Friday, November 18, 2011

The Leadership Gap in Europe

The Eurozone crisis and the impact it is having on the world is also a crisis of leadership. This is seen clearly today in the double-speak of the British Prime Minister and the German Chancellor, who met in Berlin.

It is clear that nothing of substance was agreed. The German Chancellor, Angela Merkel, continues to push for a two tier Europe with the lead countries (Germany and France) being able to take command of other countries when they do not follow the rules embodied in the growth and stability pact. What happens when Germany doesn’t follow the rules – it has broken them sixty times since the Euro was created – is not known. David Cameron, the British Prime Minister, continues to deny that there will be a two tier Europe. Suggesting that constitutional reform at this time is a major distraction, Cameron talks as if he is in a position to prevent Merkel and France’s President Sarkozy from winning this argument.

In terms of the actual debt crisis, the “solution” everyone is now narrowing down on is a tax on bank profits. Put this another way, reducing the ability of banks to help the economy by investing and lending. Cameron takes the view that, unless this tax is global, he will oppose it. Merkel takes the view that unless there is this tax, Germany will end up having to bail out Italy, Spain, France, Greece and all the rest – so its urgent and it must happen now, focused first on European banks.

Both Cameron and Merkel like to pretend that all is moving along when it isn’t. They talk rhetoric and platitudes when what is needed is courage. It would be helpful, for example, for Cameron to say at his press conference:

“Ladies and Gentlemen, thank you for being here and I would like to thank Chancellor Merkel for an honest and blunt conversation about the future of Europe. We spent several hours in conversation over the last few weeks, including three hours of face to face meetings today, and find that we disagree on the most basic aspects of reform. We do agree that the budget for the EU should be at the level of current budget plus inflation and no more, but that is all we can agree on. We don’t agree on the future of the EU. We don’t agree on the bank tax. We don’t agree that the UK must join the Eurozone as part of the stabilization solution, as Germany suggests and we don’t find it acceptable to consider a two tier Europe. We also don’t think that constitutional reform is a helpful strategy at this time. We will fight this out in a battle for the hearts and minds of the people of Europe and in the end, we will use democracy to let the people decide. Meantime, we will suspend a number of EU regulations and treaty requirements – just as Germany and France have done – so as to enable our own economy to grow. We will in particular focus on job creation through a liberalization of labour laws and tax incentives aimed at enabling investment, growth and job creation – all opposed by the EU. I have no doubt our robust conversation will continue and that we will continue to disagree on the most fundamental issues, but at least we are engaged in an honest and transparent conversation. We both agree that our core commitment is to democracy – something at the heart of our Europe and our future”.

Instead, we got platitudes like “Germany and Britain agree about a lot - starting with the need for a solid European economy, one that is "strong, efficient, that deals with its debts". Or "The UK and Germany need each other". Really.

Its time for courage, inspiration and focus – not spin, deception and double-talk. Don’t hold your breath.

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