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Notion of shopkeepers

By vetoing the EU deal to tackle the euro crisis, British PM David Cameron has kicked his country where it hurts the most. Farrukh Dhondy writes.

india Updated: Dec 14, 2011 23:00 IST
Farrukh Dhondy
Farrukh Dhondy
Hindustan Times

It's Christmas and the pantomime horses are out on a hundred stages in Britain. The central attention this year is on the one in Whitehall, Britain's coalition government with David Cameron's Tories in the front of the cloth horse and Nick Clegg's Lib Dems bent over to fill the latter half of the horse. Or is it a donkey-shaped costume? Since May 2010's election, the donkey has held the stage, the front and rear encased in the cover called the coalition agreement.

Last week, Cameron went to the European Union's (EU) emergency meeting in Brussels, called to solve the crisis faced by the euro and used the British veto to scupper the plan drawn up by France and Germany. Their proposals would have meant changes to the treaty agreements of the 27 EU countries. The other 26 countries, with small reservations, signed up. They will now form a Super-Euro group within the EU, leaving Britain standing alone, not at the table which decides fiscal measures.

Cameron, pleading that he is defending Britain's interests, returned to a country severely divided in its opinion. His party, apart from a few dissenters, backed him. At the 2010 elections his party won 27% of the vote! His coalition partners, who at first seemed to back him, soon started making ambivalent noises of dissent without declaring that it threatened their loyalty to the coalition. Cameron had blundered, they said. They and a few Tories have always maintained that Britain's future is in Europe.

Cameron's veto will prove decisive for Britain. A very vociferous minority — which can easily tilt into a majority of the Conservative Party — want Britain to either leave the EU or at, the least, regain some of the legislative rights they have surrendered as the price of membership to the European parliament. They would like, for instance, the compulsory minimum wage law to be scrapped. Then British employers could pay less that £4.80 per hour to those desperate enough to take such jobs. And, of course, the Tories intend to see that such pliant desperation overtakes Britain. These Euro-sceptics believe that Europe over-regulates capitalists and usurers and want to allow them to get richer in order to 'stimulate incentives and growth.' The old free-market subterfuge.

The Liberal Democrats have no defining economic policy. They are, like Labour, for capitalism with social justice. Pathetically enough, Cameron has told the arse end of the donkey that in exchange for loyalty on Europe they can field a bill to alleviate domestic violence. Offering a fiddle to Clegg while setting fire to Britain's future.

How so?

Let me start with a simple confession: though I have a degree in physics, things have moved so fast that string theory leaves me hamstrung. Just so, I have now read a hundred articles and watched economists and hedge-fundwallahs talking about the financial crisis of the euro night after night, and I am no wiser.

But I am working at it. Take Manipur and Karnataka. For several historical and cultural reasons, they have very distinct economic profiles. They are both Indian states, send MPs to Delhi and obey the same laws. They use the Indian rupee without ever a thought to having their own currency. The disparities between them have to find political solutions within the Indian context and Constitution. They could break out in dissatisfactions, protests, demands or even insurrections. India as one State should and does deal with these.

The 17 Eurozone countries display uneven economic development and significant differences in culture and attitudes. They weren't one nation and going their own sweet ways, Greece (and several others) ran into serious debt owing the banks of the solvent countries impossible amounts. Even those banks are not flush with money. But as one Mr Maxwell said "being rich doesn't mean having money. It means having access to money."

The bankrupt countries can't devalue the euro to make their goods cheaper to export. They are stuck with the fiscal restrains of the whole of the zone. This was not the sort of dilemma that Manipur or Karnataka would face because they belong to one country that governs their internal actions and trade. Europe, to solve this crisis, either abandons the whole European project or gets closer to the model of the Indian states. The proposals in Brussels last week couldn't ask them all to become one country, but they did suggest, as the price of the rich buying off the troubled countries' debts, strict restraints, regulations and taxes that would apply to all who agreed.

Twenty-six did. Britain singly didn't. Apologists for Cameron say that he opposed the treaty because it sought to impose a tax on financial transactions within the EU that would disproportionately affect Britain's financial sector which today monopolises 85% of all European fiscal transactions. Cameron's veto may now have the effect it seeks to prevent. The 26 countries could impose duties on transactions made from outside the Super-Euro zone.

It could also result in Britain's residual manufacturing industry, which does 45% of its trade with Europe, facing taxes, tariffs and the loss of this 500-million-strong market. What happens when the nation of shopkeepers has no customers? The anti-European Tories will pursue this veto as a step towards leaving Europe or at least getting back the powers that they calculate will help British growth.

In their jingoistic self-congratulations they haven't calculated the cost of the loss of markets, the strictures the new Super-Euro Europe may impose on Britain's vital financial sector leading to the flight of banks and London's financial institutions relocating to Paris or Frankfurt. Neither have they calculated the social disaster that this shrinkage of isolated Britain will cause.

They may not get the chance to pursue their strategy that far. The pantomime donkey has kicked itself where it hurts this time. Will its rear now stop stooping and stand up for what it believes?

Farrukh Dhondy is an author, screenplay writer and columnist based in London. The views expressed by the author are personal.

First Published: Dec 14, 2011 22:53 IST