Eurozone soap opera reveals a damaged relationship with markets

Democracies need to get some self-respect.

We’re all familiar with the story. Girl meets glamorous guy with flashy car and nice teeth who promises her the world. He screws around, and when she gets angry, he threatens to leave. But by now our girl is so dependent on the guy she’s desperate for him to stay. Sobbing, she throws herself at his feet and promises she’ll do better.

This soap opera can help us understand what’s playing out in the eurozone.

States fell in love with markets, and they let us down. Financial deals we depended on turned out to be phonies. When we talk about introducing extra regulation to prevent this happening again, financial institutions threaten to leave our borders and seek pleasure elsewhere.

Like the girl, democracies are now the ones offering to change. At the centre of the emerging eurozone plan is a call for fiscal integration, whereby states promise to abide by strict spending limits in return for bailout funds. But the underlying causes of under-regulation and overconcentration of market power remain unsolved. Our relationship with the City still suffers from an imbalance of power and we’re still at risk.

We need to be more honest about what triggered the current European crisis. Apart from Greece, the problem was not unsustainable levels of public spending. It was banks handing out risky loans and stockpiling bad debts. Spain is a classic example. The country ran a balanced budget until 2008, when it was forced to pile horrific property debts onto the public balance sheet to bail out irresponsible lenders. As this fantastic BBC graph shows  (see total debt graph), this is a common pattern for most countries.

I don’t want to abdicate responsibility. We all took on those loans from the banks when we shouldn’t. We all enjoyed that party in a bubble and lived a false dream when we should have kept a tighter eye on reality. Britain should have been in surplus from 2004-2008. The girl in our story should have been brave enough to see the writing on the wall. We should have taken action earlier.

But we are where we are. All we can do is change our behaviour now. It’s understandable that Merkel wants fiscal rules on states to make sure they don’t blow German money. But without addressing the banks too, you’re setting up a terrible incentive problem. Everyone knows if the girl gets back with the guy without punishing him for cheating, he’s going to do it again. In fact now he knows he can get away with it, he’s more likely to.

Sadly in the middle of the crisis, no country feels strong enough to limit financial services, whether it improves stability or not. In a desperate attempt to grow, governments are happy for banks to throw money at anything. Any bubble is better than stagnation. We don’t have the self-esteem or self-confidence to challenge our irresponsible partner and build a better relationship.

Although there is some talk of banking union, this is more about sharing bad debts than introducing stronger lending conditions. Although some like former F&C chairman Robert Jenkins says this may change, at the moment the assumption that “liquidity is free and will and will be freely available” continues to hold.

Britain is one of the greatest sufferers of self-delusion. Osborne is massively opposed to the transaction tax – the one small move Europe might be prepared to take to challenge the City – and he used his recent Mansion House speech to announce that the state will be underwriting risky loans. He’s pulled back on the already watered down proposals of the Vickers Commission, reducing the required amount of back up deposits to three per cent when columnists like Martin Wolf at the FT are calling for ten per cent.

You don’t have to be an agony aunt to figure out what comes next. Without a change in this poisonous relationship, we’re setting ourselves up for another fall. Our girl needs to rediscover her self-respect. Get it wrong, and it will hurt. But get it right, and democracies and markets have a chance to build a new, more honest and productive future together.

Democracies and markets could still find a more stable future together. Photograph: Getty Images

Rowenna Davis is Labour PPC for Southampton Itchen and a councillor for Peckham

Felipe Araujo
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Manchester's Muslim community under siege: "We are part of the fabric of this nation"

As the investigation into last week's bombing continues, familiar media narratives about Islam conflict with the city's support for its Muslim population.

“You guys only come when something like this happens,” said one of the worshippers at Manchester's Victoria Park Mosque, visibly annoyed at the unusual commotion. Four days after the attack that killed 22 people, this congregation, along with many others around the city, is under a microscope.

During Friday prayers, some of the world’s media came looking for answers. On the eve of Ramadan, the dark shadow of terrorism looms large over most mosques in Manchester and beyond.

“People who do this kind of thing are no Muslims,” one man tells me.

It’s a routine that has become all too familiar to mosque goers in the immediate aftermath of a major terror attack. In spite of reassurances from authorities and the government, Muslims in this city of 600,000 feel under siege. 

“The media likes to portray us as an add-on, an addition to society,” Imam Irfan Christi tells me. “I would like to remind people that in World War I and World War II Muslims fought for this nation. We are part of the fabric of this great nation that we are.”

On Wednesday, soon after it was revealed the perpetrator of last Monday’s attack, Salman Ramadan Abedi, worshipped at the Manchester Islamic Centre in the affluent area of Didsbury, the centre was under police guard, with very few people allowed in. Outside, with the media was impatiently waiting, a young man was giving interviews to whoever was interested.

“Tell me, what is the difference between a British plane dropping bombs on a school in Syria and a young man going into a concert and blowing himself up,” he asked rhetorically. “Do you support terrorists, then?” one female reporter retorted. 

When mosque officials finally came out, they read from a written statement. No questions were allowed. 

“Some media reports have reported that the bomber worked at the Manchester Islamic Centre. This is not true,” said the director of the centre’s trustees, Mohammad el-Khayat. “We express concern that a very small section of the media are manufacturing stories.”

Annoyed by the lack of information and under pressure from pushy editors, eager for a sexy headline, the desperation on the reporters’ faces was visible. They wanted something, from anyone, who had  even if a flimsy connection to the local Muslim community or the mosque. 

Two of them turned to me. With curly hair and black skin, in their heads I was the perfect fit for what a Muslim was supposed to look like.

"Excuse me, mate, are you from the mosque, can I ask you a couple of questions,” they asked. “What about?,” I said. "Well, you are a Muslim, right?" I laughed. The reporter walked away.

At the Victoria Park Mosque on Friday, Imam Christi dedicated a large portion of his sermon condemning last Monday’s tragedy. But he was also forced to once again defend his religion and its followers, saying Islam is about peace and that nowhere in the Koran it says Muslims should pursue jihad.

“The Koran has come to cure people. It has come to guide people. It has come to give harmony in society,” he said. “And yet that same Koran is being described as blood thirsty? Yet that same Koran is being abused to justify terror and violence. Who de we take our Islam from?”

In spite of opening its doors to the world’s media, mosques in Britain’s major cities know they can do very little to change a narrative they believe discriminates against Muslims. They seem to feel that the very presence of reporters in these places every time a terror attack happens reveals an agenda.

Despite this, on the streets of Manchester it has proved difficult to find anyone who had a bad thing to say about Islam and the city’s Muslim community. Messages of unity were visible all over town. One taxi driver, a white working-class British man, warned me to not believe anything I read in the media.

“Half of my friends are British Muslims,” he said even before asked. “ These people that say Islam is about terrorism have no idea what they are talking about.”

Felipe Araujo is a freelance journalist based in London. He writes about race, culture and sports. He covered the Rio Olympics and Paralympics on the ground for the New Statesman. He tweets @felipethejourno.

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