The Morning After

[Update at end of post]

So Young Dave went to Brussels, wielded the UK’s veto, and left himself in a minority of four – maybe three – member states. The resultant accord between all seventeen of the Eurozone members, along with six others who aspire to ultimately join them, is equally unsatisfactory, given that the weaknesses of the Euro have once again been kicked down the road.

And that means it isn’t over just yet: despite the apparent agreement, the Eurozone still has no lender of last resort, and nor is there any indication of how debt restructuring for those who have been through the pain of bail-outs will be handled. Because there will have to be further restructuring. Moreover, the question of how the Eurozone does what in the UK we call “regional policy” remains unanswered.

The latter is a necessary move to enable the “convergence” of otherwise disparate economies, as is a “lender of last resort”. It will require countries like Germany to yield some ground. But without it, the problems will not go away. And this is not just my view: economist Vicky Pryce came to more or less the same conclusion in an article that appeared in last Saturday’s Guardian.

She cited two elements that were necessary for the Euro to survive: the first “an institutional framework that would produce ‘convergence’ between its members’ economies”, and the second “institutional arrangements to deal with crises ... [a] lender of last resort”. As I’ve observed previously, if there is no body standing behind a currency, the panics and bank runs will keep on coming.

And, unless I missed something, none of those issues has been satisfactorily addressed thus far at the Brussels summit. So the Euro will continue, but the supportive words from Angela Merkel will not enable the project to defy reality – there is more to come yet. As for Cameron, he has come back with nothing.

Young Dave could have said he would put the whole thing to a referendum. This would have been popular with many in his own party, and would have – initially – been enthusiastically cheered on by a significant part of the Fourth Estate. The problem is that departure from the EU is a deed that can only be done once.

So what has Cameron got for his pains? Guardian Europe editor Ian Traynor made this bleak assessment: “despite his veto, Cameron does not get his financial regulation exemptions and concessions. He has isolated himself and Britain, failed to achieve his key goal, shut himself and Britain out of the negotiations on the future shape of Europe all in the name of the Great British national interest”.

He could have engaged and yielded, like John Major, keeping the UK at the heart of Europe. Instead he ends up as Austen Chamberlain, of whom Winshton memorably said “He always played the game, and he always lost”. Bad result all round.

[UPDATE 1600 hours: Cameron may now be in a minority of just one, after Hungary joined Sweden and the Czech Republic in deciding to consult their national Parliaments on the deal already agreed by the other 23 member states.

Meanwhile the negotiations continue, apart from for the UK. Cameron could of course have conceded a referendum, but doesn't want one. He could have also chosen the route of putting the deal to his own Parliament, which a Labour PM may have managed to finesse, but the Tories are so fractured on Europe that this would probably prove impossible.

And many Lib Dems are deeply unhappy at the outcome, but whether the strain will ultimately collapse the Coalition is yet to be seen. Cameron may see off UKIP as a result of his defiance, but there do not seem to be any other winners. We could have stayed in the tent and still played hardball: this is not a good place for the UK to find itself]