Wednesday, October 08, 2008

Joining the dots

Today, after days of "dithering" – a favourite Tory and media label – chancellor Alistair Darling suddenly launches "a drastic rescue of Britain's high street banks in move designed to head off a cataclysmic failure of confidence."

This just happens to be a day after an emergency meeting of the finance ministers of the 27 EU member states. Is this a coincidence?

At the Ecofin meeting yesterday, two things happened. Firstly, the ministers effectively gave the green light to member states to break the EU's state aid rules.

Secondly, they turned their faces away from initiating structural reforms to the regulatory system, which might have freed the logjam in inter-bank lending – preferring instead to make one minor and largely cosmetic change.

Now, today, we see Darling introduce a scheme designed specifically to free up inter-bank lending, including the provision of at least £200 billion to banks under the Special Liquidity Scheme and the injection of £50 billion capital into a select group of British banks - to the general approval of the Europhile Tory hierarchy.

Thus we see an alternative and far more expensive plan aimed at achieving that which the EU members states collectively failed to address. Furthermore, it is one which, in its totality, almost certainly breaches EU state aid rules, as well as being "discriminatory" – two of the EU's mortal sins.

So, Britain is in Europe but not ruled by Europe? Just join the dots …

  • Other posts on the financial crisis here.