To paraphrase the broadcast comment of Emperor Hirohito after the dropping of the Hiroshima bomb when he said “the war is proceeding, not necessarily to the advantage of Japan”, rather the same now applies to the Eurozone.   Things are certainly proceeding, but hardly to the advantage of its members, let alone of Britain on the outside.   The latest Merkel plan, Hollande growth advocate touche’, finally conceded after intense lobbying the principle of Eurobonds underwriting the debt of Spain, Greece, Italy, Ireland, etc., but only at the price of a federal Europe involving the sacrifice of national sovereigny over fiscal, social, pensions, and labour market policies to Brussels.   Germany is demanding banking, fiscal, and political integration as the price of saving the euro, and 4 EU committed federalist leaders have been commissioned to draw up proposals to carry this through.   Just about everything is wrong with this plan.

First, the euro crisis is really immediate, and not just for the survival of the Spanish banks and the Greek state, but the German proposal cannot be implemented in less than 5-10 years.   Presumably the Germans hope that the financial markets will be sufficiently impressed by the Eurozone’s medium-term aspirations for the short-term crisis to abate.   Fat chance.

The Merkel plan would require a new European treaty which after the nightmare experience of pushing through previous major new EU provisions is itself a tall order.   Even if that could be obtained, it would still leave two huge underlying problems unresolved.   One is the asymmetry in competitiveness between the German machine at the centre and the EU periphery which Eurobonds will ease in the short term, but not prevent German industrial power from steadily widening in the medium-longer term.   The other is the enormous political question of electoral control over a federal Europe.   On a strict population basis Germany, with peoples numbering 83 millions, would dominate that too, and the sacrifice of all national controls over such sensitive areas as tax, spending, pensions and labour laws is almost certainly at present a step too far.

And where would all this leave the UK?   It would be consigned to the political sidelines, since even the US would lose much of its interest if the UK were no longer its poster boy inside the wider Union.   It would play into the hands of the Tory Right who are frothing at the mouth at the prospect of leaving the EU altogether as a result of the mooted referendum – an exit that would leave the UK as an economic backwater in a world of super-blocs.

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