Fearing a Great Britain bail out from the European Union, German Foreign Minister Wolfgang Schaeuble urged conservative Prime Minister David Cameron to remain engaged in the European Union. Since the Eurozone’s sovereign debt crisis emerged earlier this year, the EU has watched its currency plummet along with its credibility. Promised unparalleled prosperity in 1999, the Eurozone launched the euro with 17 of the EU’s 29 states. Former British Prime Minister Tony Blair resisted extreme EU pressure to abandon the Pound Sterling and join the upcoming euro. In the years that followed, British officials had some second thoughts as the euro soared against foreign currencies, reaching parity with Pound Sterling and doubling the value of the U.S. dollar in 2008. Since then, the euro has been in a tailspin due to rising debt and impending bankruptcies.
Whether or not the Pound Sterling’s held its own, the U.K. made the right decision to not surrender its sovereignty to the Frankfurt-based European Central Bank. Retaining its ability to print and coin money, the Bank of England stays independent and autonomous of the Eurozone’s financial gyrations. Mired in rising debt from Greece, Portugal, Spain, Ireland and Italy, the euro no longer has the same luster as the past. German Chancellor Angela Merkel, a big supporter of the euro, called Britain an “important partner,” planning to sell the Eurozone to Cameron again. “In my view the British voce is sorely need in this [European] competition of ideas,” said Schaeuble, another big advocate of the Eurozone. Merkel and Schaeuble come to the U.K. bearing gifts but not to debt-burdened Eurozone members. With Athens rioting over Merkel’s austerity plan, the Brits remain skeptical.
Speaking a Saint Anthony’s College in Oxford, Schaeuble pleaded for more U.K. involvment in the EU. “I firmly believe Europe would be the poorer without this input to our debates. Britain should retain and regain a place at the center of Europe because this will be good for the European Union,” said Schaeuble, concerned that the U.K. was further divorcing itself for the Eurozone. It wasn’t that long ago that there was talk of the Eurozone collapsing, sending the U.S. stock market into seizures. While the Eurozone has created a so-called bailout or relief fund, there are still questions whether or not Germany is willing to underwrite the economic misery of less prosperous member states. Faced with a thankless task, Germany must continue forking over cash to bailout insolvent countries like Greece and Portugal. Germany wants guidance from London, knowing the U.K. seeks to avoid the mess.
Germany’s solution for the Eurozone’s sovereign debt crisis was to impose austerity measures on financially struggling states. Expecting the Greeks to take less in government pensions and health benefits or bumping up the retirement age for future retirees caused rioting on Greek streets. When the Greeks bought into the euro in 1999, they were promised unprecedented levels of prosperity. Instead, the Greek government went into an economic spiral. When the euro inflated in value, it made cash-strapped Greeks even poorer. Inflated euros were just too pricey for Greeks used to transacting in the more affordable Drachma. Now that the Eurozone faces more debt and a possible collapse, they look to the U.K. for answers. “Britain is an important partner in the European Union . . “ said Merkel, welcoming Cameron’s advice, despite knowing the U.K. has its own economic problems.
Merkel’s interest in the U.K. involves keeping German exports competitive. Despite all the problems with Eurozone debt, it keeps the euro competitive with the Pound Sterling, allowing Germany to flood the U.K. with exports. Merkel’s worst nightmare involves the collapse of the euro, where Germany would be forced back on the Deutsch Mark—a currency that could easily double in value. With an inflated Deutsch Mark, German exports would be decimated on world markets. It wouldn’t take long for the mighty German economy to plunge into recession. “Britain has to some extent other ideas [about Europe], it does not want such close integration. But from the German perspective, from the point of view our interests, it is an important member of the EU,” said Merkel, encouraging Cameron to stay involved. Cameron is satisfied keeping his distance from the EU.
Seeking a closer involvement with the U.K., Merkel hopes to get Britain to pony up more cash into the EU in hopes it trickles down to the Eurozone bailout fund. Instead of the European Central Bank taking responsibility for the sovereign debt crisis, the ECB expects Germany to bailout less prosperous Eurozone countries. Worried about hyperinflation, the ECB is reluctant to follow the U.S. Federal Reserve and print enough cash to re-supply capital to cash-strapped banks and governments. While Merkel insists on more austerity for debt-ridden countries like Greece, the ECB should play a bigger role in managing Eurozone sovereign debt. Expecting Germany to bailout out cash-strapped Eurozone countries is unrealistic. Instead of asking the U.K. to help the Eurozone’s problems, Germany and the ECB should figure out a real long-term fix that’s fair to all Eurozone states.
About the Author
John M. Curtis writes politically neutral commentary analyzing spin in national and global news. He’s editor of OnlineColumnist.com and author of Dodging The Bullet and Operation Charisma.