A European pantomime

It’s mid December and we are well and truly into Pantomime season.  Those of us who didn’t get to the local theatre to see Jack and the Beanstalk last weekend were treated instead to the farce of Europe’s leaders trying once more to solve the Eurozone crisis.

Much attention has been focused on David Cameron (dressed as Dick Whittington, maybe) claiming that the streets of London are paved with gold and demanding safeguards for the City’s financial services industry.  “I’ll veto your treaty if I don’t get my way”, he shouted to the audience.  “Oh no you won’t”, they replied.  “Oh yes I will”, countered Dave, and promptly did so.

But the real storyline is how little was achieved at the summit and how quickly even that is unravelling.  Like Peter Pan, the boy who never grew up, many of the main actors are living in Neverland and looking for the Goldilocks solution.  Daddy Bear’s idea of letting the ECB buy unlimited quantities of peripheral government debt is too hot for Germans to stomach, while Mummy Bear’s proposal for central oversight of national budgets is too cold for the French.  We’re all waiting on the edge of our seats for the one that’s “just right”.

Contrary to initial reports, Britain was not the only ugly sister at the ball − other non-eurozone countries including the Czech Republic, Hungary, Sweden and Denmark all agreed in principle to the inter-governmental treaty last week, but are now retreating slowly. Many are worried that they might end up surrendering too much sovereignty to the European Commission’s big bad wolf.

And let’s not forget that many of the proposals on budget deficits in the latest accord are already enshrined in the 1992 Maastrict Treaty.  This time round they are just coming with slightly firmer promises to actually follow the rules.

Another hurdle in the yellow brick road leading to the final solution is the question of whether the EU’s institutions can be used to develop and then monitor this proposed non-EU treaty.  If it does all come crashing down at their feet, you know who will get the blame − it will be “fee fi fo fum, I smell the blood of an Englishman”.

David Green is the Head of Sterling Consultancy Services, a provider of treasury management advice to local authorities and other not for profit organisations.  This is the writer’s personal opinion and does not constitute investment advice.  It should not be relied upon when making investment decisions.