Debt Crisis, Banking Crisis, Constitutional Crisis

I'm wondering how far the EU's collective idiocy can go. First, turn a resolvable sovereign debt crisis into an impending catastrophic banking crisis. Not enough? Then toss a constitutional crisis into the mix. But whatever you do, leave the forces driving the Union to disaster--right now, not ten years from now--unaddressed.

While I am trying to get my mind round that, I am also trying to make sense of the way this proliferating avoidable calamity is being reported.

I admire The Economist, my home for many years, but I am utterly bewildered by the line its main British and EU political commentators have taken over the summit. Here's Charlemagne:

Confronted by the financial crisis, the euro zone is having to integrate more deeply, with a consequent loss of national sovereignty to the EU (or some other central co-ordinating body); Britain, which had secured a formal opt-out from the euro, has decided to let them go their way.

Whether the agreement does anything to stabilize the euro is moot. The agreement is heavily tilted towards budget discipline and austerity. It does little to generate money in the short term to arrest the run on sovereigns, nor does it provide a longer-term perspective of jointly-issued bonds. Much will depend on how the European Central Bank responds in the coming days and weeks...

But especially for France, on the brink of losing its AAA credit rating and now the junior partner to Germany, this is a famous political victory. President Nicolas Sarkozy had long favored the creation of a smaller, "core" euro zone, without the awkward British, Scandinavians and eastern Europeans that generally pursue more liberal, market-oriented policies. And he has wanted the core run on an inter-governmental basis, i.e. by leaders rather than by supranational European institutions. This would allow France, and Mr Sarkozy in particular, to maximize its impact.

"Whether the agreement does anything to stabilize the euro is moot." Moot? What is the point of this entire exercise if not to stabilize the eurozone? Its success or failure in that regard is not moot, it is all that counts. Charlemagne tells us, quite rightly, what's wrong with the deal--namely, it's mostly beside the point (failing to address collective backing for debt and other pressing questions; apparently that's on the schedule for the next summit in March) and where it manages to notice what's going on it is dangerously wrong (all we need is austerity). But so what if the plan is no good? What counts is that Britain is isolated and this is quite a triumph for Sarko.

The president tried not to gloat when he emerged at 5am to explain that an agreement endorsed by all 27 members of the EU had proved impossible because of British obstruction.

I can imagine. Let the eurozone burn: the sweet smell of success.

With the entry next year of Croatia, which will sign its accession treaty today, the EU is still growing, said Mr Sarkozy. "The bigger Europe is, the less integrated it can be. That is an obvious truth."

Now I'm more bewildered. That is a misquotation or a non sequitur--or am I missing something? If it's what Sarko said, he's right--but he'd be conceding Britain's point. I suppose what Sarko meant to say or perhaps did say was, "The bigger Europe is, the more integrated it has to be. That is an obvious truth." Except it's far from obvious. The bigger the union, the more sensitive it has to be to fears about the distance between EU HQ and voters who still think of themselves as French or German or Spanish or Croatian first and European second.

Let's refresh our memories a moment. The political constraint on effective joint action to resolve the crisis is the reluctance of voters in Germany to bail out citizens in undisciplined nations such as Greece and Portugal. Germany wants to lessen that reluctance by imposing permanent too-rigorous fiscal discipline on the defaulters. This will maybe reduce German voters' alienation from the EU project, but at the significant risk of increasing everybody else's either now or in future. Meanwhile, if Germany's demands aren't met, it threatens to let the crisis worsen, because some people need to be taught a lesson.

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