Wednesday, December 07, 2011

Settling down?

After the frenetic manoeuvrings of the last few days, there is the air of things beginning to stabilise – as the issues become clearer and the parties stake their claims.

The Financial Times has it that the Germans are kicking Van Rompuy into touch – something that was already evident yesterday, and we are getting to the settled position that we are looking at full treaty negotiations. By Friday, therefore, we should be seeing an announcement that an IGC has been convened.

Back in Britain, we are seeing an unlikely star in Owen Paterson, who has told the Spectator that a referendum is "inevitable" if a treaty is agreed.

With due respect to Owen, I don't think it is. The obvious way of ensuring that nothing is imposed on the UK is for Britain to invoke the veto, which is what Cameron seems to have decided upon.

However, Paterson is saying that, "If there was a major fundamental change in our relationship, emerging from the creation of a new bloc which would be effectively a new country from which we were excluded, then I think inevitably there would be huge pressure for a referendum".

In that, he is probably right – in that the pressure for a referendum will intensify, putting Cameron on the spot. My own prediction that the Conservatives would rue the day if they did not offer a referendum on Lisbon is becoming truer by the day. The issue is taking on the mantle of an albatross, dogging Cameron's every move.

With Boris Johnson also pitching in though, one wonders what on earth the Tories seek to gain. If there is any real prospect of a British referendum holding things up, the "colleagues" will no doubt revert to their intergovernmental option, by-passing the British move.

On the other hand, if the veto (or threat thereof) blocks the imposition of any new requirements on Britain, it is hard to see what can be achieved by a referendum. This seems more like politicking for the sake of it.

In this context, one can see increasing irritation amongst the "colleagues" at a fundamentally unserious media, bolstered by a frivolous political class, which is unable to focus on the serious issues, which are threatening economic meltdown.

Come the weekend, though, one assumes it will have dawned on most commentators that we are in for the long haul. If the Germans manage to hold the line, and insist on a full IGC, we really are looking at two-years plus before a resolution, even if Germany manages to avoid a constitutional referendum.

One suspects it might be a little difficult keeping the notoriously fickle British media focused for that long. By the weekend, the Failygraph will be looking to the far more important task of providing live coverage of "Strictly".

And then there is the question of whether the markets are prepared to wait that long. Ambrose reports on massive capital flight from the eurozone, and by the time it is realised that treaty negotiations are going to offer no immediate (or any) relief - as ZeroHedge seems to have done, it is hard to see the markets remaining stable.

The stability we are currently seeing, therefore, could just be a very brief calm before the storm, and then not even that. As events change by the hour, even this evening could look very different from now.