The Lilliputian “Superstate”

For the past week, the papers have been full of the woes of David Cameron as Tory backbenchers sense the possibility of a new European settlement and try to put pressure on him to loosen Britain’s links or leave completely. In more elevated moments commentators have discussed whether a new Euro bloc, bound in a fiscal union, would act against Britain’s interests. What hardly anyone discusses is whether the EU can create a new settlement or Euro bloc, or whether the task is beyond it.

Eurosceptics have been showing off quite shamelessly. They point out, correctly, that they have exposed the establishment thinkers who supported the Euro as dupes or idiots. But on one point Eurosceptics have been horribly wrong. The EU is not the “EUSSR” or a bureaucratic dictatorship. It isn’t a super state or any kind of state, but a souped-up diplomatic alliance. To date it has failed to take any of the decisive measures a nation state is capable of.

The options before it are all unpalatable, as options before politicians invariably are.

The EU might let the printing presses roll at the ECB and flood the Eurozone with money, but German fears of inflation stand against that.

Or the north might bailout the south and create a kind of fiscal union largely beyond democratic control. The north understandably objects to spending the money and the south will object to the assault on its democracies.

Or it might break up the Eurozone, which would mean imposing a great of deal of short-term pain on Greece, Ireland, Spain etc and a generation of European politicians and bureaucrats admitting they had committed an act of monumental folly.

Beyond the immediate future is the long-term problem of how to save southern Europe from grinding austerity and not provoke its furious peoples into revolt.

To date, EU leaders have not chosen the least worst option and decisively enforced it. If the dithering continues, much of the present debate in Britain will become beside the point as the markets push the Eurozone into chaos.

Amid all the punditry, the only person I have heard make this simple point is the Labour MP Gisela Stuart. Polite but exasperated she told Jeremy Paxman on Newsnight:

“you started off by saying “if this Euro crisis is resolved” and you assume that bailouts and all these things will solve the problem which is one of periphery countries not being able to become competitive again. And what you have is a construct that simply will not work, it is economically in its tensions not sustainable and Germany is in the dreadful position that even if they wanted to, their economy isn’t big enough to permanently bail them out and they get no thanks for attempting to bail out and they get no thanks for trying to tell the other countries how to run things.”

Paxman moved on. But Stuart is right. There is no guarantee that the EU will prove itself capable of taking a big nasty decision on Wednesday. And if it does not, Messers Cameron, Osborne and Hague will have more to worry about than angry backbenchers – as, indeed, will the rest of us.