Thursday, December 01, 2011

Confused signals

Yesterday we had six central banks acting in unison, supposedly to prevent a global financial system meltdown – a state of affairs that got less coverage in some newspapers than the story of public sector strikers using their day off to go Christmas shopping.

With what appears to be open conflict between the IMF and ECB, there is now a further twist to an increasingly complex tale. Reuters, on the one hand, offers an exclusive report on how the "colleagues" are making a pitch for a treaty amendment, with the support of the British – who are no longer looking for a trade on the working time directive.

On the other hand, we have a report from AFP which talks of the European Council in nine day's time, when there will be "historic federal-style changes to save the eurozone, with France presenting its policy towards common budget control" and Merkel due to lay down her vision of how the EU should work, and her conditions, in a speech to the Bundestag on Friday.

On the proposed timescale, we cannot possibly be talking about treaty changes, but the clue is possibly in the use of the word "federal", implying a co-ordinated intergovernmental agreement, outwith the EU treaty framework, of the nature signalled by the Irish Examiner yesterday.

These, on the face of it, are contradictory options. The "colleagues" can hardly be going for treaty change and an intergovernmental agreement at the same time, although it is possible that an agreement could be followed later by a treaty change.

At the heart of the treaty option is Herman Van Rompuy, and he is planning to define what changes might be needed to the Lisbon Treaty before the European Council on 9 December. A further Council meeting in March could then give a mandate for limited treaty change, followed by an intergovernmental conference to draft the amendments.

This process, though, would not be completed by the end of next year, with ratification in 2013 – which is far too slow for the emergency action which is needed if there is going to be a serious attempt to save the euro, if that was at all possible.

The treaty change process, therefore, looks to be cosmetic, the clue to this coming from José Manuel Barroso, who says: "We believe treaty change can be a contribution to show one very important thing: that the euro is irreversible." In other words, they are looking for a confidence-builder, a statement of intent, while the real action goes on elsewhere.

That still leaves Merkel with her insoluble problems (in the short-term) with the constitutional court, limiting her freedom of action, in a situation which becomes more urgent by the day, not least as capital flight builds in intensity and currency values plummet against gold, as we see the price of gold rising for the fourth day running.

What we have as a result is a totally confused and even contradictory picture, with no clear messages coming out. When, on top of that, Greek strikers are claiming complete victory in their battle against EU-imposed austerity measures, there is now no coherent message to be taken from the torrent of events. And that tells its own story, not at all a happy one.

Anoneumouse says it all really (see pic above) ... to say nothing of the Boiling Frog, with a typically robust piece.