(From the Centre for Policy Studies blog)
What is notable in current debates about how the Eurozone economies, and the EU itself, might be rescued is not that there is discord across Europe and great uncertainty in global markets. What is remarkable is the range of states now included among the key actors whose involvement in any potential solution to the crisis is deemed crucial. Media and expert analysis of the EU agreement to substantially boost and ‘leverage’ the European Financial Stability Facility (EFSF), to recapitalise European banks and to impose a 50% ‘haircut’ on banks holding Greek debt – to thereby stabilise the imploding Greek economy and halt the crisis enveloping major Eurozone markets like Italy and Spain – focusses not only on concerns and reactions to this putative deal in developed markets. Reactions in the major emerging markets are deemed important as well, notably those of the informal grouping known as the BRICS (Brazil, Russia, India, China and South Africa). China in particular is identified as a potentially significant investor in this new scheme to save Europe from ruin, however sketchy the details so far. Western media are also reporting on the response from Russia, India and Brazil, and the potential for these countries to become contributors to the European bail-out fund.
How the times have changed. Previous crises in the global economy saw those looking for solutions focussing squarely on developments in the core of the capitalist system, which until recent decades comprised the USA, Britain, Germany, France, Japan and a handful others. This focus on the developed world reflected half a millennium of steady Western ascent and eventual domination in the global economy. The thought, even a few decades ago, that decisions made in formerly colonised and peripheral regions would impact on the ability of major Western economies to solve their economic problems would seem far-fetched indeed. Never mind a suggestion that for any solution to be viable, the West would depend on the willingness of state and private sector actors in these developing regions to lend their support in terms of substantial economic investment and signalling of their confidence in Western countries’ willingness and ability to actually implement drastic measures to rescue themselves.
As already reflected in the G20 eclipsing the G7 as the key forum for global economic negotiations, it is no longer sufficient for a consensus to emerge between Washington, London, Berlin, Paris and Tokyo in order to resolve instability and crisis in the global economy. Without the participation of Beijing, Delhi, Moscow and Brasilia there can be no lasting resolution to a European crisis fuelled by decades of profligate public spending, mounting public and private indebtedness, increasingly volatile financial speculation, eroding competitiveness and unfavourable demographic developments. There is even some note taken of the reaction from Pretoria, representing Africa in the BRICS grouping of major emerging markets. All this is in the context of the West’s (outside the USA) eroding hard power and diminishing returns of its soft power (including the USA).
In this volatile environment, British conservatives and the Euro-sceptics among them must tread carefully. They would not want to, as Lord Ashdown cautions them, turn Britain into a ‘perfectly sovereign cork bobbing along in the wake of other people’s ocean liners’ (i.e., the BRICS). There is no doubt that repatriation of powers from Brussels, particularly in the sphere of domestic affairs such as controlling immigration and exercising sovereignty in judicial matters, would strengthen British sovereignty in accordance with conservative values and also popular demand. And if a lasting solution to the Eurozone crisis now inevitably means financial union, the idea that Britain can ever effectively lead in such a united Europe while not being a member of the Eurozone is difficult to envision. However, the EU and its economic future will remain central to British economic fortunes including its potential for renewed economic growth. While EU regulation imposes an economic cost on British business, and while much can be gained by focussing on strengthening Britain’s bilateral relations with key export markets such as the BRICS, there is no escaping the fact of the EU market’s centrality for British trade. The rise of the BRICS in what is becoming the emerging markets century adds a new important dimension not only to the future of the EU and the economies of the West, but also to the on-going debate about Britain’s role in Europe and the world.
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