out of the crisis. Britain, or rather its conservative government, is being incredible selfish and short-sighted. If Europe fails, Britain sinks.
The euro crisis is affecting both the U.S. and China, two major traders with Europe. China just lowered the amount of cash Chinese banks have to keep liquid to stimulate internal spending, even at the risk of worsening inflation. That is because Chinese manufacturing is slowing down due to a drop of demand abroad.
Many in Europe feel that the U.K. should leave the E.U. altogether and be like the Swiss. That would certainly benefit the euro rescue and the world economy.