Juncker’s Europe

by Andrew Stuttaford

I had been waiting for the Daily Telegraph’s Ambrose Evans-Pritchard to wade in on the topic of Juncker’s appointment to the EU bureaucracy’s top job, and he doesn’t disappoint.

You have to be politically unhinged to think it wise or proper now to entrust the EU machinery to an arch-insider, as responsible as any man alive for the calamitous decisions that have led Europe into its current cul de sac, and a master of the Monnet Method to boot. “We take a decision, then put it on the table and wait to see what happens. If there is no protest, because most people have no idea what we are doing, we take step after step until we are beyond the point of no return,” he once told Der Spiegel.

This is not the method of a man who believes in a transparent and open democratic process.

As so often, Evans-Pritchard returns to his theme of a Europe divided between Teutonic and Latin blocs. But the equation is more complicated than he would might suggest. The pain does not just flow the periphery’s way. If the euro zone sticks with the single currency in its current form, Germany’s taxpayers, directly or indirectly, are going to end up footing the bill, and doing so in perpetuity.

On the other side, the math of austerity without any of the compensations of a depreciating currency—no panacea, I should add— remains forbidding :

Perma-slump is already written into law under the EU Fiscal Compact. Each country must cut its public debt mechanically for twenty years until the ratio reaches of 60pc of GDP, regardless of monetary policy or the state of the world. This is already haunting France as it slips deeper into a debt-deflation trap, with zero growth causing the debt trajectory to spiral upwards, despite one austerity package after another.

French debt jumped to 93.6pc of GDP in the first quarter from 91.8pc a quarter earlier. Gilles Carrez, head of the French parliament’s finance committee, says it will probably punch through 100pc by next year. This means that the debt will have to be cut by 40 percentage points, or 2pc a year, in the midst of an unemployment crisis.

It is worse for Italy, with debt ratcheting above 133pc.[Italian prime minister] Mr Renzi  can try to gain a little leeway for extra investment, but the task is beyond any political leader at this point. The EMU straight-jacket imposes obliges him to run a primary budget surplus of 5pc of GDP for year after year even if the European Central Bank meets its 2pc inflation target, which is it failing to do. At the current 0.5pc inflation rate , Italy has to run a surplus near 7pc to comply.

As for poor old Britain, Evans-Pritchard notes how Merkel (a supposed ally) bulldozed her way past Cameron so as to see Juncker installed, but:

Mrs Merkel has blithely pushed her advantage with poisonous effects on the political psychology of Britain, lifting the pro-Brexit tally to a record high 47:39 on the latest MoS poll, seemingly in order to placate her “boulevard press” and the euro-apparatchiks of her own party.

Berlin is now scrambling to control the damage. Vice-Chancellor Sigmar Gabriel warned that British exit would set off the disintegration of the European Project. “We should not underestimate the impact in the Anglo-Saxon states and the financial markets. Europe would seem broken and weakened in the eyes of the world. It is already viewed as a continent in decline,” he said.

Finance minister Wolfgang Schauble said Brexit would be “absolutely not acceptable”, vowing to do everything possible to keep Britain in the system. Quite so. British departure would upset the EU’s internal chemistry of the EU, risking a chain reaction. It would shift the centre of gravity to the South and the poorer regions of the East, leaving Germany with an untenable hegemony, deprived of a key ally in favour of free trade and market reform.

There’s something to that, but my own view (and not only mine) is that Mr. Cameron’s ersatz euroskepticism has left a gap in the genuine euroskeptic argument that UKIP and the other flag-bearers of euroskepticism have failed to fill: if Britain is to leave the EU, how are its trading and commercial relationships to be protected? Happy talk about the Commonwealth and the Anglosphere is not enough. The failure to address that question properly (see what EU Referendum’s Richard North has had to say about it for quite some time now) may be what eventually persuades British voters that the best thing is to stick with the EU, the devil they know.

But even if we do accept that (a) Brexit is a reasonably realistic prospect and (b) that the Germans are as worried about the prospect as Evans-Pritchard suggests (unlikely) the question remains whether David Cameron is tough—and imaginative— enough to push the Germans into agreeing to the sort of deal that would generate a reasonably acceptable basis for Britain to remain in the EU.     

To ask that answer that question is to answer it.

What Brits can expect instead is a purported ‘constructive engagement’ with its EU partners that will achieve nothing other than ensuring that enough former Tories will remain with UKIP to doom Cameron to defeat at the polls next year. That will mean his replacement by a europhile Labour government, and a stake through Brexit.

This is something that Chancellor Merkel almost certainly understands very well.