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Why Europe Keeps Failing........ merged with "EU Seizes Cypriot Bank Accounts"

One might also ask why anyone would choose to do their financial business outside of "The City", when London has a huge and well developed financial infrastructure that has been growing and evolving since the "Big Bang" of the 1980's?

Being frog marched into another financial exchange is hardly incentive for business to invest, take risks and otherwise grow wealth.
 
Will France be the first EU nation to go over the fiscal cliff? The size of the French economy means this could have far more serious consequences than the collapse of the Greek economy or most of the other PIIGS (Spain is also worrisome, since its economy is much larger than the others in that club). Fran ce isn't the only nation plagued by this, unfunded public service pension liabilities in the U nited States is estimated to be $2 trillion dollars:

http://blogs.the-american-interest.com/wrm/2012/12/20/sacre-bleu-the-collapse-of-french-pensions/

Sacre Bleu! The Collapse of French Pensions

American states aren’t the only ones facing major pension crises. France’s pension system now has a deficit of €14 billion, and it is expected to rise to €18.8 billion by 2017 unless significant changes are made.

Reforms put in place under former President Nicolas Sarkozy to raise the retirement age and increase pension contributions were supposed to put the program in shape by 2020, but they have been counteracted by a sputtering European economy and years of slow growth. Now French pensions are in worse shape than ever.

Yet despite these dire predictions, the Hollande government is completely unwilling to make changes, as The FT reports:

Mr Hollande, who is expected to convene talks on the issue with employers and trade unions in the new year, is likely to be reluctant to raise the retirement age. But the alternatives of increasing pension contributions, favoured by the unions, cutting pension payments or raising the number of years of contributions required to qualify are also unpalatable.

Medef, the employers’ federation, called this week for the minimum retirement age to be raised to 63 and the contributions’ period to be upped to 43 years. It opposes any increase in contribution costs for employers or employees.

The scenarios set out by COR, the pensions’ council, showed that unemployment would have to be more than halved from its present level to 4.5 per cent and productivity growth increased to 1.8 per cent to bring the pension system back into surplus by 2060; if unemployment averaged 7 per cent and productivity growth 1.3 per cent, the deficit would widen to more than €60bn in the same period.

France is between a rock and a hard place. French public debt is almost 90 percent of GDP, and the French people are unwilling to give up any more, even though France’s average retirement rate is lower than elsewhere in Europe. Sarkozy’s original reforms met with large protests, and any change in the retirement age by Hollande is likely to engender a similar reaction.

As in America, years of disastrous blue policies and overgenerous pension promises are finally catching up with France. Now  policymakers are left with with a depressing choice: renege on promises to workers or watch the system go broke. Hollande has made it clear that he doesn’t want to do anything that could be seen as an attack on the workers, but he may have no choice. When the money isn’t there, it isn’t there.
 
Well, Spain is in even more trouble (if that was even possible). As pointed out, even if Catelonia simply pushed for lower taxes it will crush the Spanish government's plans for recovery (although like most places practiceing "austerity", they are not cutting spending nearly enough and rather than lowering taxes in concert with the spending cuts to stimulate the economy, they are raising taxes). One nasty comment on Instapundet suggested that the end result would be to make Germany pay more, but what will happen when the Germans refuse to pay any more bailout monies?

http://www.thedailybeast.com/articles/2012/12/19/homage-to-catalonia.html

Homage to Catalonia
by Megan McArdle Dec 19, 2012 1:42 PM EST

Catalonian secession grows more plausible. That's bad news for the Spanish government.

There have been fitful mutterings about Catalonia, the region of Spain where Barcelona is, seceding from Spain.  Walter Russell Mead sums up the latest developments: 

Madrid did its best to spin the results of the Catalonia election as a defeat for the secessionists, but as we predicted, the new Catalan coalition has united behind the demand for an independence referendum that Madrid says is illegal.

This won’t help Spain, and it won’t help the euro. It is, however, good for the coalition partners in Catalonia, who have shrewdly set a far-away date for the referendum. This will allow Catalonia to extract the maximum level of concessions from both Madrid and Brussels as Europe’s power brokers struggle to avoid a destabilizing crisis in a major EU economy.

Blackmail Madrid as long as possible, and keep the referendum threat real: This is a smart strategy and one that will be hard to beat. Madrid is now backed into a corner: If it squeezes Catalonia, the prospect of secession increases, investors flee all of Spain, and the euro itself comes under pressure. 

Catalonia is the richest part of Spain.  If it goes, Spain's tax base shrinks dramatically.  If it doesn't go, but merely uses the threat to get lower taxes and more help with its own very large debts, Spain's fiscal picture still looks a great deal bleaker.  Which means, in turn, that Germany is going to have to pony up a lot more money. 

Europe's fiscal crisis keeps developing in completely unexpected ways.  The only thing that's really predictible is that the solutions will cost more, and work less well, then even the pessimists project.

Like The Daily Beast on Facebook and follow us on Twitter for updates all day long.

Megan McArdle is a special correspondent for Newsweek and The Daily Beast covering business, economics, and public policy. A former senior editor at The Atlantic and writer for The Economist, Megan has a diverse work history including three small startups and a disaster recovery firm at Ground Zero.
 
Sorta still on topic:

Thucydides said:
Arguing for a flat tax from a different direction. High tax rates and tax and regulatory uncertainty changes people's economic behaviour (to maximize their wealth, not increase the Government's take). Real life examples include all those US States that tried to impliment a "millionaire tax", the UK which saw tax receipts drop as higher tax rates were introduced and now France:

http://reason.com/archives/2012/12/23/taxpayers-arent-stationary-targets/print
Taxpayers Aren't Stationary Targets
Sheldon Richman|Dec. 23, 2012 8:00 am

Actor Gérard Depardieu's decision to flee France for Belgium to avoid a 75 percent marginal tax rate on incomes above $1.3 million sends a message we here in America should heed: Those who are singled out for tax increases are not stationary targets. The means of avoiding and evading the taxman are legion.

Now the Twittervserse and mainstream media are full of reports that "Putin gives sanctuary to celebrity tax refugee Depardieu."

Now I will not claim to be able to guess at the inner workings of M. Depardieu's intellect (if such a thing even exists) but my understanding is he went from France to Belgium to avoid confiscatory taxes and now he accepts citizenship from a state that confiscates not just your wealth but your private property, too?  :facepalm:  We need a "dumbass" emoticon.
 
 
Although I find M Depardieu's decision to accept Russian citizenship rather odd for the same reasons Edward does, there is an underlying logic to the process:

French top marginal tax rate = 75%
Belgium top marginal tax rate = 60%
Russian flat tax = 13%

That an entertainer has left to avoid higher taxes is hardly new or even surprising. Consider that many English entertainers did not live or work in the UK between the end of the second World War and the Thatcher era since their marginal tax rate was very high (I seem to recall up to 90%, many of them would have lived on a government allowance), and Irish band U2 has been roundly criticized for moving from Ireland to a lower tax environment in the Netherlands as well.

Depardieu's move is probably a means for Putin to poke the French in the eye and extol the virtues of Russia as a place to invest more than a fully calculated move on the actor's part.
 
Here, reproduced under the Fair Dealing provisions of the Copyright Act from the Financial Times, is an excellent article explaining why the UK can, should, even must leave the EU:

http://www.ft.com/intl/cms/s/0/50646880-5fd8-11e2-8d8d-00144feab49a.html#axzz2IFog5L4x
Passionate European’s case for leaving

By Simon May

January 16, 2013

It is irresponsible to ask a country to renew vows to a marriage it cannot abide, writes Simon May

For a passionate European there is now a strong case for Britain to leave the EU. By passionate European, I mean someone who sees the EU, for all its absurdities, as the noblest of postwar political projects – one that must and will lead to a federation, probably of a loose, Swiss kind, with a directly or indirectly elected president and a European Parliament with teeth. Someone who would love Britain to support this, but who realises it never will.

Why want a federal Europe? To create a powerful political centre, based on the supranational rule of law supervised by an independent court of justice, which can be the ultimate focus of loyalty for nations that have lived under dictatorship and whose memories of its horrors cannot be erased.

The euro crisis is a fillip to this process, despite the error of including southern “Club Med” nations from the outset. Even if they leave the single currency, they will not stand aside from a banking union, not to mention other federalising moves.

The process is far from over. The fundamental mission of the EU – to inspire and attract the loyalty of democracies, whether or not they join as full members – will continue on account of its supranational law and the cohesion this brings.

No postwar British prime minister has accepted this moral case for federalism. Even Edward Heath, the most pro-European, had no vision for Britain in Europe beyond entry.

It is irresponsible to ask, yet again, a country with virtually no interest in such a development to renew its vows to a marriage whose very purpose it cannot abide. And it is irresponsible to the rest of the EU – especially the core countries of Germany, Benelux, Italy and even France – which have a profound need to develop into a confederation.

Yet, oblivious to the incompatibility of British and most continental visions, the old “pragmatic” case for UK membership is trotted out: the EU offers our exporters the single market and our nation crucial influence in the world.

But Britain will continue to have access to the EU market if it leaves – just as Switzerland does, a country that also sends about half its exports to the EU. Competitiveness, not market access, is Britain’s problem. It has the same access as Germany to the vast Chinese and US markets but is far less successful in both. Switzerland, with a population smaller than the English Midlands, exports almost as much to Germany from outside the EU as Britain does from within it.

What about influence? Will Britain outside the EU become a nobody? In global trade talks it will suffer most, though the bloc will have strong reasons to co-opt Britain, for example in free trade talks with the US. Beyond trade, it is anyway hard to think of a significant global problem over which the EU has exerted decisive influence, from the Israeli-Arab dispute and Bosnia to Russia’s regional conflicts. As to sanctions and other instruments of trade policy, Britain can join EU action, say towards Iran, from the outside almost as well as from within.

Besides, most major UK foreign interventions have been as a US sidekick – most recently in Afghanistan, Iraq and Libya. Can one imagine the US, whatever its warnings to Britain not to leave the union, saying to its number one European military ally: “No, we can’t accept your help in Iraq or Libya if you aren’t in the EU”?

But how can a pro-European bring himself to think Britain should leave? Because if Britain (ironically, given its own commitment to liberty) repudiates the moral case for the EU, its membership is demoralising both to the country and to the EU.

The fudge yet again being urged on Britain by pro-Europeans in all UK parties, the CBI employers’ body and now the US, will not go on working. The fall of the Berlin Wall, the resurgence of Germany and the deepening weakness of France have changed everything. We are heading for a federal Europe, whether or not the euro ends up as a northern enclave around Germany. Paradoxically, the end of the communist threat to Europe has turned out to be a more powerful spur to its integration than Soviet aggression. From now on, federalism is for real – which is why pressure from the US on Britain to stay in the EU is unwise.

There must be a referendum on UK membership, and the only honest choice is in or out. Since Britain will never feel comfortable in a federal project – any more than it would as the 51st US state – it should leave this unnatural marriage, which regularly tears apart its main political parties, and find a role fit for its lonesome, imaginative and tactically adroit self.

Both the US and EU need Britain as an ally, and it will have a bright future as a semi-independent broker in world affairs. The greatest advance in Middle East peace for decades – the 1993 Oslo accords – was brokered by Norway, precisely because of its independence. If Norway can do it, Britain can do it in spades.

The writer is visiting professor of philosophy at King’s College London and was a cabinet member in the European Commission


And that, it seems to me, fairly makes the case for a referendum followed by an amicable withdrawal.


 
"And it is irresponsible to the rest of the EU – especially the core countries of Germany, Benelux, Italy and even France – which have a profound need to develop into a confederation."

Churchill's observation notwithstanding (neither Holy, Roman nor an Empire) the HRE lasted for better than 800 years as a political entity.  It amalgamated Franks, Saxons, Burgundians, Lombards and Goths in a loose confederation nominally led by pragmatic "Emperors".  Switzerland is its modern heir.

Cities, states, treaties and borders came and went but the entity survived.  Regardless of its neighbours.

If the Europeans can do as well as they did with the HRE they won't be doing badly.

And as May said, or implied, Britain's lack of a dictatorship in the last 300 years puts Britons in a different mindset than your average Continental.  Especially as so many of the modern, and successful Brits are Continental DPs that escaped those self-same dictators.
 
More on why the UK should or might have to leave the EU in this article which is reproduced under the Fair Dealing provisions of the Copyright Act from Foreign Affairs:

http://www.foreignaffairs.com/articles/138768/r-daniel-kelemen/saving-the-euro-dividing-the-union?page=show
Saving the Euro, Dividing the Union
Could Europe's Deeper Integration Push the United Kingdom Out?

R. Daniel Kelemen

January 21, 2013

_____________________________________________________________________​
The collapse of the eurozone no longer seems likely, thanks to its members' decisions to coordinate their fiscal policies more closely. But it is exactly that tighter integration that has made many Euro-skeptic Brits want to opt out of the EU altogether.

R. DANIEL KELEMEN is Professor of Political Science and Director of the Center for European Studies at Rutgers University. He is the author of Eurolegalism: The Transformation of Law and Regulation in the European Union.
______________________________________________________________________​

In an article I wrote last May, I argued that Europe's future would be defined by a "new normal." The road to economic recovery would be long and painful, but thanks to aggressive intervention by the European Central Bank and the new continent-wide governance structures being put in place, the eurozone's collapse was no longer a serious risk. The credit ratings agencies now seem to agree. The year 2012 ended with Standard & Poor's upgrading its assessment of Greek sovereign debt. Last week, Fitch declared that the odds of a eurozone breakup are now "very unlikely." Although record unemployment persists in the periphery of the common currency area and growth prospects have dimmed for Germany and other core countries, there is a growing consensus that the worst may be over.

Instead of unraveling, as so many skeptics had predicted, European countries responded to the economic crisis by taking significant steps toward deepening their integration. The continent's leaders granted EU institutions greater control over the fiscal policy of member states, ratified a fiscal compact, and reached an agreement on the outlines of a banking union. European Central Bank President Mario Draghi emphasized the bank's commitment to do "whatever it takes" to save the common currency.

But this incremental deepening of European integration may come at a cost: Not all 27 member states want to be part of a closer union -- least of all the United Kingdom. Talk of a "Grexit" from the euro has been replaced by talk of "Brexit" -- a British exit -- from the European Union itself. Euro-skepticism in the United Kingdom has reached historic heights. The U.K. Independence Party, which is committed to London's leaving the EU, has overtaken the Liberal Democrats as the third most popular party. Recent polls suggest that a majority of British residents favor an exit. British Prime Minister David Cameron, facing enormous pressure from Euro-skeptic backbenchers in his own party, will soon deliver a major speech on the United Kingdom's relationship with the EU. He is likely to call for the repatriation of powers from the EU in areas such as social policy, employment, and justice, and promise a national referendum on a "new deal" with Europe. Meanwhile, many leaders on the continent are tiring of Cameron's anti-European rhetoric and his demands for special treatment and opt-outs.

As the EU takes steps to strengthen its economic and political union, it is likely to drive a deeper wedge between core eurozone states and member states outside of the common currency that are unwilling to go along. Officials in Brussels have suggested that tensions caused by tighter coordination in the common currency area can be addressed by developing new forms of what is known as two-speed or multi-speed integration, whereby core groups of countries move ahead with deeper union on certain policies, while others opt out. Although this flexible approach has worked in the past, including for the establishment of the eurozone itself, there are reasons to believe it may be less tenable today as the EU moves toward an unprecedentedly close economic, fiscal, and political union. Flexible, à la carte approaches will not by themselves resolve the tensions between the countries committed to deepening their union and those refusing to take part.

The eurozone's troubles no longer qualify as a crisis, an unstable situation that could either quickly improve or take a dramatic turn for the worse. They are, instead, a new normal -- a painful situation, to be sure, but one that will last for years to come. Citizens, investors, and policymakers should let go of the idea that  there is some magic bullet that could quickly kill off Europe's ailments. By the same token, despite the real possibility of Greek exit, the eurozone is not on the brink of collapse. The European Union and its common currency will hold together, but the road to recovery will be long.

It has been nearly two and a half years since the incoming socialist government in Greece revealed the extent to which its predecessor had accumulated debt, precipitating an economic storm that has left slashed budgets, collapsed governments, and record unemployment in its wake. With each dramatic turn, observers have anticipated the story's denouement. But again and again, a definitive resolution -- either a policy fix or a total collapse -- has failed to emerge.

The truth is that there are no quick escapes from the eurozone's predicament. Divorce is no solution. Although some economists suggest that struggling countries on the periphery could leave the euro and return to a national currency in order to regain competitiveness and restore growth, no country would willingly leave the eurozone; doing so would amount to economic suicide. Its financial system would collapse, and ensuing bank runs and riots would make today's social unrest seem quaint by comparison. What is more, even after a partial default, the country's government and financial firms would still be burdened by debt denominated largely in euros. As the value of the new national currency plummeted, the debt would become unbearable, and the government, now outside the club, would not be able to turn to the eurozone for help.

Some economists go further and argue that countries on Europe's periphery could thrive outside the euro straitjacket. This is equally unconvincing. Southern European countries' economies suffer from deep structural problems that predate the euro.  Spanish unemployment rates fluctuated between 15 and 22 percent throughout most of the 1990s; Greece has been in default for nearly half of its history as an independent state. These countries are far more likely to tackle their underlying problems and thrive inside the eurozone than outside it.

Others have suggested that Germany and other core countries -- weary of funding endless bailouts -- might abandon the euro. That is even less plausible. Germany has been the greatest beneficiary of European integration and the common currency. Forty percent of German exports go to eurozone countries, and the common currency has reduced transaction costs and boosted German growth. An unraveling of the eurozone would devastate German banks, and any new German currency would appreciate rapidly, damaging the country's export-led economic model.

A number of policy reforms may improve economic conditions in the eurozone, but none offers a panacea. Eurobonds, increased investment in struggling economies through the European Investment Bank and other funds, stricter regulations of banks, a common deposit insurance system, a shift from budget cuts to structural reforms that enhance productivity and encourage private-sector job creation -- all of these could improve Europe's economic situation and should be implemented.

But none of these measures would quickly restore growth or bring employment back to pre-crisis levels. That is because they do not address Europe's central economic problem: the massive debt accumulated by the periphery countries during last decade's credit boom. The 2000s saw a tremendous amount of capital flow from the northern European countries to private- and public-sector borrowers in Greece, Ireland, Portugal, and Spain. Germany and other countries with current account surpluses flooded the periphery with easy credit, and the periphery gobbled it up. This boosted domestic demand and generated growth in the periphery but also encouraged wage inflation that undermined competitiveness and left massive debt behind. As the economists Carmen Reinhart and Kenneth Rogoff have pointed out, when countries suffer a recession caused by a financial crisis and debt overhang, they take many years to recover.

With both breakup and immediate solutions off the table, then, the eurozone is settling into a new normal. As the union slowly digs itself out of the economic pit, it is important to recognize that its system of economic governance has already been fundamentally transformed over the past two years.

First, the eurozone has, at least in practice, done away with its founding documents. In any monetary union in which states retain the autonomy to tax, spend, and borrow, there is a risk that some countries' excessive borrowing could threaten the value of the common currency. Recognizing this, the euro's creators drafted the Stability and Growth Pact and the "no bailout" clause in the Maastricht Treaty. The SGP placed legal restrictions on member-state deficit and debt levels, and the no-bailout clause forbade the European Union or individual member states from bailing out over-indebted states to avoid moral hazard.

The Maastricht governance regime is dead. The SGP was never strictly enforced, and when the crisis hit, the European Union tossed aside the no-bailout clause. Fearing contagion, it extended emergency loans to Greece, Ireland, and Portugal and set up a permanent bailout fund -- the European Stability Mechanism (ESM) -- which will be up and running this summer.

Having broken the taboo on bailouts, Europe had to find a way to limit the moral hazard of states turning again and again to the European Union for aid. EU lawmakers introduced the so-called six-pack legislation, which strengthened the European Commission's ability to monitor member states' fiscal policies and enforce debt limits. Twenty-five EU member states signed a fiscal compact treaty, which committed them to enshrining deficit limits into national law. Only those states that eventually ratify the treaty will be eligible for loans from the ESM.

Such legal provisions alone will not overcome the moral hazard, but they have been accompanied by evolution in bond markets, which now distinguish between the debt of healthy governments in the core and weak ones on the periphery. For the first decade of the euro's young life, bond markets priced the risk associated with the peripheral economies' bonds nearly the same as that associated with German ones. Today, the yield spreads are substantial and increase at the first sign of heightened risk. And by forcing private investors to take a nearly 75 percent loss on Greek bonds in conjunction with the second Greek bailout in February 2012, European leaders made clear that private bondholders should not expect bailouts to cover their losses, too. Now, more vigilant bond markets will police governments that run up unsustainable deficits or whose banking sectors grow fragile.

The second major structural change is that the European Central Bank -- legally prohibited from purchasing any member state's debt -- has thrown its rules aside and directly purchased billions in Greek, Irish, Italian, Portuguese, and Spanish bonds. Moreover, the ECB has indirectly financed billions more loans through its long-term refinancing operation, which extended over a trillion euros in low-interest loans to commercial banks.

ECB President Mario Draghi has repeatedly insisted that the bank is not engaging in "monetary financing" of member-state debts. If I were an Italian president of a central bank located in Frankfurt with a mandate designed by German inflation hawks, I would say that, too. But in practice, the ECB has shown itself to be far more flexible than many had anticipated. It has revealed, quite simply, that it will not oversee the demise of the currency that justifies its existence.

This new system of eurozone governance is more sustainable than the pre-crisis regime set in place by the Maastricht Treaty. It will withstand a Greek exit, for example. If Greece refuses to adhere to the terms of its bailout package and is forced out of the eurozone in the coming weeks, the ECB will likely scramble to stop contagion, but it will not be faced with the entire system's collapse. Meanwhile, by standing firm on Greece, the European Union will have further demonstrated that the conditions attached to its bailouts are serious, motivating other states to stick to their reform programs.

Greece's exit from the eurozone would be a catastrophe for Greece and a trauma for Europe, but it would not change the fundamentals of the post-2008 eurozone governance regime, which will still be based on stronger fiscal surveillance, more robust enforcement procedures, more vigilant bond markets, and a more activist central bank. With such a system in place, and with their commitment to fiscal discipline established, EU leaders will now face the slow, difficult tasks of adjustment and structural reform. And those burdens must be shared by all. It is understandable that Germany and the ECB initially demanded austerity as the condition for bailouts, but this one-sided approach has driven peripheral economies deeper into recession. Moving forward, austerity, wage reductions, and structural reform on the periphery must be coupled with public spending and wage increases in Germany, which will boost demand. There will be no quick fix, but the eurozone will recover, slowly but surely.
 
And the UK's Prime Minister David Cameron begins the long, complex dance on a high-wire that will be required to either make the EU acceptable to the UK or pave the way for "Brixit" (British exit) according to this article which is reproduced under the Fair Dealing provisions of the Copyright Act from the Gobe and Mail:

http://www.theglobeandmail.com/news/world/cameron-promises-britain-straight-choice-on-leaving-european-union/article7652837/
Cameron promises Britain straight choice on leaving European Union

PAUL WALDIE
London — The Globe and Mail

Published Wednesday, Jan. 23 2013

British Prime Minister David Cameron is hoping he has found a solution to solve the seemingly never ending question of Britain’s position in the European Union.

In a long-awaited speech on Britain’s future in the EU, Mr. Cameron announced Wednesday that he will try to renegotiate the terms of the country’s membership and then hold a public referendum on the new arrangement. However, none of that will happen until after the next election in 2015 and only if Mr. Cameron remains Prime Minister.

“It is time for the British people to have their say,” Mr. Cameron said. “It will be a very simple in-or-out choice, to stay in the EU on these new terms or come out altogether.”

Mr. Cameron acknowledged that Britain’s place in the 27-member EU has become increasingly contentious in recent months partly because of the ongoing recession and problems in the euro zone. Roughly 100 Conservative MPs have been pushing for changes to the EU treaty and a referendum. The United Kingdom Independence Party, Ukip, has also risen sharply in the polls lately by campaigning on pulling Britain out of the EU.

“Today public disillusionment with the EU is at an all-time high,” Mr. Cameron said. “The result is that democratic consent for the EU in Britain is wafer thin.”

Mr. Cameron said he wants to see a “more flexible, more adaptable, more open” European Union where some powers flow back to member countries. “Countries are different. They make different choices. We cannot harmonize everything,” he said. He added that his government is undertaking a kind of audit of EU powers and whether they should remain applicable to Britain. “Nothing is off the table,” he said.

Under his plan, after the next election in 2015 the government would attempt to negotiate a new “settlement” for Britain in the EU and then put that new agreement to voters in a referendum. That vote would be held within the first half of the government’s five-year mandate.

In the speech, Mr. Cameron tried to address critics who argue that other EU members will be reluctant to negotiate changes that only apply to Britain. They say the EU is already going through a round of treaty changes and that whatever reforms are made should apply to all members, not just one. Mr. Cameron said the EU will be stronger if it addresses the needs of member states. And he said many other countries want changes too.

He also took on those who argue Britain should simply hold a referendum now, without trying to negotiate changes. That would be a “false choice,” he said, because the EU is in a state of flux. This is not the time to make such a monumental decision, he added. “If we left the EU it would be a one-way ticket, not a return.”

Mr. Cameron stressed that Britain is better off inside a reformed European Union and he added that he is optimistic changes to the treaty can be made. However, he was not clear what would happen if Britain cannot negotiate enough changes and whether that would force him to campaign for the No side in a referendum.

The move carries big political risks for Mr. Cameron. The issue of Britain’s position within the EU has dragged on for months, made worse by economic troubles that some blame on excessive EU regulation. Further uncertainty won’t help and may not quell rising opposition to Europe. Other world leaders, including U.S. President Barack Obama, have also urged Mr. Cameron to keep Britain within the EU.

Labour Leader Ed Miliband also criticized Mr. Cameron for catering to political dissent within his own party instead of leading the country.

“This speech by David Cameron will define him as a weak Prime Minister, being driven by his party, not by the national economic interest,” Mr. Miliband said. “Everyone knows that the priority for Britain is the jobs and growth that we need. We have had warning after warning from British business about the dangers of creating years of uncertainty for Britain. This speech will do nothing for a young person looking for work, for a small business worried about a loan, for the family whose living standards are squeezed.”

Mr. Cameron’s Conservatives are also in a coalition government with the Liberal Democrats who have come out against changing the EU treaty and a referendum. It’s not clear how the two parties would address the issue if they formed another coalition government after the next election. Mr. Cameron said he is hoping for a Conservative majority but added that “If I am Prime Minister this will happen.”


I will repeat what I have said, earlier, about "layers": the EUI needs to redefine itself as a layered organization: the top layer will be countries bound by a real, working currency union; the second layer will involve countries who use the common currency but have no say in the operation of the central bank because, most likely, they are unable to conform to the monetary policy snake of budget deficits, inflation rates, etc; the third layer will consist of countries that are members of a customs union and a "free" border agreement (the Schengen Agreement); the fourth layer will be countries that only subscribe to the customs union; and the fifth layers will countries that have free trade arrangements with the customs union but are outside of the formal body. Britain probably wants to be in the fourth or fifth layer but many other EU members want only a three layer "cake," and will insist that Britain move up or out.

Canada should, now, take steps to assure Britain that if it leaves the EU it will still have the, at least, full benefits of any Canada/EU free trade deal and that Canada will remain a firm friend and ally.
 
And here is the very necessary counterpoint, by Timothy Garton Ash, which is reproduced under the Fair Dealing provisions of the Copyright Act from the Guardian:

http://www.guardian.co.uk/commentisfree/2013/jan/23/why-britain-stay-europe-cameron-speech
From outside, it's clear why Britain has to stay in Europe
Cameron's speech could have been a lot worse, but five years of anxious uncertainty are bad news for Europe and the world

Timothy Garton Ash
The Guardian

Wednesday 23 January 2013

So now we know: Europe will be roiled by internal turmoil for another five years. While Germany, France and others wrestle to build a stronger core Europe around the eurozone, David Cameron's Conservatives, if elected in 2015, will try to renegotiate the terms of Britain's membership in the whole EU club and then put that "new settlement" to the British people in an "in or out" referendum by the end of 2017.

World, you have been warned. Europe as an economic giant? Yes, still. Europe as a strong force in a new multipolar world? Postponed to the Greek calends – and now to the British ones as well. Whether you are watching from India, China, Russia, America or Brazil, you can forget that prospect for the foreseeable future. In fact, most people in those countries already have.

But first, what of the speech itself? Well, it could have been a lot worse. As a pro-European who has argued that Britain should hold an "in or out" referendum in the next parliament, once the shape of eurozone-Europe and the results of any attempted renegotiation of the terms of Britain's membership are known, I can hardly complain if the British prime minister plumps for exactly that. While much of the phrasing was patently crafted to please Eurosceptics, some of his criticisms of today's EU are also justified.

Above all, the peroration of the speech was as clear, eloquent and forceful an argument for Britain staying in the EU, on clearsighted, hard-nosed Palmerstonian grounds of national interest, as you could hope to hear from a leader of today's Conservative party. Those last minutes, between about 8.35am and 8.45am London time, confirmed me in a view that I have taken against nervous British pro-Europeans for some time: when it comes to the point, the British people will vote to stay in the EU.

Yet they also confirmed the futility of this entire strategy. For those basic arguments of national interest for Britain to stay in the EU will remain true, however paltry the results of any formal renegotiation after 2015. In fact, since Europe is a permanent negotiation, Britain would get a better deal if it remained fully involved and committed all the time.

If other EU member states agree on nothing else, they agree on this: Britain should not be given any major new exceptions from the rules of the whole club. Now they will concede even less. If EU politics were a game of bridge, Cameron has just effectively thrown away his strongest ace: the credible threat of Britain leaving. Germany and other free-market north Europeans would not really want to be left alone with the southerners. Even France would be ambivalent, since Britain is the only other European country with a serious tradition of projecting hard power – as most recently in Libya.

It's also bad for Europe. Some of the good reforms Cameron is preaching at continental Europeans are now even less likely to happen since, whatever he says, our partners all feel that he is batting for Britain not for Europe. In a rare and revealing stumble by this otherwise accomplished speaker, when he was arguing for his preferred option of a new reform treaty for the whole of the EU, he said: "But if there is no appetite for a new treaty for us [pause, stumble] … for us all." Freudian slip or Thatcherite one: that's what most continental Europeans think he subconsciously means.

And yet, even though it would have been better for Europe to carry on without this added diversion to the core problems of the whole project, a referendum would have come sooner or later anyway. With the stakes raised like this, it will be hard for other parties to refuse the British people a direct choice. As a nice Polish phrase has it: we have to swallow this frog.

Meanwhile, the world will yawn its way through five more years of euroshemozzle. And it will deal with Europe as it finds it: economic giant, political hydra-head.

Like Reading Lolita in Tehran, watching Cameron in Mumbai has been a surreal experience. Here I am, surrounded by the afterlife of British colonialism at its most grandiloquent – the monumental Gateway to India, built in Bombay harbour to celebrate the visit of the King-Emperor George V in 1911, colonial-style tearooms fluttering with now Indian talk of "tiffin" and "chaps". And there, on the television screen, a hundred years later, is a vaguely viceregal British prime minister who nonetheless feels it necessary to explain, to what was once the party of empire, why Britain really should not opt to be an offshore Switzerland, a Norway without the oil or the Greater Cayman Islands.

And the Indians, those at the top of the pile who are now prosperous and sophisticated representatives of one of the 21st-century's great emerging powers, how do they view this distant political gymkhana? Mainly not at all. Indian acquaintances confirm my impression that the speech did not make the news bulletins of the main local channels. Indians have their own politics to worry about, and their own problems: India's poverty makes hard-hit Greece look like paradise. But beyond that, they view Britain's agonising about its place in the world with mixed feelings.

One hears of a liking for London as a place to live and do business; of admiration for UK universities (if only the Cameron government's misbegotten student visa squeeze does not prevent their children studying there); of some attachment to British traditions of literature, good government and common law (a shipping merchant here tells me he makes contracts with Chinese partners under English law).

But there is absolutely no echo of the neo-Tory idea that a strategic special relationship between Britain and India, Britain and the whole Commonwealth, could be any substitute for Britain's place in Europe, and India's relationship with Europe as a whole. India, like Britain, will pursue its own national interest, starting in its own neighbourhood. If Cameron doesn't know that already, he will hear it again on his planned second official visit to India next month.

Ultimately the point is this. History has dealt Britain an amazing hand. Though a shadow of its former imperial self, the country has unique ties to Europe, to the United States, to the rest of the English-speaking world, and to quite a few other places (for instance, in Latin America) as well: spades, hearts, diamonds and clubs. Who but an idiot would throw away one of his (or her) strongest suits? And we Brits are not idiots, are we? Are we?


I suspect that Garton is correct - in the near term, but the Eurosceptics are both right, in the long term, and more likely to win a referendum since no deal that Cameron can extract from the EU will be good enough for most Britons.
 
The topic is: "Why Europe Keeps Failing ..." Maybe the answer is that they keep trying to avoid the hard but necessary problems and look for simple albeit irrelevant course of action. See this article which is reproduced under the fair Dealing provisions of the Copyright Act from the National Post:

http://news.nationalpost.com/2013/01/27/silvio-berlusconi-praises-benito-mussolini-for-backing-hitler-says-he-did-good-despite-anti-jewish-racial-laws/?utm_source=dlvr.it&utm_medium=twitter
Silvio Berlusconi praises Benito Mussolini for backing Hitler, says he ‘did good’ despite anti-Jewish racial laws

Associated Press

Jan 27, 2013

ROME — Former Italian Premier Silvio Berlusconi praised Benito Mussolini for “having done good” despite the Fascist dictator’s anti-Jewish laws, immediately sparking expressions of outrage as Europe on Sunday held Holocaust remembrances.

Berlusconi also defended Mussolini for allying himself with Hitler, saying he likely reasoned that it would be better to be on the winning side.

The media mogul, whose conservative forces are polling second in voter surveys ahead of next month’s election, spoke to reporters on the sidelines of a ceremony in Milan to commemorate the Holocaust.

In 1938, before the outbreak of World War II, Mussolini’s regime passed the so-called “racial laws,” barring Jews from Italy’s universities and many professions, among other bans. When Germany’s Nazi regime occupied Italy during the war, thousands from the tiny Italian Jewish community were deported to death camps.

“It is difficult now to put oneself in the shoes of who was making decisions back then,” Berlusconi said of Mussolini’s support for Hitler. “Certainly the (Italian) government then, fearing that German power would turn into a general victory, preferred to be allied with Hitler’s Germany rather that oppose it.”

Berlusconi added that “within this alliance came the imposition of the fight against, and extermination of, the Jews. Thus, the racial laws are the worst fault of Mussolini, who, in so many other aspects, did good.”

More than 7,000 Jews were deported under Mussolini’s regime, and nearly 6,000 of them were killed.

Reactions of outrage, along with a demand that Berlusconi be prosecuted for promoting Fascism, quickly followed his words.

Berlusconi’s praise of Mussolini constitutes “an insult to the democratic conscience of Italy,” said Rosy Bindi, a center-left leader. “Only Berlusconi’s political cynicism, combined with the worst historic revisionism, could separate the shame of the racist laws from the Fascist dictatorship.”

Italian laws enacted following the country’s disastrous experience in the war forbid the encouragement of Fascism. A candidate for local elections, Gianfranco Mascia, pledged that he and his supporters will present a formal complaint on Monday to Italian prosecutors, seeking to have Berlusconi prosecuted.

Advocating aggressive nationalism, Mussolini used brutish force and populist appeal evoking ancient Rome’s glories to achieve and keep his dictatorial grip on power, starting in the early ’20s and lasting well into World War II. His Fascist “blackshirt” loyalists cracked down on dissidents, through beatings and jailings.

He encouraged big families to propagate the Italian population, established a sprawling state economy and erected monumental buildings and statues to evoke ancient Rome. Mussolini sought to impose order on a generally individualistic-minded people, and Italians sometimes note trains ran on time during Fascism.

With dreams of an empire, he sent Italian troops on missions to attack or occupy foreign lands, including Ethiopia and Albania. Eventually, Italian military failures in Africa and in Greece fostered rebellion among Fascist officials, and in 1943 he was placed under arrest by orders of the Italian king. His end came at the vengeful hands of partisan fighters, who shot him and his mistress, and left their bodies to hang in a Milan square in April 1945.

Berlusconi’s former government allies have included political heirs to neo-fascist movements admiring Mussolini.

In 2010, he told world leaders at a Paris conference that he had been reading Mussolini’s journals, and years earlier Berlusconi had claimed that Mussolini “never killed anyone.”

Berlusconi is running in Feb. 24-25 Parliamentary elections and has repeatedly changed his mind on whether he is seeking a fourth term as premier. Monti is also running, but polls put him far behind front-runner Pier Luigi Bersani, a center-left leader who supported Monti’s austerity measures to save Italy from the Eurozone debt crisis.

Polls show about one-third of eligible voters are undecided.


It is important to recall that the rise of the Italian Fascists and German Nazis was rooted in economic crises - not unlike those Europe is facing today. The rubbish Berlusconi is sprouting is typical of that which tries to paper over the cracks and offer people and easy way out. The "easy way" will lead, again, to more problems than it solves.
 
I remember having this discussion with a classmate in Guelph back in 1978 or so.  She was Italian although born in Canada. 

She said you couldn't say a bad word to her grandmother about Mussolini because "he gave her her first pair of shoes".  Up until Mussolini many Italians, like many folks across Europe, including Britain, went barefoot.

Mussolini won power in 1922, 10 years before Hitler came to power, 17 years before Britain declared war and governed through the depths of the depression.  He had the backing of the monarchy, the papacy and the majority of the public (the defining characteristic of those nasty "populist" regimes).

Tangent Alert:

Populist Government - bad - Most people agree with the government and disagree with me.
Democratic Government - good - Most people agree with me and the government.

Populist forces - bad - the majority that disagrees with me (Mensheviks)
Democratic forces - good - the minority that agrees with me (Bolsheviks)
 
This article, which is reproduced under the Fair Dealing provisions of the Copyright Act from EurActiv.com, illustrates a problem with my "layer cake" proposal:

http://www.euractiv.com/consumers/eu-threatens-punish-selfish-norw-news-517431
EU threatens to punish Norway for breaching EEA agreement

Published 30 January 2013

Norway is failing to live up to its obligations as a member of the European Economic Area (EEA), including imposing extra taxes on EU products and not implementing more than 400 directives, according to an EU report to be published later this year.

In the Commission draft report, which looks into the functioning of the EEA, the Scandinavian country is being criticised for imposing tariffs on EU products from 2013 and "resisted EU efforts for ambitious liberalisation" of the EU's single market.

According to the draft, obtained by EurActiv, 427 acts whose compliance date in the EU has expired, also remained to be incorporated in Norway by October 2012.

"This situation might thus lead to competitive advantages for operators based in the EEA-EFTA countries, and more fundamentally risks undermining the legal certainty and homogeneity of the single market," the report reads.

"This problem is of great concern for the EU side and should be solved as a matter of urgency," the report states.

'Selfish Norway'

Moreover, the EU also dislikes the fact that Norway has rejected several directives coming from Brussels. The Norwegian government has for example warned it won’t implement the EU’s postal directive about competitiveness for letter mail weighting less than 50 grams.

Danish MEP Bendt Bendtsen (European People's Party), who has been closely following the trade issues with Norway, told EurActiv the problems started in 2012 when Norway raised the price of hydrangeas from the EU by 72%.

Eventually, the extra taxes spread to EU food products such as cheese and meat.

Bendtsen said Norway is acting "selfishly" and that the taxes were put on EU goods "deliberately" as the Norwegian Centre Party, which is part of the Norwegian government, has for a long time pushed for the extra taxes.

"Norway only wants the cream on the cake," the MEP said.

Threaten with punishment

The EU’s foreign service and the Commission, which have the formal responsibility for the relationship with Norway through the EEA agreement, have confirmed that there is an increasing disapproval with Norway.

“This development worries us. We don’t like the backlog on implementing directives, and this is a case we are trying to deal with now," Maja Kocijancic, spokesperson of Catherine Ashton, the European Union High Representative for Foreign Affairs and Security Policy, told Norwegian TV2.

She confirmed that the EU is looking into the possibilities for sanctions within the EEA agreement's frame.

Leader of the pro-EU organisation Europabevegelsen Paal Frisvold said Norway risks exclusion from the European marine and cargo market and could lose cooperation on mobile roaming prices, making them more expensive in Norway.

However, Bendtsen said that the right EU punishment would be to hit Norway's fishing industry, or to take the step even further: "The consequence should be kicking Norway out of the EEA," the MEP said.

Stupid situation

Norway's Prime Minister Jens Stoltenberg said the country has a good relationship with the EU, but the fact that there are disagreements over individual directives is nothing new.

Erna Solberg, leader of the biggest opposition party, the Conservatives, said the Norwegian government doesn’t understand the EEA’s mutual obligations. She said Norway isn't active enough when it comes to its Europe policy and doesn’t use the opportunities in effecting the EU legislation enough.

“It is stupid that we have put ourselves in a situation where our closest partners obviously are frustrated with us,” Solberg said.

Potential impact on British EU debate

Bendtsen said the problems in the EU-Norway relations could eventually affect the ongoing British debate on whether to stay in or leave the EU.

Norway has previously been mentioned as a positive example of a non-EU member which still gets advantages and benefits of being part of the EU's single market.

However, in his EU speech last Wednesday, British Prime Minister David Cameron asked whether it was in Britain's best interest and desirable for Britain to be like Norway or Switzerland – with access to the single market, but outside the EU.

"While Norway is part of the single market – and pays for the principle - it has no say at all in setting its rules: it just has to implement its directives," Cameron said.


Although many of us, me included, too often tend to see Europe as a monolith it is, very clearly, not that at all. Scandinavia and the Balkans have little in common, less even than, say, Britain and Spain. Europe is both an idea and, for some, an ideal, but it isn'y, yet, a concerete anything. There is no reason for Norway to want to please Portugal (where the hydrangeas are grown) or, even, Germany and until there is Europe remains a place of differences, not a monolith. It is easier to pull it apart than to hold it together.
 
It's possible the Euros are choosing this moment to beat up on the Norwegians as a shot across Cameron's bows.

Norway is often held up as a successful example of the type of relation Europe should have with Britain. 

Cameron has been making noises about moving towards that type of relation.

The Europeans have responded by threatening the Square Mile.

Unfortunately that may be a bit of a losing game for them.  They are threatening to undermine London if Britain stays in its current association with Europe; if it accedes to Euro demands and becomes part of the Eurocore; if it leaves Europe entirely.

Short form:  This is all about the Huguenot Banks of the 1690s (England, Scotland and Barclays) versus Frankfurt's Metzler Bank and Colbert's legacy.  And Mark Carney is right in the middle of the battle.

From a British perspective, leave or stay, they are going to have to fight to keep their position in the international monetary arena.  That likely means more gifts to bankers and much chagrin at the pubs.
 
Bloomberg reports that, as Italy approaches a 24 Feb election, "former Italian Prime Minister Silvio Berlusconi narrowed the lead of front-runner Pier Luigi Bersani to within the margin of error of an opinion poll."

And that's why Europe keeps failing.
 
E.R. Campbell said:
Bloomberg reports that, as Italy approaches a 24 Feb election, "former Italian Prime Minister Silvio Berlusconi narrowed the lead of front-runner Pier Luigi Bersani to within the margin of error of an opinion poll."

And that's why Europe keeps failing.

And in Italy the Arian Lombard Germans of the Ghibelline faction continue their courageous struggle against the equally courageous Catholic Frank Germans of the Guelph faction for the control of Rome.    :nod:

As you say - that's why Europe keeps failing.  The names and banners and causes change but the blood feuds carry on.
 
While Bloomberg reports that Italian voter turnout fell in the first day of parliamentary elections, setting a pace for a post- World War II low, the latest polls show Italian elections still up in the air as newest polls show Berlusconi in the lead in Senate; in short: those who can be bothered to vote do so for the dimwit who promises an easy (fascist) solution.

Italy will fail ~ along with Greece, Portugal, Spain and, most likely France ~ ultimately destroying the European Union, as it now exists, and allowing room for Germany to, finally, create Mitteleuropa.
 
Yep.  Nothing like making a promise to refund last year's property taxes and buying a soccer player or two for your team to get voters out to vote for you...

Our system isn't perfect but I'll take it over theirs any day.
 
Yep you thought it was YOUR money in the bank.Its really the State's money.

http://news.yahoo.com/savers-forced-bear-costs-cyprus-bailout-051941784.html
 
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