Tue, Dec 13, 2011 - Page 9 News List

UK veto an act of crass stupidity

David Cameron has made a crucial misjudgment, simply to appease the City of London and his own jingoistic right-wingers

By Will Hutton  /  The Observer, LONDON

Illustration: Yusha

The British Conservatives — also known as the Tories — are one of the world’s most enduring political parties. However, this long life is built on its cultural attractiveness to parts of the English middle class, especially in the home counties near London, rather than on its political judgments, which have, over the centuries, been almost continuously wrong, especially in foreign policy.

It was wrong to resist revolutions in France and the US; wrong to go slow over abolishing the slave trade; wrong to champion the protectionist Corn Laws; wrong to embrace appeasement in the 1930s; wrong to contest the decolonization of India. The British right’s instincts — jingoistic, imperialistic, anti-progressive and isolationist — have consistently led the country into calamities. Today, once again, the Conservative right, indulging its atavistic instincts and egged on by a no less atavistic right-of-center press, is landing the country in the soup.

There might have been a case for British Prime Minister David Cameron to veto the use of the EU treaties for the eurozone bailout if Britain’s national interests had really been threatened last week, but they were not. Much of British finance, in whose name Cameron exercised his veto — routine banking, insurance and accounting — was wholly unaffected by any treaty change. The financial services industry in Britain constitutes 7.5 percent of GDP and employs 1 million people; the City, London’s financial district, represents perhaps a third of that and, in turn, that part threatened — if it was threatened at all — some fraction of that. This is a tiny economic interest. If the coalition government is serious about rebalancing the British economy, it is preposterous to place a fragment of the City at the forefront of the UK’s national priorities.

Moreover, any tax, such as the financial transaction tax about which Cameron was so exercised (and which is, in any case, a good idea if done right as recommended by the IMF), has to be agreed by all. Which means that the threat was nil. Even regulatory proposals, although proceeding by qualified majority voting, have in financial services proceeded, in reality, by unanimity.

There was no threat that could not have been resisted if Britain really was committed to defending the casino dimension of the City. The UK’s entire relationship with the member states of the EU, along with its capacity to shape policies that may influence a far higher share of the national GDP, has been put at risk for nothing. At worst, a dozen foreign investment banks and a couple of dozen hedge funds, along with their bonuses, might have been affected. However, now the capacity to defend them, even if we wanted to, has been thrown away. As an act of self-defeating, crass stupidity, this has rarely been equaled in British foreign policy.

Worse, the UK has made it significantly harder for the 17 members of the eurozone rapidly to put in place the cluster of policies needed to save the euro. German Chancellor Merkel said the compromise was workable — to widespread German skepticism; the European Central Bank warmly welcomed the progress, but announced no new measures. If the euro breaks up because its members have to move clumsily and slowly outside the formal EU treaties and institutions because of Cameron’s veto, the resulting series of bank collapses and consequent depression will hurt Britain badly. What is more, fellow Europeans will not forgive the UK for a generation. This is a catastrophic moment in British and European affairs.

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