The Staggers

The New Statesman’s rolling politics blog

Disorder abroad, opportunism at home -- the euro crisis keeps getting worse

Balls' hostile position on UK money going towards an IMF bailout is clearly aimed at destabilising the coalition.

By Rafael Behr Published 04 November 2011 16:30

So it looks as if the G20 has failed to agree concrete, immediate measures to prop up struggling eurozone economies. President Sarkozy has said the details of a collective boost to IMF resources will be discussed at a finance ministers' meeting in February. Yes, February. In other words, those leaders gathered in Cannes who don't front eurozone governments are not mobilising (or indeed reaching into their pockets) today to stop bond market pressure on Greece and Italy.

It is officially branded a eurozone-only problem. In fact David Cameron has said it in exactly those terms:

The primary responsibility of sorting out the problems of the eurozone lies with eurozone countries themselves.

What this means more specifically is that a heavy burden now falls on the European Central Bank where short-to-medium term market intervention is concerned. Meanwhile, France and Germany must now really get to grips with the medium-to-long term questions of political will, institutional structures, treaty changes and general revision of the EU project to make the single currency work.

There is no money left in Europe and no-one wants to lend anymore. I'd say we are getting pretty close to a "game over" moment for Greece in the eurozone.

But would a process to ease Greece out of the single currency make contagion to Italy more or less likely? Would a Greek exit suggest that eurozone discipline is real -- i.e. if you can't cut it in the club, you're out -- and thereby reassure markets that the crisis is being dealt with in a rigorous fashion, or would it just suggest that the whole thing is unravelling chaotically and lead to another panicky flight from all southern European debt? The latter seems more probable (but then I am neither an economist nor a bond trader.)

From a domestic point of view, Cameron is spared an immediate battle with his party over Britain's contribution to the IMF. That is a small consolation though, as the general lack of commitment to a consolidated global euro rescue means continued instability and insecurity and, by extension, a weaker economic outlook.

Meanwhile, on that IMF point, an aside on Labour's role (bearing in mind that the UK opposition party's position is on the margin of the real conversation): Ed Balls has come out with a pretty hostile position regarding UK money going towards a euro bailout via the IMF. The argument -- made also, it must be said, by most Tories -- is that the Fund is meant to administer loans and set technical conditions for reform to nations only (something along those lines is planned for Italy). It is emphatically not meant to be absorbed into some wider European single-currency political rescue machine. The problem is, of course, that it is very hard to ringfence UK money once it has been paid to the IMF, so any decision to contribute more can -- as I argued yesterday -- look like participation in a euro bailout. That is certainly how Tory eurosceptics will present it.

I have a suspicion Balls was less pernickety about the IMF's constitutional obligations when Gordon Brown was corralling the G20 into a global economic rescue package. No doubt he has found it easier to arrive at his current position knowing it paves the way for a parliamentary alliance against the government, should there be a vote on increasing the UK's IMF contributions.

The last time that happened, Labour sided with the sceptics but the Tory rebellion wasn't big enough and the opposition whips not firm enough to get sufficient MPs through the lobby to defeat the government.

Feelings would certainly be stronger and turnout higher in a repeat fixture. The idea of Labour abetting Tory eurosceptics represents a victory of sorts for the shadow Treasury team over the shadow Foreign Office team. Douglas Alexander has generally been of the view that Labour should be playing the part of would-be responsible global citizens, exposing Tory recklessness. As one person familiar with Alexander's thinking on the matter put it to me recently: "it isn't as if Labour's problem is not being opportunistic enough."

Ed Balls clearly thinks the opportunity to destabilise the coalition with a parliamentary defeat is too good to waste.

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Tags: Eurozone Ed Balls

More from Rafael Behr

30 comments

Wed, 2011-11-09 13:54 — Awake!

Italians bonds getting slammed this morning...absolutely smashed. So, Italy won't have any money next yeat to opay it's public sector. So why would we listen to Balls EVER on anything- he wants to jeopardise UK low interst rates-he dosen't understand FUNDAMENTALLY how debt markets work yet spent a career relying on them, he's drom a chicago school of economics, him and blanchflower and loads of otheres- mose in textbooks zzzzzzz.
Summing up on euro currently, the greeks havent chosen the new guy yet defittely, actually papandreou hasn't officially resigned (LOLOLOL) , berlusconi going but no date, G20 no decisions made but 1 million euros on hotel suites at 20K a pop, sarkozy asking if anyone wants to see his elephant impression, merkel claimng that the crisis will lead to a stronger europe... So please tell me these guys didn't model themselves on Benny hill when they were creating their structure.
Which means unless we want proper 1920.s stylie, let's have some contingency fund- balls, brown and other nutters don't do these types of thing cos in their heads they're always right- they simply don't get that life is a gamble, it's fundamental to why they are so disrespectful of others.

Sat, 2011-11-05 09:40 — Luddite (not verified)

matthew fox: research!! so you like researching do you 1%... Well stop it, yours only produces irrelevant shite. The consequences now are obvious for the Greek's with a debt of 180 of GDP, the interest rates on German government bonds has widened 'dramatically'. Financial markets around the world now assumes Spain and Italy will also be unable to meet their own financial commitments, and because none can devalue their currency because they are trapped inside the Euro, basically all they can do is impose harsh austerity measures. That something our own government is reluctantly doing. it's called been a 'responsible government'..... Matthew. run along and check-out my facts, that can be your project for today.

Sat, 2011-11-05 10:59 — matthew fox (not verified)

Excuse me Luddite, your the genius who thinks Osborne has only produce one budget, and remember the Bankers Bonus fiasco, is it all coming back old chap?

Our " responsible government " has made sure unemployment is now at a 17 year high, our " responsible government " is increasing NHS waiting lists.

I take it your do understand the term responsible.

Cameron and Osborne have come away from yet another G20 meeting, with an agreement that will unravel.

His Plan A for the saving the eurozone, by getting the IMF to print money is dead in the water.

Keeping on being a conservative apologist Luddite.

Sat, 2011-11-05 11:46 — Sir Michael (not verified)

@Lox - I misunderstood, my apologies. It is odd that people argue so hard against socialism when we already have it for big business, and it keeps them going. It is only the poor and the workforce in the real economy who are subjected to the cruelty of capitalism.

Sat, 2011-11-05 11:49 — Luddite (not verified)

matthew: It's the Euro that's dead in the water, and many are making billions out of the French and German attempts to save it. 1% you can't keep spending what you no longer have and neither can you keep borrowing your way out of debt...

Sat, 2011-11-05 12:09 — Luddite (not verified)

Sir Michael: If our government spent just a fraction of what they squander on bank bail-outs in industry and infrastructure, the nation would be in a better shape to weather the coming storm, but your socialist government didn't did they? and when you talk of the "real economy" I hope you are not including social workers and 10s of thousands of none essential none wealth creating government jobs.

Sat, 2011-11-05 13:04 — Lox (not verified)

No need to apologise, Sir Michael, but let me be clear on where I'm coming from: I believe passionately in free market capitalism. I loathe crony capitalism, but the state is as much part of that problem as the corporate entities it whores itself to.

Mon, 2011-11-07 12:57 — Awake!

Good to see NS dealing with europe.
Wrote loads in answer but lost in the upload...

Mon, 2011-11-07 13:10 — Awake!

Sir michael
ure so asleep it's boring
www.strongtowns.org
get on with your education clown man

Sat, 2011-11-05 13:39 — Sir Michael (not verified)

@Luddite - We haven't had a socialist government for decades, hence this mess and the need for so many social workers.

@Lox - Free market capitalism, indeed capitalism itself, might well work. I've got nothing at all against honest capitalism, it has just never been tried before. We have a system of corporate government for a while now across most of the world in general. This is basically a return to the old aristocracy but with shareholders rather than lords and chairmen rather than kings. No accountability to the population, no restraint on their part, and catastrophic consequences for the poorest and those who don't serve the system.

Sat, 2011-11-05 18:27 — Luddite (not verified)

Sir Michael.. Same old cop-out they weren't socialist, or they weren't socialist enough.. it's becoming quite tiresome. There's never any need for fucking social wankers..

Fri, 2011-11-04 17:26 — swatantra nandanwar

I think its time for a bit of statesmanship from all sides instead of scoring petty political points.

Fri, 2011-11-04 17:35 — Luddite (not verified)

"Balls' hostile position on UK money going towards an IMF bailout is clearly aimed at destabilising the coalition" That maybe so, but don't you like the picture of Mr Ball's is somewhat demonic... "It's officially branded a eurozone-only problem. In fact David Cameron has said it in exactly those terms": Which it is!! Gordon Brown with all his faults was fundamentally correct about the un-sustainability of the Euro.. So what is your fucking point. Few in Britain bought into this foolishness, so all of a sudden it's our fault it failed.... bollocks..

Fri, 2011-11-04 18:44 — Hugh Markey (not verified)

Gordon Brown is a genuine martyr. He and his team saved the United Kingdom from financial disaster. President Glitz, Chancellor Hausfrau and Prime Minister Silvio Berlusconi gave him the nod( and each other a wink) - reassuring Gordon that they would follow his lead.
Of course this trio of political realists had no intention of cleaning up their act. With gullible electorates who needs it.
Virtual reality has always worked for these Conservative magicians. And then, with the addition of a British conservative government to the European Union, the magic stops.
The 'market manipulators' are told to keep the illusion going but the smell of taxpayers' blood is in the air.
Merkel and Sarkozy grit their teeth and warn speculators there is only one capitalism and logically no host means no parasites.
Had any shark-fin soup lately? Rhinoceros horn?
The usual excuse is wheeled out. "You've made your bundle - wait 'till we've made ours!"

Sod'em and Gomorrah

Fri, 2011-11-04 19:27 — David Lindsay

Labour has always been against the euro and everything to do with it. Who do you think kept Britain out of the wretched thing? If the 1997 Election had gone the other way, admittedly never very likely, then Ken Clarke would have taken us in at the start. Thankfully, we had Gordon Brown instead.

Love Ed Balls or loathe him, but he is the Shadow Chancellor and a well-known figure to the general public. As has been the case at least since Maastricht, Labour Eurosceptics include substantial figures as well as fringe oddities, whereas the much less numerous other lot were Tony Marlow and Teresa Gorman then, and are the obvious successors of such ornaments now.

Fri, 2011-11-04 19:50 — Lox (not verified)

Balls is an opportunistic clown, but he's bang on here. Let the whole euro project flounder: some short term economic disorder that'll sort itself out if politicians stand back and let the markets sort it out, and then back to a feasible economic future for every nation in Europe.

Off topic, for that contemptible pygmy Sarkozy to be praised by Obama for his role in bullying the Greeks out of a referendum on the austerity package is disgusting. I always had the fear that Obama was a slightly more attractive version of Blair: an ambitious lawyer who looked good in a suit, but without a grain of principle.
Hugh, if Brown had the balls (boom boom) to let RBS fail three years ago, things would be much, much better now.

Sun, 2011-11-06 15:20 — Eddy S (not verified)

gordon brown a martyr? (that's a good one) that would be the same iron chancellor who spoke of the golden rules and then continuously moved the goal posts.

claiming to solve boom and bust was the biggest fraud to the bristish people, there was no way it was true and he only said it so that we did not have to run a budget surplus when tax revenues were bouyant through booming property and finance sectors.

Fri, 2011-11-04 20:17 — David Lindsay

On the contrary, Lox, with RBS back in profit under public ownership, the public stakes in RBS and in HBOS must be recognised as permanent, non-negotiable safeguards of the Union, with the profits of each from those stakes divided equally among all households in the United Kingdom. Apart from that, all the banks must be turned into mutual building societies, ironclad as such by statute.

Thu, 2011-11-10 23:37 — Gracie

"Posted by Rafael Behr - 04 November 2011 15:30
Balls' hostile position on UK money going towards an IMF bailout is clearly aimed at destabilising the coalition."________________________

What do you mean destabilising it? This hideous coalition government is already destabilised, incompetent, deceitful, disingenuous run by fantasist liars who are completely out of their depth.

Fri, 2011-11-04 20:36 — elrob

swatantra
I think its time for a bit of statesmanship from all sides instead of scoring petty political points.
----------
Waht about Tories claiming the finacial crisis was a British problem; nit international; now saying, it is international?

Or the recent nerve shown by Cameron at PMQs, accusing Labour of causing the mess with deregulation. The Tories complaining that Labour wnt too far on deregulation!! Credit where it is due, Cameron did it with astraight face, too.

Fri, 2011-11-04 20:43 — elrob

Hugh, if Brown had the balls (boom boom) to let RBS fail three years ago, things would be much, much better now.
-------------
What I could not believe is that we paid money for taxpayer shares (on top of the debt on our off-balance sheet books), and contracted over-priced managers to run the bloody thing as they did before.

Banking is an unadulterated failure at the top of a bubble that has burst. There is 25 years of accumulated private sector debt riding on this. And the personal debt levels in the UK are eye-watering, dwarfing that of the govt debt. We should have nationalised the entire show for nothing. And put all the debts into a bad bank and run them down in as orderly a fashoin as possible. Creditrs would have had to Q up and be told; our way, or no pay.

Fri, 2011-11-04 21:06 — matthew fox (not verified)

Another G20 meeting breaking up with an agreement, but no detail.

This agreement will unravel like the last one.

Classic Cameron and Osborne, another summit, another failure.

Fri, 2011-11-04 21:16 — Sir Michael (not verified)

I agree with elrob. Brown isn't a martyr, he is a weak and feeble man. He had an absolutely golden opportunity unlike any other leader in the Labour movement in history - a chance to really get a grip on corporate statism and usary. He could have let the banks fall, then create a national bank which runs at no profit (or at least redistributes profits to the population). Instead he propped it up, kept it alive, and now we've got to go through that entire thing again.

Fri, 2011-11-04 21:17 — Hugh Markey (not verified)

Within the bounds of socialised free enterprise Gordon did his best.
Yes, Gordon Brown saved Capitalism and the Conservative domain from extinction and little thanks did he get. Tony Blair with a little help from wordsmith Alastair Campbell helped the Royal Family and the Monarchy survive Diana's unfortunate end. Was Tony the recipient of eternal gratitude? No way! Instead a Royal coup gave us the Coalition government, the cuts and the extension of working life. Just look at the Queen and Prince Phillip. Still going strong at eighty plus. What an example to our seniors! Throw away those walking sticks and straighten up.
Constitutional Monarchy

Fri, 2011-11-04 21:23 — Luddite (not verified)

matthew: don't you have any other opinion besides defending the indefensible.... We are talking about national identity, not party political bull-shit.. This crisis in far-beyond party political sectarianism.

Fri, 2011-11-04 21:31 — Luddite (not verified)

Sir Michael: I agree... it would of being painful, but in the long-term beneficial.

Fri, 2011-11-04 22:20 — Lox (not verified)

David, what's a non-negotiable safeguard of the union, and who'd want such a thing anyway?

So if we're going to divide up the profits from RBS and HBOS, will we divide up the liabilities too? Or are going to just wish them away?

All the banks must be turned into mutual building societies? Why? How?

Fri, 2011-11-04 22:50 — Sir Michael (not verified)

@Lox - "So if we're going to divide up the profits from RBS and HBOS, will we divide up the liabilities too?"

What? In case you don't know about recent history the taxpayer accepted their liabilites last time. They were happy to accept their profits and bonuses when things were going well, but as soon as things went bad we had to deal with the mess they created.

Their profits really should go to us.

Fri, 2011-11-04 23:42 — matthew fox (not verified)

Luddite, I know your lazy, and don't do any research.

Again, the G20 summit has broken up, with an agreement, but no detail.

Cameron talks about action, but has signed up to a fudge.

You defend Osborne, poorly, but it still counts as defending Osborne. He's the genius whose on his 2nd budget.

Sat, 2011-11-05 01:49 — Lox (not verified)

Sir Michael, the state accepted the liabilities. Did you? I didn't, but no-one asked me.

My point is that we didn't have to accept the mess they created. The last UK govt should have done what Iceland did-if they'd allowed Northern Rock to sink in 2007, perhaps HBOS and RBS might have had enough of a fright to start being a bit more sober.