Geithner's arrival tells you how bad things are in the eurozone

UK officials say it's like 2008 all over again.

The fact that Timothy Geithner is flying in for today's meeting of European Union finance ministers has been widely reported, but the significance hasn't been duly acknowledged.

American Treasury Secretaries don't drop in at Ecofin meetings on their way to the shops, because they happened to be in the area, because they had nothing better to do on a Friday afternoon. This is a sign that Washington is alarmed and impatient watching EU governments fail to get to grips with a crisis that threatens to upend the global economy.

I touched on some of this in my column this week, but that was more about the domestic implications for the Tories.

The institutions that were designed to manage the single currency have failed and there is no political will -- not least because there is no domestic political constituency in any eurozone country -- to start redesigning the project in a way that would be financially sustainable for the long term.

The bottom line is that financial markets will not be reassured until there is some progress (not just a statement of intent) towards a deal that puts the whole German economy up as collateral for Greek and Italian and Portuguese debt, and the rest.

Now why would the Germans sign up for that? Well, one answer is that their banking system will collapse if they don't. But that just feels like blackmail so, not surprisingly, they resist.

I strongly recommend this piece by Wolgang Munchau in the FT (behind a paywall unfortunately). The gist is that Germany's constitutional court has effectively ruled out any level of fiscal integration deeper than the current stabilisation mechanism, and that is failing. So the thing that would resolve the crisis -- a major political project to embed the euro in new institutions -- is unconstitutional in Germany.

I generally try to avoid sounding apocalyptic, because it is often too easy and lazy to paint the worst case scenario and claim it is inevitable. But things really are looking very bleak for the euro now.

The coordinated intervention by central banks yesterday to keep commercial banks liquid is another short-term fix. The revealing thing about it is that the central bankers felt they needed to act and managed it because they are less constrained by the complex and competing demands on EU heads of government. In other words, central bankers acted because elected politicians can't.

That says a lot about the dysfunctionality of European governance in a crisis.

I spoke to a senior Treasury official recently who told me the whole situation was reminding him of the run-up to "recap weekend" -- the period between markets closing on a Friday and re-opening on a Monday when Gordon Brown and Alistair Darling had to put together a plan to save the banking system from collapse in autumn 2008. Not a happy flashback.

Rafael Behr is political columnist at the Guardian and former political editor of the New Statesman

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Saudi Arabia is a brutal and extremist dictatorship – so why are we selling it arms?

With conflict in Yemen continuing, it’s clear that we’re failing to moderate the actions of “our despots”.

This year, during Pride week, I noticed something curious on top of the Ministry of Defence just off Whitehall. At the tip of the building’s flagpole hung the rainbow flag – a symbol of liberation for LGBTIQ people and, traditionally, a sign of defiance, too.

I was delighted to see it, and yet it also struck me as surprising that the governmental headquarters of our military would fly such a flag. Not only because of the forces’ history of homophobia, but more strikingly to me because of the closeness of our military establishment to regimes such as Saudi Arabia, where homosexuality is a sin punishable by jail, lashing and even death

That relationship has been under the spotlight recently. Ministers writhed and squirmed to avoid making public a report that’s widely expected to reveal that funding for extremism in Britain has come from Saudi Arabia. The pressure peaked last week, after a series of parliamentary questions I tabled, when survivors of 9/11 wrote to Theresa May asking her to make the report public. At the final PMQs of the parliamentary term last week, I again pressed May on the issue, but like so many prime ministers before her, she brushed aside my questioning on the link between British arms sales and the refusal to expose information that might embarrass the Riyadh regime. 

The British government’s cosy relationship with Riyadh and our habit of selling weapons to authoritarian regimes is “justified" in a number of ways. Firstly, ministers like to repeat familiar lines about protecting British industry, suggesting that the military industrial complex is central to our country’s economic success.

It is true to say that we make a lot of money from selling weapons to Saudi Arabia – indeed figures released over the weekend by the Campaign Against Arms Trade revealed that the government authorised exports including £263m-worth of combat aircraft components to the Saudi air force, and £4m of bombs and missiles in the six months from October 2016.

Though those numbers are high, arms exports is not a jobs-rich industry and only 0.2 per cent of the British workforce is actually employed in the sector. And let’s just be clear – there simply is no moral justification for employing people to build bombs which are likely to be used to slaughter civilians. 

Ministers also justify friendship and arms sales to dictators as part of a foreign policy strategy. They may be despots, but they are “our despots”. The truth, however, is that such deals simply aren’t necessary for a relationship of equals. As my colleague Baroness Jones said recently in the House of Lords:

"As a politician, I understand that we sometimes have to work with some very unpleasant people and we have to sit down with them and negotiate with them. We might loathe them, but we have to keep a dialogue going. However, we do not have to sell them arms. Saudi Arabia is a brutal dictatorship. It is one of the world’s worst Governments in terms of human rights abuses. We should not be selling it arms.”

With Saudi Arabia’s offensive against targets in Yemen continuing, and with UN experts saying the attacks are breaching international law, it’s clear that we’re failing to moderate the actions of "our despots".

The government’s intransigence on this issue – despite the overwhelming moral argument – is astonishing. But it appears that the tide may be turning. In a recent survey, a significant majority of the public backed a ban on arms sales to Saudi Arabia and just this weekend the Mayor of London denounced the arms fair planned in the capital later this year. When the government refused to make the terror funding report public, there was near-universal condemnation from the opposition parties. On this issue, like so many others, the Tories are increasingly isolated and potentially weak.

Read more: How did the High Court decide weapon sales to Saudi Arabia are lawful?

The arms industry exists at the nexus between our country’s industrial and foreign policies. To change course we need to accept a different direction in both policy areas. That’s why I believe that we should accompany the end of arms exports to repressive regimes with a 21st century industrial policy which turns jobs in the industry into employment for the future. Imagine if the expertise of those currently building components for Saudi weaponry was turned towards finding solutions for the greatest foreign policy challenge we face: climate change. 

The future of the British military industrial establishment’s iron grip over government is now in question, and the answers we find will define this country for a generation. Do we stamp our influence on the world by putting our arm around the head-choppers of Riyadh and elsewhere, or do we forge a genuinely independent foreign policy that projects peace around the world – and puts the safety of British people at its core?

Caroline Lucas is the MP for Brighton Pavilion.