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Euro has 'one in five chance' of survival, warns CEBR

The chances of the euro surviving in its current form have been put at "one-in-five" by one of the UK's leading economics consultancies.

By Philip Aldrick, Economics Editor, Telegraph Business, 13 Dec 2010

In a research paper published today, the Centre for Economics and Business Research (CEBR) claims that keeping "the euro alive will require cuts in living standards greater than the UK faced in the Second World War" for weaker eurozone members.

"There is no modern history of falling living standards in peacetime on the scale necessary to keep the euro in its current form. This is why I think there is at best a one-in-five chance that the euro will survive as it is," Douglas McWilliams, CEBR chief executive, said.

His warning came as the Ernst & Young eurozone forecast raised the prospect of a severe recession in the eurozone to one-in-10. Its "central" prediction is for GDP to grow 1.4pc next year, against 1.7pc in 2010, and an average of 1.9pc for the following three years. Following the resurgence of sovereign debt fears, though, there are now "greater downside risks".

E&Y said there is a 10pc chance of the eurozone economy shrinking "more than 2pc in 2011 and a further 3pc in 2012". In such an event, the area's GDP "would still be around 3.5pc below pre–crisis levels at the end of 2014" – six years after the start of the recession. There is a further 25pc chance of sluggish growth that plunges "several peripheral countries [into] recession".

E&Y pointedly criticised the European Central Bank (ECB). "It is a cause for concern that the ECB appears to have rejected outright the option of using quantitative easing. This would mean that the ECB could be left with very little effective ammunition to counter the negative impact of a renewed eurozone sovereign debt crisis," the report said.

A new eurozone crisis will affect the UK, E&Y warned. Just under half of UK exports are to the eurozone. Andrew Goodwin, senior economic advisor to the E&Y ITEM Club, said: "With the home market stagnating, UK businesses will be increasingly looking to grow their sales abroad. Slower growth in the eurozone will mean softer demand for exports and weaker growth."

Trouble in the UK, though, is small compared with difficulties faced by the weaker eurozone countries. The CEBR said Ireland, Greece, Spain, Portugal and Italy need consumer spending to fall by 15pc for their debts to become sustainable. By comparison, the "fall in consumer spending during the Second World War was 14pc for the UK".

At the same time, government spending in the weaker countries must contract by 10pc and all members must cede "control over economic policy" to the European Union. The CEBR also claimed a larger bail-out package is needed than the existing €440bn (£370bn) fund to deal with the risk of a Spanish or Italian rescue.

The eurozone is in bad need of an undertaker

The EU’s Franco-German "Directoire" and the European Central Bank have between them ruled out all plausible solutions to the eurozone’s debt crisis.

Ambrose Evans-Pritchard, International Business Editor, Telegraph Business, 12 Dec 2010

There will be no Eurobond, no increases in the EU’s €440bn (£368bn) rescue fund, and no mass purchases of Spanish and Italian bonds by the ECB. Nothing. The system is politically and constitutionally paralysed. Spain and Portugal will be left nakedly exposed before their funding crunch in January.

It is entirely predictable that Angela Merkel and Nicolas Sarkozy would move so quickly to shoot down last week’s Eurobond proposal, issuing pre-emptive warning before this week’s EU summit that they will not accept “a bundling together of all Europe’s debts”.

How can Germany or France agree lightly to plans that amount to an EU debt union, with a common treasury, tax system, and budget policy, the stuff of civil wars and revolutions over the ages? To do so is to dismantle the ancient nation states of Europe in all but name.

Even if Chancellor Merkel wished to take this course – and even if the Bundestag approved it – the scheme would still be torn to pieces by the German constitutional court unless legitimised by radical EU treaty changes, which would in turn take years, require referenda, and face populist revolt in half Europe.

What the German people are being asked to do is to surrender fiscal sovereignty and pay open-ended transfers to Southern Europe, taking on a burden up to six times reunification with East Germany.

“If we pool the debts of the countries in the south-west periphery of Europe, we are blighting our children’s future: the debt levels are astronomic,” said Hans-Werner Sinn, head of Germany IFO institute.

Any attempt to prop up the status quo will cement the current account imbalances of EMU’s North and South, to the detriment of both sides.

“I doubt that the current leaders of Europe fully understand the economic implications of their decisions. They are repeating the mistakes that Germany made over reunification,” he told the Handelsblatt.

Transfers to the East are still running at €60bn a year two decades after the fall of the Berlin Wall. There has been no meaningful East-West convergence for the last 15 years.

To those who blithely argue that EMU is a good racket for German exporters because it locks in Germany’s competitive advantage, he retorts that a trade surplus is the flip side of a capital deficit. Germany has seen €1 trillion – or two thirds of its entire savings since 2002 – leak out to fund the EMU party, gutting investment at home. This is toxic for Germany too.

It is no surprise to eurosceptics that Europe should have reached this fateful point where leaders must choose between the twin traumas of EMU break-up or giving up their countries. Nor is it a surprise to an inner-core of schemers within the EU system, who have always calculated that they could exploit such a crisis to catalyse political union.

However, it is a big surprise to Europe’s leaders, and they do not know what to do about it.

Chancellor Merkel and President Sarkozy seem unwilling even to boost the firepower of the European Financial Stability Facility, though in this they may be right.

The drama has moved beyond the point where headline "shock and awe" pledges can achieve anything. Markets are already looking beyond the debt-stricken periphery to the creditor core, fearing that bail-out costs will themselves create a chain of contamination. Credit default swaps on France have risen above 100 basis points, where they linger stubbornly.

A Fitch report on the European Stability Mechanism (ESM) said the new rescue fund “could result in lower ratings” on the risky sovereigns because the EU would have instant debt seniority, leaving private bondholders exposed to the risk of bigger haircuts. To make matters worse, debt restructuring would depend on the whim of politicians. The incoherence of the rescue machinery itself is feeding the debt crisis.

So as EU leaders flounder, the task of saving monetary union falls to the ECB. Yet it too has declined the burden, refusing to go nuclear with bond purchases. “Each country needs to be held responsible for its own debt," said Germany’s monetary avenger at the ECB, Jurgen Stark.

He was joined last week by Mario Draghi, Italy’s governor and candidate for ECB chief, who said it was not the job of a central bank to carry out fiscal rescues. “We could easily cross the line and lose everything we have, lose independence, and basically violate the Treaty," he said.

Indeed. Maastricht forbids the ECB from buying the debt of eurozone states except for specific purposes of liquidity management. But this saga no longer has anything to do with liquidity. Southern Europe faces a solvency crisis.

The ECB has postponed its threat to pull away the lending props beneath the banking systems of the PIGS. Beyond that it has limited itself to tactical strikes in the small illiquid debt markets of Ireland and Portugal, buying enough bonds to ram down yields and burn a few hedge funds.

The effect has faded within days. It had little impact on Spanish and Italian bonds in any case. Spanish 10-year yields reached 5.45pc last week, far above 5pc level where compound arithmetic comes into play.

At the end of the day, debtor governments still have to persuade Japanese life insurers, Mideast wealth funds, or French and German banks, to put up real money to buy their bonds at a bearable interest rate.

Credit Agricole said last week that it would hold back at next week’s auction of Spanish debt because it is not yet clear whether the ECB will back-stop the country. “The risk is simply too large for our appetite,” it said.

So we drift on with rising yields into 2011, when Portugal must raise €38bn, Belgium €85bn, Spain €210bn, and Italy €374bn – according to Goldman Sachs.

Europe’s leaders still seem to hope that brisk global growth will lift everybody off the reefs. That too is wishful thinking. Recovery brings its own set of problems, and will make intra-EMU tensions even worse.

Germany will hit the inflation buffers and force the ECB to raise interest rates before the trickle down benefits of trade have begun to make any difference in the closed economies of the South. Floating Euribor rates that determine 98pc of mortgages in Spain have been shooting up already, even as wages fall. The vice is still tightening on Spain.

The reflex of the EU elites is to blame this structural mess on lack of statesmanship.

“There is something surreal about the unfolding financial crisis,” said Stefano Micossi from the College of Europe, the sanctum sanctorum of the European Project.

“Leaders grudgingly do what is needed to prevent disaster at the last minute before it is too late, and the next minute they go back to the behaviour that brought them against the wall in the first place. The eurozone is in bad need of a psychiatrist,” he wrote at VoxEU

“If the eurozone follows this path, either all of the sovereign debts become German public debt, or the euro will collapse,” he said.This is admirably candid in one sense, but is today’s crisis really just a failure of leadership? Was EMU not dysfunctional from the first day? Did it not inflict negative real interest rates on Club Med and Ireland in the boom years, driving them into distastrously pro-cyclical policies?

Did it not lock in chronic imbalances between North and South? Has it not left victim states trapped in debt deflation or slumps which have gone too far to respond an austerity cure, and from which there seems to be no escape on terms acceptable to Germany?

Should we blame the current hapless leaders, or the guilty men of Maastricht who created this doomsday machine? If the project itself is rotten, surely what the eurozone needs most is an undertaker.

The euro is a currency in search of a government, or it is nothing

The European Council meets this week. On the agenda is the establishment of a permanent crisis resolution mechanism for the eurozone to replace the European Financial Stability Facility (or EFSF), which expires in 2013.

This goes right to the heart of the issues that were hotly debated before monetary union was formed – and then brushed under the carpet.

Monetary union needs a fiscal union. Without it, the union could easily suffer from the worst of both worlds: no clear mechanism available to provide support for weaker members in trouble – to make up for the absence of an independent monetary policy and the possibility of changes in the exchange rate – and yet more profligate members being able to free-ride on the credibility of the more prudent ones.

But full fiscal union would surely require political union. At the time that monetary union was forged, the peoples of Europe did not seem ready for such a dramatic move (subsequent developments have suggested that they are even less keen on it now), so measures were put in place to plug the gap; the Stability and Growth Pact and the no bail-out clause in the Maastricht Treaty. Both of these have been honoured more in the breach than the observance.

So, all along, the eurozone has been a half-way house; a currency in search of a government.

Doubtless there will be a strong temptation to muddle through. Yet, as suggested by the current chaos in the bond markets, if nothing is done, before long there will be a financial disaster. More radical action is required.

As the great Yogi Berra once said, “When you come to a fork in the road, take it.” The eurozone is at such a fork: the choice is between using the crisis to forge a fiscal and political union or to break up.

Germany holds all the cards. Since she has striven to create a common Europe for decades, her default position must be to keep the eurozone together. Moreover, German business has done well from the euro. Without it, improvements in competitiveness could have been overwhelmed by a strengthening currency.

Nonetheless, it is far from clear that building Europe ranks higher in the pantheon of German values than fiscal probity and low inflation. And the competitive advantages from the euro could easily be outweighed by a financial crisis that Germany was forced to pay for.

It is often argued that Germany would suffer hugely from a break–up of the eurozone, not least because of the effect of sovereign defaults on her banking and financial system. This is true. But, whatever the eventual result, there is no outcome from the current situation which will not bring immediate costs and dangers. It is a choice between evils. Some sovereign defaults are all but inevitable anyway. The 60pc reference value for the ratio of government debt to GDP was included in the Maastricht Treaty for a reason.

Once you get much higher than that the debt dynamics get very dangerous. By the end of next year, Greece will probably be at 150pc and Ireland at 110pc. The likely figures for Portugal, Spain and Italy are 85pc, 70pc and 120pc respectively. Meanwhile, Belgium will probably be somewhere near 100pc. More worryingly, France will be about 90pc and Germany will be not far off 80pc.

There has been an assumption that German fiscal resources are unlimited. Far from it. So it is not only that forking out money to support the weaker members would cost the German taxpayer huge sums, the issue is also about what continued German support would do to the German fiscal position. Policymakers everywhere must ensure that governments have sufficient fiscal firepower to support a bail-out of the domestic financial system if that were necessary. Is protecting the stability of the German system best served by squirting money around the eurozone to try to prevent a break-down or by husbanding your resources, ready to inject the money directly to those parts of the German system that are in trouble?

This is a similar dilemma to that faced by British military commanders in 1940. They had to decide whether to keep Spitfire squadrons in France to try to prevent a French collapse – recognising that this might be in vain – or withdraw them to ensure that Britain could be successfully defended in the event that France fell. They chose the latter and we all know the result.

What will German leaders do when they begin to believe that fending off a eurozone financial collapse, which may happen even with gigantic financial support from them, would imperil their own stability? Breaking up is hard to do, but staying together may turn out worse in the end.

• Roger Bootle is managing director of Capital Economics and economic adviser to Deloitte

Bruges Group: The EU’s CREDIBILITY CRUNCH

Last week, after the EU agreed its 'Economic Recovery Plan' José Manuel Barroso said “Europe has passed its credibility test”. Yet, the Bruges Group’s detailed examination of the EU’s economic policies in The EU’s Credibility Crunch finds that the European Union has been a major contributor to the economic malaise in Europe and is not a credible body to face the challenges of the downturn.

Nevertheless, the European Union is using the economic crisis to expand its power; particularly by using it as an excuse to push for the Lisbon Treaty to be ratified and even to re-start the debate in Britain on joining the euro.

Also in this paper, the Bruges Group sets out the policies that Britain must follow which including freeing-up trade, cutting taxes and government expenditure, and begin with leaving the shackles of EU control.

The EU’s Economic Recovery Plan

The Bruges Group’s analysis finds that the EU’s Economic Recovery Plan, agreed on Friday, 12th December, will cost Britain 1.5% of GDP which is £25 billion; a sum our debt laden economy simply cannot afford. That amount is equivalent to 6 pence off the basic rate of income tax for a year, or £417 per person in the UK.
The EU’s plans for recovery are either counterproductive or irrelevant to the present situation; being little more than an excuse to fund the European Commission’s pet projects, including money for environmentally-friendly cars and factories, expanding internet access to very rural areas, all irrelevant to the financial crisis.

The EU claims that the economic crisis is due to a lack of EU financial regulation, yet, the EU is the author of most financial sector regulation. Any faults in that legislation primarily belong to the EU.
All the EU banks that are having difficulties met their core EU regulatory capital requirements in their 2007 financial statements.
There is already an 8,000 page regulatory rulebook and 2,600 regulators at the Financial Services Authority alone. Better quality, and more localised, regulation is needed instead.
There are even moves for increased regulation of financial sectors that are not responsible for the downturn.
There is already a glut of international bodies facilitating the co-operation of financial service regulation.

The EU’s labelling of the economic crisis as a “US problem” is misleading. There is $2,520 billion of government support pledged to EU banks compared to $700 billion for US banks.

The ‘need’ for the bail-out in the EU has not been driven by losses incurred in the USA but from problems originating inside the European Union. It should be noted that the UK bank with the highest US exposure, HSBC, is regarded as the safest bank in the UK.

How the EU is damaging the economy

European economies would be better placed to deal with the downturn if EU membership did not weaken them.
The EU has grown considerably slower than the other advanced economies which are not within the European Union. This contradicts the well-propagated myth that the UK could not survive outside the EU; statistics show non-G7 developed economies outside the EU grew by 1.42% more each year than EU economies; such faster growth would benefit the UK by at least £18 billion per year including £6.6 billion of additional tax revenues.

The inability of member states to negotiate their own trade agreements has prevented pro-free trade states, including the UK, from expanding their markets. Since 2000, Australia and the USA have eliminated tariffs and created pro-growth new free trade zones covering hundreds of millions of people, whilst the EU has stood still.

Certain EU policies, notably on migration and the effective enforced ending of Dividend Tax Credits, are among the contributors to the damaging property bubbles arising in several member states.

Since 2000 the eurozone has been the slowest growing region of the major developed economies; the world economy has grown at a rate 98% faster than the EU area.
The euro is a “one-size-fits-no-one” policy. It is unsuitable for high growth economies; e.g. financially prudent Ireland is now in recession due to the euro’s uncompetitive exchange rate and high interest rate policy. However, members of the euro having made their currencies extinct have no short-term prospect of a White Wednesday rescue.
The European Central Bank has committed major mistakes in responding to the economic crisis. As recently as July 2008 it increased interest rates rather than cutting them to avoid the recession.

“The European Union’s approach to the recession is one of top-down instruction by the elites to businesses and individuals of Europe. However, there is no better time to note that the eurozone’s economic performance is the worst in the developed world and wake-up to the benefits of being a free-trading economy, free of the EU’s costs and shackles

“As growth in the overregulated and overtaxed economies of the European Union has consistently been the worst in the developed world there is a need to defend businesses and the taxpayer from yet more regulation and wasteful EU spending.”

“The EU is proven to have the low economic growth, damagingly high interest and exchange rates, regulation that weakens banks and a trade policy that isolates Europe from the benefits of globalisation. Yet, its Economic Recovery Plan is merely a wishlist for its pet projects that will cost each single UK resident £417. At a time, when economic management skills are key, the EU has a major Credibility Crunch.”

About the Author
Damon Lambert is the UK Corporate Tax Director of a major European Bank. Previously, he worked for 11 years in KPMG’s financial sector practice where he specialised in advising on mergers and acquisitions, primarily for financial sector multinationals. The advice he provided to clients included amongst other issues the impact of the EU and the ECJ on UK tax law. Damon is a qualified Chartered Accountant. He regularly writes on European tax matters and was a member of the working party on the Tax Reform Commission instigated by George Osborne, co-authoring the chapters on business taxation and tax reforms in other jurisdictions.

Ignore the europhiliac chorus – we need the pound now more than ever

The europhiliacs are on the march again. They have been pushing three arguments in favour of the UK joining the euro.

First, the recent fall in the exchange rate has taken the pound to a competitive rate which it would be advantageous to lock in.

The current rate is 15pc below that seen on the day the euro was created in 1999, 14pc below the rate ruling when the Treasury last assessed the five entry tests in June 2003 and 20pc below the rate of two years ago.

The Euro - a Safe Haven?

Second, the recent sharp swings in the UK's exchange rate have supported the idea that as a medium-sized economy, during periods of global instability the UK's exchange rate is always going to be susceptible to volatility. The euro would be a safe haven.

Third, the recent problems in the UK's banking system have highlighted the potential perils of having financial liabilities that dwarf the size of the economy.

The UK is like a gigantic hedge fund. If we were to adopt the euro, we would secure the backing of the European Central Bank and the fiscal power of the whole euro-zone.

There is something in all of these arguments, although not much in the last one. I cannot see other eurozone members being keen to pour resources into supporting the City of London in a banking crisis.

Moreover, there are two strong counter-arguments. First, joining the euro would require the UK to hand over the responsibility for setting interest rates and other forms of monetary policy to the ECB.

It sets euro monetary policy to achieve economic objectives for the eurozone as a whole, not for individual member countries. Our economy is very different from the eurozone average. Consequently, for much of the time, euro interest rates would be wrong for us.

Moreover, although the ECB has, on the whole, done a pretty good job, it has displayed marked characteristics which may be very unhelpful in current circumstances.

During its 10 years of existence, it has regularly been slower to respond to events than other central banks and less willing to change interest rates as aggressively.

The UK in the Euro?

And just think how bad things would be now if the UK had adopted the euro at its formation in 1999, as the europhiliacs then urged.

Our interest rates would have consistently been nearly 2pc lower than they in fact were. The result would have been an even bigger bubble in our housing market, leading to an even larger collapse and a deeper recession.

Second, it is all very well saying that the pound is now at a competitive level, but if we had already joined the euro the pound would not have been able to fall to this level.

And if we were to join it now, it would not be able to fall in future recessions – or to rise, if circumstances so required, as, believe it or not, some day they might. The simple fact is that there is no right exchange rate for all seasons. The key is to retain flexibility.

Without the recent 20pc fall in the pound, the UK's recession would be much deeper and much longer. The ability of a more competitive exchange rate to boost activity is even more crucial when the capacity of lower interest rates to stimulate demand is impaired by the banking crisis.

A Eurozone Disaster

Consider the plight of Italy. In time-honoured fashion, it has allowed its costs and prices to rise faster than the eurozone average.

The result has been a massive loss of competitiveness, both inside and outside the eurozone. Traditionally, Italy got out of this sort of mess by devaluing. Now it is stuck with having to grind its relative costs down through the effects of depression.

It is all very well saying that a lower exchange rate imposes no discipline and the virtuous path is to suffer. For Italy, the virtuous path could be the road to disaster. If we were in the euro, that could be our fate too.

The key reason why the UK emerged from the Great Depression of the 1930s earlier than most major economies was that it left the Gold Standard early, and subsequently enjoyed a significant boost from a lower exchange rate and lower interest rates.

Similarly, the UK managed to shrug off the recession of the early 1990s only because the exchange rate fell sharply and we were able to set our own interest rates after the pound was ejected from the Exchange Rate Mechanism in 1992.

The urge to throw in our lot with the continentals and let those nice, clever chaps in Brussels or Frankfurt manage our affairs strengthens whenever we experience one of our periodic bouts of national depression and loss of self-confidence.

The drive to join the EU in the first place originated in this way, and so did our membership of the ERM.

We are now passing through another cycle. Until recently, we suffered from national hubris – the end of boom and bust; our marvellous fiscal rules; our wonderful MPC; our outperformance of the continental economies leading to gross over-confidence, to the point where the Prime Minister took glee in lecturing our European friends on how to run their economies. Then disaster.

It is now surely clear that the Treasury, the Bank and the Financial Services Authority have made a gigantic Horlicks of managing our economy.

They, and we, are bound now to suffer from a deep depression of mood as well as economic performance. In such a frame of mind it is unwise to take radical decisions. The wise thing to do is to carry on until the mood lifts.

As one of those who was not taken in by the Brownian delusion of economic transformation, and has not experienced the associated yo-yoing of moods, let me say this: the eurozone is not going to have a picnic either.

Indeed, the strains will be intense and it is far from obvious that the ECB will be as imaginative and urgent as the Bank of England in seeking cures.

Grim though things will be here, eventually they will get better. Out of the debacle of the ERM exit, came a period of genuinely successful UK economic management and good economic performance.

Roger Bootle is managing director of Capital Economics and economic adviser You can contact him at roger.bootle@capitaleconomics.com

Bullying Germany gets a free ride with its beggar-thy-neighbour policy

For the first time in my life, I am starting to feel twinges of anti-German sentiment, writes Ambrose Evans-Pritchard.

By Ambrose Evans-Pritchard, Telegraph Business, 15 Dec 2008

This does not come naturally. My father insisted on German au pair girls during my childhood as his gesture towards post-War comity. I later did a stint at Mainz University dabbling in Kant (great) and Hegel (a fraud).

But even Teutophiles who think that Germany has played an enlightened role for 60 years are losing patience with the antics of the finance ministry and Bundesbank, and with the dictatorial turn in Berlin's EU strategy.

Put bluntly, Germany is pursuing a beggar-thy-neighbour policy. It is not fulfilling its responsibilities as the world's top exporter and pivotal power of Europe's monetary union. It is leaching off global demand, even as it patronizes Anglo-Saxons, Latins, and Slavs.

No doubt binge debtors in the Anglosphere are much to blame for this crisis. But Germany rode the boom too. It made those Porsches and BMWs driven by the new rich. Its banks are among the most leveraged in the world.

Nor should we not forget that the European Central Bank set interest rates at recklessly low levels early this decade to help Germany out of a slump. Can this be separated from the property bubbles in Club Med, Holland, Ireland, Scandinavia, and Eastern Europe now causing such grief?

Within the EMU, Germany has gained a competitive edge against France, Italy, and Spain for year after year by screwing down wages. In pre-euro days the North-South rift did not matter. The D-Mark revalued. Balance was restored. In monetary union it is toxic.

Germany now has a current account surplus of 7pc of GDP. It is hollowing the industrial core of Latin Europe. Yes, Club Med needs to pull its socks up, but the flip side of the coin is that Germany is in breach of EMU's implicit contract.

The rules of the game are that surplus countries should boost demand. The Gold Standard collapsed in the early 1930s because they – then the US and France – refused to do so. The burden of adjustment fell on deficit states, who had to tighten yet harder. The downward spiral dragged everybody into depression.

Germany and China are today's violators. Their trade surpluses over the last 12 months have been $283bn and $279bn, respectively. They are exporting excess capacity.

Peer Steinbrück, Germany's finance minister, seems in no mood to yield, preferring to mock the "crass Keynesianism" of the British.

Nobel Laureate Paul Krugman was so disgusted that he broke away from his Stockholm banquet to pen The Economic Consequences of Herr Steinbrück.

"The world economy is in a terrifying nosedive, visible everywhere. The high degree of European economic integration gives Germany a special strategic role right now, and Mr Steinbrück is doing a remarkable amount of damage. There's a huge multiplier effect at work; it is multiplying the impact of German boneheadedness," he said.

Meanwhile, the Bundesbank has been doing its bit for depression. Germany's two ECB members – caught in a 1970s time-warp – orchestrated the mad rate rise in July. They are now trying to head off cuts in January, saying the ECB cannot risk using up its ammo. Even Switzerland's uber-hawks have ditched that doctrine.

Worst of all is Germany's nefast role in dredging up the EU Constitution (Lisbon Treaty) after it had been rejected by French and Dutch voters. Having made one blunder, they are now making another by refusing to accept the Irish verdict as well.

Why are they so maniacal about this? Because the treaty establishes German primacy in the EU's voting structure. This is raw national interest – camouflaged, of course.

So Brian Cowen – already the most reviled Taoiseach since the creation of the Irish state – is bludgeoned into a second vote. This is what now passes for EU statecraft. A tactical case can be made, that fear will induce Irish voters to change their minds as GDP contracts by 4pc next year. Even if that proves correct, will it convince anybody that the European Project is advancing with democratic assent?

What if the Irish vote 'No' again? Will Germany carry out its threat to "suspend" them from the EU, and thereby risk a final revulsion against Europe and the unravelling of the post-War order?

One notes that Germany has acquired the taste for bullying small nations. Mr Steinbrück threatened to "take a whip" to Switzerland. The sooner Germans take a whip to Mr Steinbrück and all he stands for, the better. Otherwise the rest of us will have to start examining our options.

Flint 'patronises' the Irish by saying they misunderstood EU Treaty

The Irish electorate rejected the controversial European Union treaty in their landmark referendum mainly because they did not understand it, a senior minister has claimed.

By Rosa Prince, Political Correspondent, Daily Telegraph, 14 Dec 2008

Caroline Flint, the Europe Minister, was accused of "patronising" the Irish public after saying that no-voters had been suffering from a number of misconceptions about the nature of the Lisbon Treaty, the accord which replaced previous plans for a European constitution.

As the Tories attacked the Government for failing to allow UK voters a referendum, Miss Flint welcomed the prospect of a second poll in the Republic of Ireland, saying that she was confident of a yes vote.

The minister suggested that scaremongering by "no" campaigners had led to fears among Catholic voters that the Treaty would overturn the ban on abortion, and could see Irish youngsters being forced to serve in an EU army.

She told Sky: "There have been a number of studies in Ireland about how people voted and why they voted as they did.

"I visited Dublin about a month ago and met some people who told me directly that people sincerely thought - partly because of the campaign against the Treaty - that they would have their rights in a number of areas taken away, and that wasn't the case and isn't the case.

"If there is a way in which we can answer these questions that people had so they can feel reassured and the Irish want to have a second referendum, so be it.''

Brian Cowen, the Irish Taoiseach, last week secured legally-binding reassurances from the EU that the Treaty would not allow Brussels to interfere in tax and abortion policies, or affect the Republic's traditional position of neutrality.

A fresh referendum is now expected next year, with a yes vote meaning that the Treaty, which was held up as a result of the first poll, could finally be enacted.

Describing Miss Fint's comments as "extremely patronising, Lorraine Mullally, of the euro-sceptic think tank Open Europe, said: "Either she has no idea what is in the Treaty, or she is being deliberately misleading."

In a speech to the Bar European Group tonight[mon], Dominic Grieve, the shadow home secretary, will say: "The Lisbon Treaty is a document of profound legal importance yet the British Government and Parliament had absolutely no democratic mandate from the British people to sign up to it.

"Whether it comes into force will, unless we have an early general election, be up to the Irish electorate, not the British voter, who has had no opportunity to give any opinion on the matter at all.

Czech leader in shock after EU assault

A bizarre confrontation in Hradcany Castle confirms the inablilty of the Euro-elite to accept anyone else's opinions, writes Christopher Booker.

Christopher Booker, Sunday Telegraph 14 Dec 2008

Imagine that a Franco-German MEP, invited to meet the Queen at Buckingham Palace, plonked down in front of her an EU "ring of stars" flag, insisting that she hoist it over the palace alongside the Royal Standard, and then proceeded to address her in a deliberately insulting way. The British people, if news of the incident leaked out, might not be too pleased.

Something not dissimilar took place at a remarkable recent meeting between the heads of the groups in the European Parliament and Vaclav Klaus, the Czech head of state, in his palace in Hradcany Castle, on a hill overlooking Prague. The aim was to discuss how the Czechs should handle the EU's rotating six-monthly presidency when they take over from France on January 1.

The Lisbon Treaty - Czech Doubts

The EU's ruling elite view President Klaus, a distinguished academic economist, with a mixture of bewilderment, hatred and contempt. As his country's prime minister, he applied to join the EU in the days after the fall of Communism in the 1990s. But now Klaus is alone among European leaders in expressing openly Eurosceptic views, not least about the Lisbon Treaty, which the Czech parliament has yet to ratify.

Klaus was an outspoken dissident under the Communist regime, and he has come to regard the EU as dangerously anti-democratic. But he compounds this sin with highly sceptical views on global warming, on which he recently published a book, Blue Planet in Green Shackles. He likens the extreme environmentalism favoured by the EU to Communism, as a serious threat to democracy, freedom and prosperity.

So when Klaus was due to meet the MEPs, one of them decided this was a moment to display the Euro-elite's hostility to him. Daniel Cohn-Bendit, who is German born but lives in France, first came to prominence in Paris in 1968 as a student agitator. He is now leader of the Green MEPs. Talking loudly in the plane to Prague, he made no secret of his intentions, and brief French journalists on how to get maximum publicity for his planned insults.

I happen to know the splendid room in which the meeting took place, because I sat there myself with President Klaus in 2005, when he had arranged for a history of the EU I had co-authored to be published in Czech. As Cohn-Bendit was aware, the only flag that flies over the castle is the presidential standard (though the "ring of stars" is much in evidence elsewhere in Prague, flown outside every government ministry).

As described to me by someone present, President Klaus greeted the MEPs with his usual genial courtesy. Whatever his own views, he assured them, his countrymen would conduct their presidency in fully "communautaire" fashion. Cohn-Bendit then staged his ambush. Brusquely plonking down his EU flag., which he observed sarcastically was so much in evidence around the palace, he warned that the Czechs would be expected to put through the EU's "climate change package" without interference.

"You can believe what you want," he scornfully told the president, "but I don't believe, I know that global warming is a reality." He added, "my view is based on scientific views and the majority approval of the EU Parliament".

He then moved on to the Lisbon Treaty. "I don't care about your opinions on it," he said. If the Czech Parliament approves the treaty in February, he demanded, "Will you respect the will of the representatives of the people?"

He then reprimanded the president for his recent meeting in Ireland with Declan Ganley, the millionaire leader of the "No" campaign in the Irish referendum, claiming that it was improper for Klaus to have talked to someone whose "finances come from problematic sources".

Visibly taken aback by this onslaught, Klaus observed: "I must say that no one has talked to me in such a style and tone in the past six years. You are not on the barricades in Paris here. I thought that such manners ended for us 19 years ago" (ie when Communism fell). When Klaus suggested to Hans-Gert Pöttering, the president of the EU Parliament, that perhaps it was time for someone else to take the floor, Pöttering replied that "anyone from the members of the Parliament can ask you what he likes", and invited Cohn-Bendit to continue.

"This is incredible', said Klaus. "I have never experienced anything like this before."

After a further exchange, in which Cohn-Bendit compared Klaus unfavourably with his predecessor, President Havel, he gave way to an Irish MEP, Brian Crowley, who began by saying "all his life my father fought against the British domination [of Ireland]… That is why I dare to say that the Irish wish for the Lisbon Treaty. It was an insult, Mr President, to me and the Irish people what you said during your state visit to Ireland." Klaus repeated that he had not experienced anything like this for 19 years and that it seemed we were no longer living in a democracy, but that it was "post-democracy which rules the EU".

On the EU constitution, Klaus recalled that three countries had voted against it, and that if Mr Crowley wanted to talk about insults to the Irish people, "the biggest insult to the Irish people is not to accept the result of the Irish referendum". This provoked Crowley to retort angrily, "You will not tell me what the Irish think. As an Irishman, I know it best."

Everntually Pöttering closed the meeting by saying that he wanted to leave the room "in good terms", but it was quite unacceptable to compare himself and his colleagues with the Soviet Union. Klaus replied that he had not mentioned the Soviet Union: "I only said that I had not experienced such an atmosphere, such a style of debate, in the Czech Republic in the last 19 years."

This bizarre confrontation, which has been recounted and discussed with shock across formerly Communist eastern Europe, confirms the inability of the Euro-elite to accept that anyone holds different views from their own, on Lisbon, global warming or anything else. As we see from the way our own political parties are run, when it comes to "Europe", the system has no place for opposition. Everything must be decided by "consensus", directed from the top. There is only one approved "party line". Apart from a few little powerless dissidents round the edges, the EU is thus in essence a one-party state.

EU Referendum - Irish must Vote till they get the answer right

It was a sense of this that powerfully influenced the French, Dutch and Irish people, when they were given the chance, to vote against the constitution which will cement that one-party state into place more firmly than ever. And it explains why, last week, the European Council told the Irish that they must hold their referendum again, on the understanding that this time they will get it right. That is the way one-party states behave – as President Klaus, who lived under one for the first 50 years of his life, knows only too well.

Why Eurocrats believe that No to EU treaty is the Irish for Yes

For Euro-hirelings, Lisbon isn't about democracy, it's about their mortgages.

By Daniel Hannan, Sunday Telegraph 14 Dec 2008

This is becoming like the closing scenes of Terminator. However many times you kill the European Constitution, it keeps lurching to its feet again. Blam! Fifty-five per cent of French voters say "Non". Zap! Sixty-two per cent of Dutch voters say "Nee".

But the automaton keeps advancing, its flesh burned away, its charred metal skeleton stamped with the words "Lisbon Treaty". Then – pow! – 53 per cent of Irish voters vote "No". The machine is briefly swallowed by orange flames. Then, after a short lull, the red lights go on in its skull and, once again, it starts clawing its way forward.

Shortly before Ireland voted, the president of the European Commission, José Manuel Durrão Barroso, warned electors that there was no Plan B. Irish commentators innocently took this to mean that, if the treaty was rejected, it would be dropped. What Barroso in fact meant, as is now clear, is that Plan A would be resubmitted over and over again.

This is how EU leaders invariably behave after a "No" vote. They machine-gun out a couple of platitudes about listening to the people, then carry on regardless. For them, public opinion is an obstacle to tear aside, not a reason to change direction.

Their desire for a second Irish referendum next autumn isn't really to do with voting weights or numbers of commissioners or extensions of majority voting. Many of the provisions of the Lisbon Treaty can be – indeed, have been – implemented in anticipation of formal ratification.

For example, the European elections on June 4 will be fought on the basis of the number of MEPs that would have been authorised by Lisbon, not the ones provided for by the current treaties.

No, this is about keeping the project going – a project from which millions now earn their living. The EU employs more than 170,000 officials, on handsome and largely untaxed retainers.

And for every formal Eurocrat there are dozens of fellow travellers: the Europe officers retained by every local council, large corporation and NGO. Their salaries might not be paid directly by Brussels but their livelihoods depend on the process of integration.

For Euro-hirelings, Lisbon isn't about federalism or democracy; it's about mortgages and school fees. They realise, to borrow their favourite simile, that the EU is like a bicycle that will fall over if it stops moving.

And so they have convinced themselves that voters are suffering from what Engels called "false consciousness": that they secretly want their leaders to disregard their votes and push ahead with deeper integration.

If you think I exaggerate, consider these words, spoken to the Czech President last week by Brian Crowley, leader of Ireland's governing party, Fianna Fáil, in the European Parliament: "All his life my father fought against the British domination. Many of my relatives lost their lives. That is why I dare to say that the Irish wish for the Lisbon Treaty."

Disregard the curious way in which Crowley equates his father's campaign for national independence with his campaign against it. Ignore, too, the anachronism: since Crowley's father was born 13 years after independence, he can hardly have spent his life fighting "the British domination".

Focus, instead, on the extraordinary presumption: "the Irish wish for the Lisbon Treaty". So much for the referendum result. Crowley believes he knows the voters' desires better than they do.

Will a second referendum succeed? Irish politicians think so: they calculate that the financial crisis has changed the mood, that their constituents want to be part of a big bloc.

But Irish voters might remember the EU's aggressive attitude when their government sought to guarantee bank deposits. They might have spotted that euro membership exacerbated their crisis by artificially fuelling the boom. They might even notice that the people telling them to vote "Yes", in Dublin and in Brussels, are the ones who presided over the breakdown.

An opinion poll in The Irish Times last month showed the Pro-Treaty Forces (if I might use that loaded term in an Irish context) four points ahead. Then again, they were 18 points ahead at this stage last time, and still got thumped. Received opinion can be woefully wrong.

Two weeks before the last referendum, I urged readers of my Telegraph blog to bet their shirts on a "No" vote, at odds of 7–2. In the event, the "Yes" side was so complacent that the bookies had already started paying out the wrong way before polling stations closed.

I won't repeat that advice, for one reason. The consequences of a second "No" for Brian Cowen would be disastrous: he would have to resign, and would go down in history as the Taoiseach who wouldn't take "No" for an answer.

If, after the European elections next year, the polls are still looking dicey, my guess is that Cowen would find a way to push the treaty through by a combination of parliamentary ratification, executive fiat and judicial activism. But he won't abandon it: that would be unthinkable.

MEPs: Not too polite, not too bright, either

Here is an account of the bad manners shown by MEPs -- among them was Daniel Cohn-Bendit, known on the Marxist barricades of Paris '68 as 'Dany the Red' -- towards President Václav Klaus, the Head of State of the Czech Republic, at an official meeting last Friday in Prague. Thanks to the EU Referendum blog for getting its hands on the transcript:

Daniel Cohn-Bendit MEP: I brought you a flag, which - as we heard - you have everywhere here at the Prague Castle. It is the flag of the European Union, so I will place it here in front of you. [President Klaus refuses the gesture]. As for the Lisbon Treaty, I don't care about your opinions on it. I want to know what you are going to do if the Czech Chamber of Deputies and the Senate approve it. Will you respect the will of the representatives of the people? You will have to sign it.

President Vaclav Klaus: I must say that nobody has talked to me in such a style and tone for the past 6 years. You are not on the barricades in Paris here. I thought that these manners ended for us 18 years ago but I see I was wrong. If you are concerned about a rational discussion in this half an hour, which we have, please give the floor to someone else, Mr Chairman.

EU Parliament President Hans-Gert Pöttering: No, we have plenty of time. My colleague will continue, because anyone from the members of the EP can ask you whatever he likes. (to Cohn-Bendit:) Please continue

President Vaclav Klaus: This is incredible. I have never experienced anything like this before.

[Cohn-Bendit goes at President Klaus again, then Pottering calls on Brian Crowley]

Brian Crowley MEP: I am from Ireland and I am a member of a party in government. All his life my father fought against the British domination. Many of my relatives lost their lives. That is why I dare to say that the Irish wish for the Lisbon Treaty. It was an insult, Mr Presdent, to me and to the Irish people what you said during your state visit to Ireland.

President Vaclav Klaus: As for the Lisbon Treaty, I would like to mention that it is not ratified in Germany either. The Constitutional Treaty, which was basically the same as the Lisbon Treaty, was refused in referendums in other two countries. If Mr. Crowley speaks of an insult to the Irish people, then I must say that the biggest insult to the Irish people is not to accept the result of the Irish referendum. In Ireland I met somebody who represents a majority in his country [Declan Ganley, leader of the No to Lisbon campaign]. You, Mr. Crowley, represent a view which is in minority in Ireland. That is a tangible result of the referendum.

Brian Crowley MEP: With all respect, Mr. President, you will not tell me what the Irish think. As an Irishman, I know it best.

President Vaclav Klaus: I do not speculate about what the Irish think. I state the only measurable data which were proved by the referendum.

The Czech president was too polite to say more than that to the not-quite-up-to-it Mr Crowley. Just for the record, 'what the Irish think' was expressed in the result of their high-turn-out referendum on Lisbon earlier this year: 53.4 percent voted against, just 46.6 percent voted in favour. Though 'what the Irish think' - or any other European voters think - of MEPs behaving in such an ill-mannered way on an official visit to a head of state is anybody's guess.

No still means No

Brian Cowen, the Taoiseach, has told his fellow European leaders that he does not intend to take “no” for an answer from Ireland's voters. Instead he has committed himself, a second time, to seeking ratification of the Lisbon treaty that they rejected by 53.4 per cent to 46.6 per cent six months ago.

Mr Cowen could have disgraced himself more thoroughly by ignoring Ireland's first referendum on the Lisbon treaty altogether. But his decision to heed European blandishments rather than his own citizens' ballots still shows, as the leader of the Irish “no” campaign has said, contempt for the democratic process. It is also a grave and unnecessary indictment of the EU's current priorities, which in more outward-looking eras have unquestionably been a force for good. If a second Irish referendum on the Lisbon treaty does take place, it deserves to be resoundingly rejected once again.

Ireland's Constitution - and only Ireland's - requires EU treaties to be ratified by referendum: hence the first vote on the Lisbon treaty in June. A committee of Irish MPs has since decided that a second referendum would be legal. But the first was legal, too, and it does not take a committee to point out that Mr Cowen and the “yes” campaign have already mocked their Constitution and insulted Ireland's voters by holding a perfectly legitimate and transparent referendum and refusing to abide by its result.

Dick Roche, the Irish European Affairs Minister, has claimed that “from a constitutional point of view there's no other choice than a second referendum”. He could hardly be more wrong. The obvious choice of respecting the voters' first verdict is difficult but right.

What would it mean in practice? Unratified by Ireland, the Lisbon treaty would probably also remain unratified by Poland and the Czech Republic. It could not come into force, and the “streamlining” of European decision-making that its proponents promised would not happen.

There is no question that the EU's sudden expansion in the past four years has rendered it unwieldy as a global political player and poorly balanced as an economic unit. It is possible, though not obvious, that the Lisbon treaty's proposed shrinking of the EU's executive might have eased the path to consensus on apparently intractable issues such as climate change mitigation and co-ordinated fiscal rescue packages.

But Ireland's voters decided that the price in sovereignty and influence was too high. They worried that streamlining in principle would mean bulldozing in practice, especially on tax and social policies, and they did not relish losing a commissioner. Brussels' response to Dublin's lobbying since the June vote has been dramatic: José Manuel Barroso, the Commission's President, and Nicolas Sarkozy, current President of the European Council, have reversed themselves on the treaty's central proposal and promised every member state its own commissioner after all.

It is hard to imagine a more compelling proof that this treaty's supposed benefits are not essential. Meanwhile, Europe's - and Mr Cowen's - impatience with Ireland's voters have revealed a basic misunderstanding of democracy next to which the EU's other problems pale. Europe can and must thrive as a coaltion of the willing. That is not what the Lisbon treaty promises to build.

Financial Crisis: Who is going to bail out the euro?

Europe must pull together if it is to avoid further financial disaster, argues Ambrose Evans- Pritchard.

By Ambrose Evans-Pritchard, Daily Telegraph, 8 Oct 2008

A half-point cut in global interest rates may not halt the slide into a debt deflation, but at least we can hope to avoid the errors of the Great Depression. The slump – remember – had little to do with the 1929 crash. What turned the mild recession of 1930 into the sweeping devastation of the early 1930s was an entirely avoidable collapse of the banking system in both the US and Europe.

The culprit was tight money, made worse by beggar-thy-neighbour policies. The key levers of power in Western finance were held by the sorts of people who now think it is a good idea to drive our banks over a cliff.

Thankfully, wiser heads are in charge this time. Yesterday's move by the US Federal Reserve, the Bank of England, the European Central Bank (ECB), the Canadians, Swiss and Swedes – with Chinese help – is the first time in this sorry saga that the big guns have joined forces in monetary policy to arrest the disintegration of the credit system. The Fed and the ECB are no longer fighting. That alone is a massive change for the better.

However, the failure to offer a lifeline to distressed banks across the world earlier by cutting rates is unforgivable. The G7 bloc of economic powers is in recession or on the cusp, including Japan – where the Nikkei index fell by 10 per cent yesterday. American consumer credit is contracting at an annual rate of 7.9 per cent, the most violent squeeze on record.

The Baltic Dry Index measuring freight rates for shipping has fallen 70 per cent since May. The whole nexus of commodities except gold, now a super currency, is in freefall. Oil has fallen by 41 per cent from its peak, copper by 38 per cent, wheat by 50 per cent. Few with their finger on the pulse of global commerce now think the threat of inflation is remotely credible. Tesco's Sir Terry Leahy says food prices are now deflating at two per cent in his stores.

My view is that Washington has done what is needed to prevent the collapse of the US economy. It has taken over the entire credit system, after all, surpassing Roosevelt's New Deal.

The US has guaranteed the $3.5 trillion money market funds. It has nationalised the $5.3 trillion pillars of the mortgage market, Fannie and Freddie. The Fed is accepting any junk as collateral at its lending window. This week it went the whole hog after panic hit the $1.6 trillion market for commercial paper. It is now offering loans without any security at all. The US government has become a bank. Yes, this is US socialism. What is the alternative?

The $700 billion Paulson rescue plan should put a floor under the colossal dung heap known as "structured credit". It is a bad plan, since it does not target the money on the recapitalisation of the core banking system. But it will help refloat lenders by raising the price of beaten-down securities somewhere nearer their true "hold-to-maturity" worth.

An ugly recession is coming, as debt leverage kicks into reverse. The purge will be slow and punishing. Some 12 million Americans are already trapped in negative equity, but at least they can see where this might end. After much drama, the US institutions have risen to the challenge. The Fed, the Treasury, and Congress have managed to take some sort of coherent action. The jury is out on Europe, where the hurricane is now smashing the banking system.

Those such as German finance minister Peer Steinbruck – who thought the sub‑prime crisis was just an "American problem" – have had a rude shock. The collapse of Hypo Real with €400 billion of liabilities has made him face the unsettling truth that German banks have played a big part in this $10 trillion speculative venture undertaken by the whole global banking industry.

Europeans borrowed vast sums in dollars in the offshore money markets when dollar credit was cheap. This was leveraged by multiples of 50 or 60 to fund whatever craze was in fashion – Russia, Brazil, infrastructure. The credit crunch has left these banks floundering. They have to pay back a lot of dollars, yet the underlying assets are crumbling. They are caught in a self-feeding spiral of "deleveraging". Even those European banks that stuck to stodgy investments are caught in a vice, since many rely to some degree on three-month loans for funds. That market is jammed shut. They cannot roll-over their loan books. This way lies sudden death, as Hypo discovered.

Who in the eurozone can do what Alistair Darling has just done in extremis to save Britain's banks, as this $10 trillion house of cards falls down? There is no EU treasury or debt union to back up the single currency. The ECB is not allowed to launch bail-outs by EU law. Each country must save its own skin, yet none has full control of the policy instruments.

Germany has vetoed French and Italian ideas for an EU lifeboat fund. The former knows exactly where that leads. It is a Trojan horse that will be used one day to co-opt German taxpayers into rescues for less Teutonic EMU kin. One can sympathise with Berlin. But sharing debts with Italy and Spain was implicit when they agreed to launch the euro. A shared currency entails obligations. We have reached the watershed moment when Germany has to decide whether to put its full sovereign weight behind the EMU project or reveal that it is not prepared to do so in a crisis.

This is a very dangerous set of circumstances for monetary union. Will we still have a 15-member euro by Christmas?

Euro membership does not boost trade

The case for joining the Euro has been dealt a blow – with a study finding that membership has not boosted trade by as much as was claimed by its proponents.

By Edmund Conway, Economics Editor, Daily Telegraph Business, 7 Dec 2008

The long-held view that euro membership would as much as triple the trade in goods between its members has been demolished by a new paper from one of the US's leading economists.

It comes amid growing speculation that the Government may be quietly considering joining the single currency in the coming years as the UK recovers from the effects of the financial crisis.

One of the most important pieces of research used by euro proponents was a paper from Andrew Rose showing that countries which joined currency unions tended to see their trade increase by up to 200pc. However, a paper published by Harvard's Jeffrey Frankel has shown that, in fact, trade within the eurozone increased by just 10-20pc during the first four years of the currency. Moreover, the volume of trade did not rise any further thereafter.

In the paper, published by the National Bureau for Economic Research, Prof Frankel says: "The most surprising finding of this study was the absence of any evidence that the effects of the euro on bilateral trade have continued to rise during the second half of the eight-year history of the euro."

The paper underlines the question marks that still remain over whether euro membership would significantly boost the UK economy. A growing number of politicians and economists have argued that Britain should reconsider its refusal to join the euro, in the light of the pound's dramatic fall over the past year. European Commission Jose Manuel Marroso has claimed that Britain is "closer than ever" to joining, and despite Downing Street's insistence that there are "no plans" for membership, some cabinet members, including Lord Mandelson, are known to be behind such a plan. Some suspect entry procedures could commence imminently if Labour won the next election.

The prospective benefits to trade of euro membership were one of the chief attractions highlighted by a number of papers published by the Treasury in the run up to Gordon Brown's five tests in 2003. However, Prof Frankel's research shows that the promise proved somewhat greater than the reality.

The DM says: Even French economists have come to the same conclusion - the Euro has comprehensively failed to boost trade and jobs. Remind us again - what was the Euro for? Note that the so-called "people who matter" (see below), who want the Euro, are keeping very quiet about their plans.

EU to spend £27m on boosting vote turnout

European Union spin doctors are planning to spend £27.5 million on promoting Euro-elections next year.

By Bruno Waterfield in Brussels, Daily Telegraph, 5 Dec 2008

An internal letter seen by The Daily Telegraph has revealed top-level fears that June 2009 polls for the European Parliament could be a political disaster for the EU.

Margot Wallström, the European Commission's Vice-President responsible for "communication", expressed the concerns in a letter to the Parliament's President.

She wrote: "In next year's elections, the legitimacy of your parliament, and that of the Union as a whole, is at stake."

The Commission is intervening for the first time in the 30 year history of European elections because of a high risk that steeply declining voter turnout for the unpopular EU assembly will fall to an all-time low.

The turnout for the last European elections in 2004 dropped to 45 per cent, just 38.9 in Britain – rates that are almost a fifth lower than during the first poll held in 1979.

Officials are concerned that if participation drops further then EU institutions will be exposed as unpopular or irrelevant to voters.

Mrs Wallström has pledged budgets worth £14.5 million to be added to £13 million of Parliament funding earmarked for the elections.

Brussels funding will be used to "mobilise our European and local networks, NGOs and other organisations with whom the Commission works".

Money will also be used to "specifically" target "journalists of women magazines" and to "to support a blogging project with young journalists".

"I hope that through our collective actions we will be able to contribute to reversing the trend," said Mrs Wallström.

Nigel Farage, leader of the UK Independence Party said: "With this the Commission both throws down the gauntlet, and recognises, finally, that there are question marks over the EU's legitimacy as a political project. Well we in Ukip will gladly take up a challenge so defined."

Officials fear that the denial of referendums across Europe on the Lisbon EU Treaty combined with the Irish No vote and a deepening recession will prove to be catastrophic political mix.

"The rate of voter abstention as well as the Eurosceptic vote could be reinforced with detrimental consequences," admitted one document written by the Paris office of the European Parliament.

The DM says: Typical European Union solution - spend our money to try to persuade us that the European Union is not a disaster for us. EU Costs are high enough already without paying for all this propaganda.

Czechs leave Irish isolated on EU Treaty

Bruno Waterfield in Brussels at Nov 26, 2008
Posted in: Telegraph, Foreign Correspondents

There is only one group of people who can, and should, be trusted with deciding on political issues such as European Union treaties. It is the people, not the judges.

The Czech Constitutional Court ruled on Wednesday that the Lisbon Treaty conforms to national law, clearing the way for the country's parliament to proceed with ratification.

"The Lisbon Treaty does not run counter to the constitutional order," said Pavel Rychetsky, the court's chairman.

The Czech parliamentary route will not be easy but is pretty much assured, meaning that, barring technicalities or formalities (such as the country's President Václav Klaus signing it off), Ireland is all alone.

The quarantine, isolate and pressure strategy - aided and abetted by Gordon Brown - is running to plan. Dublin is expected to announce a second referendum in the coming week or so, backing a recommendation from the country's parliament, leaked here.

It is wrong for unelected judges to be involved in politics and Europe's constitutional judiciary has played a key role in railroading the Treaty though - in Denmark, the Netherlands and now the Czech Republic.

The issue of a referendum, or not, is a political not a legal or technical question. It is not up to judges or officials to decide if governments have broken promises, over EU referendums, or anything else. It is up to voters.

Unfortunately the constitutional role of judges in deciding on EU matters has been reinforced by some Eurosceptics, who are a litigious bunch.

No doubt some political cretins, if no one objects to the term too much, are still holding out hopes that German judges will sink Lisbon after the traditional challenge from the right wing Bavarian MP Peter Gauweiler. Get real.

The trend to hand over political decisions over to the experts - whether it is British judges and civil servants or European judges and civil servants - is the same tendency that has created the EU of the 21st century.

The DM says: The European elections in 2009 offer the only chance we are likely to get of something like a referendum on the European Union. Let's make sure the politicians get the message loud and clear.

EU condemned on tuna 'mockery'

Countries involved in the Mediterranean bluefin tuna trade have voted to maintain catches nearly 50% above what scientists say are "safe" levels.

Environment groups labelled the move, by the International Commission for the Conservation of Atlantic Tunas (Iccat), as a "mockery of science".

They put most blame on the EU which, they said, used trade issues to bully smaller nations into giving support.

Iccat's scientists had said next year's total allowable catch (Tac) should not exceed 15,000 tonnes; but on the final day of its annual meeting, Iccat members set a figure of 22,000 tonnes. Iccat has missed its last chance to save the bluefin tuna from stock collapse

They also rejected the scientists' call for a closure of the fishery in the spawning months of May and June.

The scientists had warned the commission that "a collapse in the near future is a possibility" given the high number of boats engaged in the lucrative trade.

"The spawning closure was probably more important than the Tac issue because actually the Tac was never respected," said Sergi Tudela, head of the fisheries programme at the environment group WWF.

"It was the one thing that might have stopped overfishing", he told BBC News from the Iccat meeting.

"The decision is a mockery of science and a mockery of the world; Iccat has shown that it doesn't deserve the mandate to manage this iconic fishery."

Earlier this year, an independent expert report branded Iccat's management of the tuna fishery a "disgrace", and put the blame on the shoulders of major fishing nations which, it said, routinely flouted the rules.

In 2006, Iccat scientists estimated that illegal fishing in the Mediterranean added about 30% onto the official catch figures.

The bargaining position adopted by the European Commission - which represents all EU members on Iccat - came as something of a surprise.

At the World Conservation Congress in October, Spain - the biggest tuna-fishing country - backed a suspension of the fishery, and Italy was reported to have gone further and called for a moratorium.

The EU's opening statement at Iccat acknowledged that "the situation of the bluefin tuna is critical", and that "urgent action is needed to ensure the sustainability of this emblematic stock".

The reasons why the European Commission decided, against this backdrop, to argue for catches considerably above the scientific advice are not yet clear.

Some conservationists at the meeting said the EU had threatened developing nations with trade penalties on goods such as bananas unless they backed the European position.

Conservation groups which have long lobbied Iccat members to adopt scientists' advice are now likely to take their fight to the Convention on International Trade in Endangered Species (Cites).

Numbers of the East Atlantic stock of bluefin have fallen so fast that listing it as a threatened species is a possibility. The southern bluefin is already categorised as Critically Endangered.

"The game is over - Iccat has missed its last chance to save the bluefin tuna from stock collapse," said Sebastian Losada, oceans campaigner for Greenpeace in Spain.

"It's time to take the fishery out of their hands and look to conventions like Cites to impose trade restrictions on the species."

The DM says: European Union policies nearly always achieve the opposite of what they intend, unless they are designed to give one country, usually France, an unfair advantage. This time it's Spain.

Best to leave the Euro to its own (de)vices

Joining the single currency would make our situation worse

By Ambrose Evans-Pritchard, Telegraph, 1 Dec 2008

The euro is on a roll. Icelanders are clamouring to join, as soon as they can get into the EU. The Danes seem ready to abandon their long rebellion and sign meekly on the line. A Danish referendum is pencilled in for March.

Eastern Europe's states are trying to engineer entry as fast they can to escape the hell of semi-fixed currencies. It was not such a good idea after all to take out euro mortgages in Budapest, Warsaw and Sofia – or Swiss franc mortgages, heaven forbid.

Everybody wants a safe port in this Force 10 storm. No matter if it is full of undetonated mines. No matter, too, that Denmark's travails stem from membership of the ERM, a half-way house that has forced them to raise rates twice – into the Copenhagen property crash.

Honesty from the European Union?

José Manuel Barroso, the Commission's chief, was a little too honest telling French TV that the people who count in Britain hanker for monetary union. What a slip of language. Is this a reversion to his Maoist youth in Portugal, or has he been drinking the EU waters for too long?

The people who count in British democracy are the voters. But let us not quibble. Mr Barroso is right to sense a shift in the undercurrents of British politics. This is a tricky moment for those who fear that total loss of control over our monetary policy would lead to even more destructive cycles of booms and busts than those we have already.

"I don't want to break the confidentiality of certain conversations," said Mr Barroso. "But British political leaders have told me that: if we'd had the euro, we'd be better off."

How, exactly, would we have been better off? Our current mess is caused by over-reliance on bankers (7·8 per cent of GDP), six years of incontinent spending by Gordon Brown and a housing/credit bubble that has pushed personal debt to 103 per cent of GDP.

Impact of the Euro on Britain

Joining the euro would not have prevented any of this. It would have made matters worse. The European Central Bank held rates at 2 per cent for part of this decade to help Germany out of the doldrums. Imagine what such rates – or anything near – would have done to Britain's property boom. You might as well have poured petrol on the fire, as Ireland and Spain can attest.

Events since the crunch began last year – and reached volcanic fury in September – entirely vindicate our refusal to give up control over our economy. Sterling has come down from silly levels, falling 30 per cent against the dollar and 21 per cent against the euro. Perfect. The economy has suffered an asymmetric shock: the currency has acted as the shock absorber. Our sympathies to well-heeled Britons in Aquitaine or Umbria living off sterling rents, but policy is not set for their needs.

The Bank of England botched the crisis at first, but it is now responding to emergency with stunning boldness. The 1·5 point cut in November – and what follows this week and beyond as rates fall to the lowest level since the Bank's creation in 1694 – may make the difference between recession and depression. Others that gave up their currency may not be so lucky.

Would you really want Frankfurt to decide your fate? The "people who count" in global finance – investors, economists and hedge funds – are increasingly in despair about the conduct of the ECB. It has misread events at every turn over the past year. It panicked in July when it raised rates to offset an oil and food price spike. By then, Germany and Italy were already in deep recession, and Spain faced a housing crash.

The "Shadow ECB", a panel of private economists from across Europe, last week called for immediate and drastic rate cuts, demanding to know what the ECB's strategy now is – if it has any at all. It would be going too far to describe the ECB's policy utterings as primitive gibberish – as two Nobel Laureates put it – but the bank is bent on a course of action that is at best very different from the reflation strategies of the Anglo-sphere, China and Switzerland, and risks repeating the errors of 1931 to 1933.

These are early days in this long, winding crisis. We cannot yet judge whether the euro is a force for stability, or whether it is workable at all – given the lack of an EU treasury and debt union to back it up. Monetary unions can create an illusion of calm for a while. They shield sinners from market discipline, but in doing so they let problems fester.

Will the Euro Fail?

Locking the currencies together was the easy part of EMU. Once the euro was off the ground, it was unlikely to face an existential test for at least a full credit cycle. But then it gets harder. The Latin bloc has allowed costs to creep up, while Germany has squeezed wages with relentless discipline. The gap has grown wider every year.

This is starting to matter. Investors are no longer willing to treat Greek, Italian, Irish or Spanish debt as interchangeable with German debt.

Nothing is pre-ordained in the euro drama. The chief reason for launching the single currency – before economies had properly converged – was to force the pace of political union. It may have to deliver on this agenda. Either the EU creates the machinery to needed cushion the bust on Europe's fringes, or EMU will drift into crisis. The ball is in the court of very reluctant paymasters in Germany.

Whichever of these two paths its chooses, there is no earthly reason for us to follow.

Could José Manuel Barroso's Euro statement refer to Peter Mandelson?

For José Manuel Barroso, the president of the European Commission, "the people who matter in Britain" think we should join the euro.

There speaks the authentic voice of the Euro elite for whom common-or-garden voters are an irritating irrelevance.

To whom could Mr Barroso possibly be referring? Could one of them be his former colleague in the Brussels Commission, Lord Mandelson, now returned, for the third time, to high office in the Labour Government?

There is a clue. The Business Secretary said at the weekend that he believed "that our aim, our goal, should be to enter the single currency".

It was the first time the euro has been mentioned by a Cabinet minister in years. Make of that what you will.

If the commission president does indeed regard the pro-euro Lord Mandelson as the arbiter of British policy, he is making an astute judgment.

For his lordship has been given exceptional latitude by Gordon Brown to let his writ run far beyond his own Whitehall department: his fingerprints seem to be on a great deal of what the Government is up to these days.

The Barroso theory is also supported by the tumbling value of sterling against the euro - down by close to 15 per cent since the start of the year. At this rate of descent, the two currencies will align around March 2010, the eve of the general election.

Could this prompt a fresh attempt to join the eurozone? Unfortunately for single currency supporters, there is a fly in the ointment. Under the Maastricht convergence criteria, successful applicants should have a debt/GDP ratio not exceeding 60 per cent.

The Treasury admits the ratio is heading towards 57 per cent, but that excludes PFI projects, pension liabilities and the bail-out of the banks. Add in those and our debt ratio is already double the limit. Even Lord Mandelson will struggle to finesse that away.

The DM says: some have suggested that, rather than having anything to do with our government reconsidering joining the euro, Barroso's outburst may be more of an attempt to bolster confidence among the eurozone's existing members. It comes amid growing evidence that some countries are finding the constraints of eurozone membership too limiting on their abilities to pursue necessary policies to pull their countries out of recession as quickly as possible.

In response to Barroso's claims, Downing Street has said that the government's position on euro membership remains "unchanged". But the EU and elements of our political elite still craven to such ideas of the past rather than open to opportunities of the future will miss no apparent justification, however spurious, to attempt to expand the EU's powers at the expense of democracy, economic flexibility and prosperity.

EU membership cost to British taxpayers will treble to more than £6 billion, Treasury says

Britain's payments to the EU will more than triple in two years to more than £6 billion under a failed deal to cut European farm subsidies.

By James Kirkup, Political Correspondent, Daily Telegraph, 2 Dec 2008

Treasury figures show that the UK government will increase its payments to European institutions even as ministers prepare to cut money for programmes including hospital construction.

In 2008/09, Britain's net contributions to the European budget are expected to be £2 billion. In 2010/11, the Treasury forecasts the price of EU membership will be £6.5 billion.

The payments could end up being even higher since the contributions are paid in euros and sterling has fallen to record lows against the single currency and continues to slide on currency markets.

The contribution figures were revealed in the footnotes of last week's pre-Budget report, which also sets out plans for huge borrowing to be repaid by tax rises and spending cuts starting in 2010.

Figures elsewhere in the PBR show that as part of the planned clamp on public spending, £1.2 billion has been cut from the Department of Health's capital spending programme for 2010/11.

In all, £37 billion will be cut from the Government's spending plans as a result of the PBR measures.

Yet even as domestic spending is squeezed, more taxpayers' money will be spent on EU institutions and aid programmes.

Britain is a major net contributor to the EU budget, but UK payments are reduced by an annual rebate, first negotiated by Margaret Thatcher in 1984.

Britain's EU contributions are rising as a result of a 2005 agreement by Tony Blair - with Gordon Brown's backing - to a staged series of cuts in the rebate.

The extra British payments were meant to be matched by cuts in the Common Agricultural Policy subsidies paid to farmers, which cost the average British family over £300 a year. But France is trying to renege on the agreement to review farm spending.

The Daily Telegraph last week revealed French plans to use the country's EU presidency to find ways of protecting the CAP from reform during negotiations in 2009. The issue may spark clashes between Britain and France at an EU summit in Brussels next week.

Ministers insist Britain's EU membership is good value, pointing out that the EU accounts for nearly 60 per cent of British trade, supporting 3.5 million British jobs.

Mark Francois, the Conservative shadow Europe minister said: "These figures show what a bad deal Gordon Brown agreed to when he and Tony Blair signed away billions of pounds of our rebate. With a falling pound these figures are now set to get worse.

"They gave away British taxpayers' hard earned cash but failed to secure anything concrete in return. That money is now badly needed yet Britain is still struggling to secure further necessary reform of the Common Agricultural Policy."

Ruth Lea, of the eurosceptic think-tank Global Vision, said the rising UK contribution "calls into question the affordability of EU membership"

She said: "With the French digging in over CAP reform, there will be no progress. It demonstrates the extraordinarily naÃ¯ve deal the Government struck in 2005. It was simply a giveaway with no guarantee of any quid pro quo from other European countries."

ment when events decide whether Europe will bind together to save monetary union, or fracture into angry camps. Will the Teutons bail out Club Med? If not, check those serial numbers on your euro notes for the country of issue. It may start to matter.

Britons want looser ties with EU

British voters would back radical moves to negotiate a new, looser relationship with the European Union, a survey has shown.

The ICM opinion poll for Global Vision, the Eurosceptic campaign group, found that among people who want to remain in the EU, a majority would like Britain to opt out of political and economic union, and restrict itself to links based on trade and co-operation.

A British government seeking to achieve such an outcome could only do so by putting it to voters in a referendum. If there were a positive result, ministers would then need to renegotiate the terms of Britain's membership with all other EU member states – a policy currently held by none of the three main political parties.

The survey findings come days before Ireland holds a referendum on the EU's Lisbon Treaty, the only member country to vote on the issue.
If the Irish vote No on Thursday the treaty, which gives more powers to Brussels, abolishing dozens of national vetoes and creating the new post of EU president, cannot come into force in any of the 27 member states.
It would be another big blow to supporters of further EU integration, after the collapse of the Union's proposed constitution when voters in France and the Netherlands rejected it in 2005.

The Irish Government could, in theory, seek to hold a new referendum, and carry on doing so until it achieved a Yes vote. But recent surveys in the Republic have suggested that public opinion would be hostile to such a move.

Latest opinion polls yesterday showed a dramatic surge in the No vote. Those saying they oppose the treaty have doubled in three weeks to 35 per cent, with just 30 per cent in favour – a result that has shocked the government and the country's major political parties, all of which want a Yes result.

The Global Vision/ICM survey found that when British voters were asked about their ideal relationship with Europe, 41 per cent chose one based simply on trade and co-operation. Some 27 per cent wanted Britain to stay a full EU member while 26 per cent wanted to withdraw altogether.
If the "trade-only" option were offered in a referendum, 64 per cent said they would vote in favour. Asked what should happen if Britain sought to negotiate a looser relationship but other nations blocked the move, 57 per cent said the UK should leave the EU, while 33 per cent said it should stay in.

Ruth Lea, director of Global Vision, said: "A looser relationship, based on trade and co-operation, rather than full political and economic integration, is consistently the option of the British people."

Gordon Brown has said Britain will not get a referendum on the Lisbon Treaty, although the House of Lords will vote on this decision this week. Stuart Wheeler, the millionaire businessman and major Conservative donor, will make a High Court challenge, also this week, attempting to force the Prime Minister to call a public vote.

Meanwhile, tomorrow, Britain will come under pressure to pass an EU directive giving temporary agency workers the same employment rights as permanent staff. Britain has always opposed the directive because business leaders fear that it could cost 250,000 jobs.

Brian Cowen, Ireland's prime minister, embarked yesterday on a last bid to persuade voters to ratify the treaty, saying it was his "most important" task. Defeat would be a personal humiliation for him and would also set back – perhaps permanently – hopes for a reformed and more streamlined decision-making process within the EU.

Ireland has received huge economic benefit from EU membership and Mr Cowen has warned that it could suffer dire consequences, with a No vote interpreted in Europe as a rejection of the union. But the business downturn and public uncertainty over how the treaty will work in practice mean acceptance is not certain.

The DM says: A Referendum on the Lisbon Treaty and our relations with the EU would show that the majority of British voters want to go further and leave the European Union.

Martin rejects British group's poll on Lisbon

Minister for Foreign Affairs Micheál Martin today accused a British eurosceptic think-tank of interfering in the national debate on the Lisbon Treaty. Mr Martin said a poll, commissioned by Open Europe, was an outside interference in discussions on Ireland’s future in Europe.

“I would like to know what prompted a British organisation with a strong ideological bias to commission a poll into Irish attitudes to Europe at this time,” said Mr Martin. “Ireland’s future in Europe is a matter for decision by Irish people.”

He said the Government has commissioned a study aimed at exploring the reasons behind the No vote.

“This will provide an input into a national debate which needs to take place in the months ahead as we seek to find and agree a way forward that will serve Ireland’s interests. We will, of course, be consulting with our EU partners, but I do not believe that we have anything to learn from anti-EU bodies like Open Europe. Its views are not in tune with Irish interests.”

Neil O’Brien, director of Open Europe which commissioned the Red C poll, maintained that by appearing to bully the voters, EU politicians were driving lots more people into the no camp.

The poll suggested the Irish electorate would vote No by an even bigger margin if made to have a second referendum on the Lisbon Treaty.
Some 71 per cent of those questioned in the Republic opposed a second referendum on the Lisbon Treaty, with just 24 per cent in favour. Of those who expressed an opinion, 62 per cent said they would vote No in a second referendum, compared to 38 per cent who would vote Yes.
The Lisbon Treaty was rejected by 53.4 per cent to 46.6 per cent in last month's referendum.

The Dáil will be recalled early from its summer recess to establish an all-party committee on the Lisbon Treaty that can help plan a way forward. Labour leader Eamon Gilmore said today that the EU must accept that the Irish rejection of Lisbon cannot be solved simply by a second vote by the Irish electorate.

"There must be a period of reflection, where all 27 countries participate collectively in seeking to determine a way forward. It appears that the European election in June 2009 can only take place under the Nice criteria. The sooner this is accepted by the Irish Government, and communicated by the Taoiseach to the rest of the member states, the sooner progress can be made in looking to a broader solution in the future," he said.

Chair of the People's Movement and former Green MEP Patricia McKenna said: "Minister Martin showed no concern about outside interference prior to the vote on Lisbon, when he and other Government Ministers invited with open arms every political heavyweight in the EU to come here and urge us to vote Yes.

"There was no concern expressed about outside interference when the German Chancellor Angela Merkel, EU Commission President Jose Manuel Barroso and EU Vice President Margot Wallstrom came here to here to urge us to vote Yes. It's a bit late for Government Minister to be taking the moral high-ground now about outside interference."

Ms McKenna said the Government had never complained about polls commissioned by the EU political establishment. "But because other interested parties, who have a different agenda, commission opinion polls on our attitude to Lisbon it just not acceptable."

The DM says: If the Irish vote No again, there is the interesting possibility that the treaty will still be unratified when (or if) David Cameron wins the next election. He might then have to keep his promise to allow the British a vote on the Treaty, killing it off.

Growth slump may force Italy out of eurozone

Italy is sliding into a deep structural crisis and risks being forced out of Europe's monetary union as the region's economic downturn gathers pace, according to a new report by Capital Economics. Over the last decade, the country has failed to reform its labour product markets sufficiently to cope with the rigours of euro membership and is now caught in a spiral of decline as the working population starts to shrink. Productivity growth has slowed to 0.5pc a year.

"An ugly combination of weak GDP growth, poor international competitiveness, and rising government borrowing costs could lead to renewed calls for Italy to leave the euro," said the report, written by Julian Jessop and Roger Bootle. “As things stand, not only will Italy lose ground to the rest of the eurozone, it could soon start to do so at an even more rapid rate," they said.

Italy has lost roughly 40pc in labour competitiveness against Germany since 1995, according to Eurostat data.

Capital Economics said Italy - now on the cusp of its fourth recession this decade - faces a "demographic time bomb" as the workforce starts to shrink at an accelerating rate over the next 30 years, making it ever harder to finance the biggest national debt in Europe (107pc of GDP).

There is a risk that the spreads between German Bunds and Italian 10-year bonds could widen quickly from 58 basis points today to over 100 if the question of euro membership creeps back onto the table.

Italy set off a minor scare in mid-2005 when two cabinet ministers from the radical Northern League called for a return to the lira. It was suggested that the political pain threshold in a major economic crisis may be lower than widely assumed. The country regained momentum during the final upswing of the global credit boom, helped by Fiat's remarkable comeback. This has entirely faded. "Italy's upswing has unravelled at an alarming pace," said the report.

Business confidence has fallen to the lowest since October 2001, following the 9/11 terrorist attacks. The country is disproportionately hit by the high euro because it relies heavily on "mid-tech" exports that compete toe-to-toe with Asian goods.

Italy can at least take some comfort that other euro members are feeling the strain too, reducing the risk of EMU break-up. France's Insee consumer confidence plunged to a 21-year low in July.

The epicentre of the unfolding crisis is Spain, where the number of houses built this year is expected to collapse by half from the 760,000 constructed in 2007 at the peak of the bubble. Spanish unemployment is rising by almost 70,000 a month, touching 10.6pc at the end of the fourth quarter. However, Spain has a much smaller public debt than Italy.

Most studies on the risk of an EMU break-up conclude that it cannot occur because the costs would be too high. But this overlooks that markets could set in motion a chain of events that forces a country to leave.

The DM says: The Euro has always been the weak spot of the EU. Sharing a currency between two such different economies as Germany and Italy was always a recipe for disaster. If the Euro breaks up, what will happen to "ever-closer union"?

UK 'closer' to adopting the Euro

BBC News website, 1 Dec 08

The UK is "closer than ever before" to joining the euro, according to the European Commission's president.

Jose Manuel Barroso told French radio that British politicians were considering the move because of the effects of the global credit crunch.

Lord Mandelson said at the weekend that "our aim" should be to join the single currency - but Downing Street said its position on the euro remained the same.

In 1997 Gordon Brown, seen as less keen on the euro than Tony Blair, set five economic tests which had to be met before ministers would recommend UK euro entry and holding a referendum.

The key test is whether the UK economy is coming together with those of countries in the eurozone and whether this can be sustained in the long-term. The second test, linked to this, is whether there is sufficient flexibility to cope with economic change.

The remaining three tests assess the impact of joining the euro on jobs, foreign investment and the financial services industry.

Opinion polls have suggested that any vote on scrapping the pound and adopting the euro would be lost, and in the UK the currency has not been a significant political issue for years.

In his interview Mr Barroso acknowledged "the majority" of British people continued to oppose joining the eurozone.

But he said the recent economic uncertainty had made the currency a far more attractive option.

In the RTL radio/LCI television broadcast, the former prime minister of Portugal said: "We are now closer than ever before.

"I'm not going to break the confidentiality of certain conversations, but some British politicians have already told me, 'If we had the euro, we would have been better off'."

He said the current poor economic situation had emphasised the importance of the euro and the UK, but added he believed a move would not take place in the immediate future.

"I know that the majority in Britain are still opposed, but there is a period of consideration under way and the people who matter in Britain are currently thinking about it," he said.

The value of sterling compared with other currencies has fallen during the credit crunch, and the UK government has had to spend massively in recent months to try to support the economy.

During the interview, Mr Barroso highlighted the situation in Denmark - an EU state which voted against joining the eurozone in 2000, but is now considering holding a new referendum on the single currency.

In the daily Brussels briefing later an EC spokesman said "member states would benefit from a country like Britain being in the euro".

He said the euro could be "an anchor of stability in troubled times... the advantages are very clear".

He added that Mr Barroso's comments were "reflections" and added: "The British are very pragmatic. When they feel it is right to join the euro, they will join the euro."

A Downing Street spokesman said: "We have no comment on this. Our position on the euro is the same - it has not changed."

Business Secretary Lord Mandelson, a former European Commissioner, told Labour's Progress conference on Saturday: "I hold to the view that our aim, our goal, should be to enter the single currency."

He added that the government was "obviously not going to take on that challenge" in the current economic climate.

Shadow foreign secretary William Hague said: "It is extraordinary that certain politicians are whispering to the EU Commission about joining the euro behind the British people's backs.

"Keeping the pound is vital for Britain's economic future. We need interest rates that are right for Britain, not the rest of Europe. There are no circumstances in which the next Conservative government will propose joining the euro.

"If Labour ministers still want to get Britain into the euro they should come out and say so. We will be putting questions to the government to find out what conversations have been going on."

The leader of the UK Independence Party, Nigel Farage, said "the people who matter in Britain are the people, not the professional political class that Barroso is himself a member of".

The DM says: European Union leaders will never stop trying to get us to join the Euro. Inside the Euro we'd have a nice safe haven, just like the Irish - see below. The irish Finance Minister has blamed his countriy's economic problems on the Euro. If we Keep the Pound, we can set interest rates to suit the British economy, not the European one.

Irish house of cards comes down

A drop in building work has meant fewer customers for Dave's cafe
As the bacon rind turns a crispy brown colour, Dave Jones gives it a generous extra splash of oil.

The food at the Smithstown Diner, a small roadside cafe near Drogheda, is high on grease - the builders who come here like it that way. But lately business has dropped.

"It used to be really hectic in here. Now look," he says, gesturing at rows of empty plastic seats.

The Smithstown is popular with what the Irish call "breakfast roll man," building workers in white vans. This morning, there are just two.

"Times are hard, a lot of boys are being let go," says 40-year-old Robert Daley, who runs an aluminium fitting business.

"We do mainly big projects - developments of shops, offices and flats," he says. "We're just finishing one, so we're busy at the moment but there's nothing else coming up."

"We're really feeling the pinch for the first time, because you know there's nothing else out there.

"In the worst scenario I could go to England - but it's pretty quiet over there too."

Tony is not the only person in Drogheda talking about working abroad. A number of people mention Australia as a possible destination.

The Irish thought their Celtic Tiger economy had put an end to generations of emigration. It is not back yet, but the fact that people are talking about it again is a sign of how bad things have got.

Ireland is the first country in western Europe to officially fall into recession, defined as two consecutive quarters of negative economic growth.

During the unprecedented boom years, the population here grew by a third. Now, it is an unemployment black-spot - ringed by new developments with empty, unsold houses.

Giles Belton has been an estate agent here for 20 years. He took me to the Termon Abbey estate to show me the problem.

"This is quite typical of any of the new estates that have been built in the Drogheda area," he says.

"At the height of the market these properties were selling exceptionally well. A lot of people were buying second, and third, and fourth houses. There were record breaking prices."

The property collapse has combined with the global financial crisis to create what some see as a perfect storm hitting Ireland's banks - whose loan books are groaning with property-related debt.

Earlier in October, the government announced a scheme to guarantee deposits in the banks to prevent a run.

Now, Dublin is buzzing with speculation that this will not be enough - and that a British-style buy-out of top banks will be needed.

It is estimated that Irish banks need an additional 10 to 14bn euros and that some may have to merge.

Shares in the top four banks have tumbled, but at a banking conference in Dublin this week Finance Minister Brian Lenihan insisted that buying stakes in the banks was "the last option".

Last week it unveiled its biggest budget deficit in 20 years - despite the budget including tax rises and cuts in spending on education and health.

The latter included cuts in free health provision for the over 70s, and brought a huge revolt by backbench Fianna Fail MPs that led to a partial, but nonetheless humiliating, climb-down by the government.

Prime Minister Brian Cowen had his authority undermined - looking shocked and angry in parliamentary exchanges.

Taunted for being "cruel and callous" by the opposition, he shouted back: "You call me callous - call me any names you like. I'll continue to provide leadership in the solution of problems".

But the following day, despite the U-turn, 15,000 pensioners converged on parliament in a day of protest.

According to Ray Kinsella, professor of banking at University College Dublin, it shows that "the financial crisis can and does morph into an economic crisis".

"The ability to fund public services is undermined. The government have had to introduce a budget to cope with this astonishing turnaround, and we haven't had to do anything like this for a generation," he says.

The buskers in Drogheda know this. They line the high street, but do not have many coins in their hats.

Local senator Dominic Hannagan, from the opposition Labour Party, says the crisis does have international roots, but that the government is also to blame.

"The government relied far too heavily on the building trade. So when credit became difficult to get, when mortgage rates went up, that area suffered most. Because our economy was so heavily dependent on building, we suffered.

"We've been telling the government to diversify the economy for years. They didn't, and now we're suffering."

"That ruling elite would love to bounce us into the euro and will grasp at any straw to do so, for it's a step on the way to their dream and our nightmare, a federal superstate.

"We're told that some British politicians have said 'If we had the euro, we would have been better off'. Whoever these people are we need to hunt them down and explain some simple economics to them."

He added that if Mr Barroso wanted to test the mood in Britain "then he can call for a referendum on both the euro and the Lisbon Treaty so that the people of Britain can tell him where to go".

Britain should join euro says Hong Kong's Tsang

By Ambrose Evans-Pritchard, International Business Editor, Telegraph, 27 Nov 2008

Britain's efforts to hold on to sterling are doomed to failure in a global economy dominated by powerful currency blocs, said Hong Kong's leader Donald Tsang.

Tsang, an elder statesman of Asian finance, said open trading states must adapt to the realities of modern finance.

"I do not believe in the sustainability of a small floating currency. Look at the pound, it's being attacked," he said in interview with the Daily Telegraph.

"The euro is a good move. People have to abide by the Maastricht criteria, so it imposes discipline. Other options are less palatable if you really want to become a big strong economic union."

Mr Tsang, the chief Executive of the Hong Kong Special Administrative Region of the People's Republic of China, is a veteran of East Asia's currency crisis of the late 1990s and the SARS epidemic. As a Beijing loyalist, he offers clues into the current thinking of the Chinese leadership. His comments on sterling are a warning sign that China may ultimately prove reluctant to buy large amounts of UK Treasury debt in the future.

Mr Tsang, as always wearing his signature bow tie, said it will be impossible for the Far East to launch its own currency union until China makes the renminbi convertible. This is not yet remotely on the agenda.

"We have to mark our time. One thing is clear, this is not something you can impose. You have to work for it, with the market, and back it up with a solid banking system," he said.

The DM says: Here we go again. The credit crunch is the latest excuse for calling for the UK to join the Euro. Bank of England Governor Eddie Georg e called the idea of sterling in the Euro "The elephant in the rowing boat" - a large currency that would destabilise the Euro and eventually cause it to sink. Much better for it to sink without us.

Will Europe impose exchange controls to head off disaster?

Posted By: Ambrose Evans-Pritchard, Daily Telegraph Nov 23, 2007. Posted in: Business

The die is now cast. As the euro brushes $1.50 against the dollar, it is already too late to stop the eurozone hurtling into a full-fledged economic and political crisis. We now have to start asking whether the EU itself will survive in its current form.

It takes eighteen months or so for the full effects of currency changes to feed through, so the damage will snowball late next year and beyond into 2009. Although "damage" is a relative term.

As Airbus chief Thomas Enders warned in a speech to the Hamburg workers last night, Europe's champion plane-maker - the symbol of European unification, in the words or ex-French president Jacques Chirac -- is now facing a "life-threatening" crisis.

Mr Enders said the company's business model is "no longer viable", and "massive losses" are on the horizon. So much for all those currency hedges that analysts like to cite. Have they ever tried to buy a currency hedge? They would discover how expensive these instruments are. Hedges cannot protect a company with $220bn in delivery contracts priced in dollars, when the euro/sterling cost-base is leaping into the stratosphere.

Will the Euro Collapse?

The sudden rocketing in sovereign bond spreads this week between core German Bunds and Club Med debt - Italian, French, Spanish, Portuguese, Greek, as well as Irish, Belgian and Slovenian - is a clear sign that markets are starting to price in a break-up risk for the single currency, however remote. Italian spreads have risen beyond the danger point of 40 basis points. This is less than the 100bp or so seen in Quebec (viz Ontario debt) when it looked as if the separatists might prevail. But it is dangerous nevertheless.

Moreover, these bond spreads are telling us that liquidity is drying up and that monetary policy is now too tight for the eurozone, as it is across much of the developed world. Two-year bond yields are collapsing in the US, Britain, and the Anglo-Saxon states, a signal that markets are now discounting possible recession. The whole central banking fraternity seems behind the curve, spooked by residual (lagging) inflation - and prisoners of a defective economic model (Neoclassical/New Keynesian synthesis). This is how the 1930 recession metastasized, although one doubts that Ben Bernanke will allow Part II to unfold this time. He has spent half his life studying the blunders of the Fed in 1930-1932.

One thing is sure, President Nicolas Sarkozy will not let Airbus go bankrupt, nor see decimation of the French industrial core, without an almighty fight against those countries deemed to be engaging in a beggar-thy-neighbour strategy of currency devaluation - benign neglect in Washington, less benign in Beijing.

He will have allies soon enough, once the housing bubbles collapse in Spain and across the Med. Mr Zapatero will not be in power for long in Madrid. Mr Prodi is on borrowed time in Rome. A new political order will soon take hold in much of Europe, bringing in a new wave of prickly national populists.

So, how will they fight? Will Mr Sarkozy and his allies resort to 1970s-style exchange controls to stem the rise of the euro?

They certainly have the power to do so. Four years ago a little-known cellule at the European Commission wrote a report - on prompting from Paris - exploring the legal basis for measures to stabilize the currency.

After combing through the EU treaties and court judgments, it concluded that Brussels may impose "quantitative restrictions" on capital inflows.

"Should extremely disturbing capital movements endanger the operation of economic and monetary union, Article 59 EC provides for the possibility to adopt restrictive measures for a period not exceeding six months," it says.

It would be renewable each six months, so the policy would in fact become permanent.

Any decision would be taken by EU finance ministers under qualified majority voting. Britain would have no veto, even though the effects of such a move on the City of London would be catastrophic - and trigger the certain withdrawal of Britain from the EU (and good riddance, some might say in Paris).

This "disturbing" capital movement is occurring right now. Portfolio inflows into the eurozone reached a record EUR46.2bn in September. China, Asian wealth funds, Petrodollar sheikdoms, and now even Nigeria, have all joined a stampede into euros, utterly disregarding the underlying reality that Europe is in no better shape the United States itself. It is in worse shape, though this is disguised by the cycle. It is much worse in terms of economic dynamism and demographics.

Confidence has cratered in Germany, and the Netherlands, not to mention Belgium - which has not had a government for 165 days, and is now sliding towards disintegration. Since Belgium is a metaphor for the EU - an arranged marriage of squabbling tribes, speaking different languages, who do not love each other, and never did - this in itself amounts to a tremor for the EU system.

EU industrial orders fell 1.6pc in September. Spanish, French, South Italian, and Irish house prices are already all falling.

Spreads on the iTraxx financial index of 25 European bank and insurance bonds have jumped to a fresh record, worse than during the depths of the August crunch. The iTraxx Crossover of low-grade corporates is back to crisis levels above 400.

The European Covered Bond Council suspended trading in covered bonds this week because the spike in spreads had become disorderly, and three-month Euribor rates have gone through the roof again, and that is the rate that sets Spanish and Irish mortgages. Bond issuance in Europe is frozen.

France is in the grip of a national strike costing EUR2bn a day. The railways are paralyzed. The country's 5.2m public workers are staging walk-outs.

Is this a currency bloc that should be now be deemed the ultimate safe-haven, the repository of trust in a dangerous economic world? This hodge-podge of disputatious clans, lacking a central Treasury, government, debt union, and guiding philosophy - let alone the sacred solidarity of a nation?

Returning to the Commission cellule, it said that: "Among the actions that can be undertaken when a member state experiences serious balance of payments difficulties, Articles 119 and 120 EC provide for the possibility to reintroduce 'quantitative protective measures' against third countries."

The measures are of course exchange controls. This is the nuclear option, but Europe's politicians could equally invoke Article 104 of the Maastricht Treaty giving politicians the power to set fixed exchange rates (by unanimous vote) or a dirty float for the euro (by majority).

The document is annexed to the Commission's 2003 EU Economic Review. Nobody paid any attention at the time, just as the Commission had hoped - at least that is what one of the authors told me. This is the EU's Monnet Method, one silent fait accompli after another.

French President Nicolas Sarkozy certainly seems inclined to go this route. He has again invoked his ideas for "Community Preference" - ie, a closed trade bloc - in a speech this month to the European Parliament. Contrary to claims, he is not letting go of his mercantilist plans.

The ECB may or may not intervene in the currency markets to cap the euro. But this is a red herring. Europe's retort - if and when it comes - will be far more political, and far more dramatic. We are at one of History's "inflexion points".

One recalls the months leading up to the collapse of the Gold Standard in 1931. That was triggered first by Credit Anstalt in Austria and then by a British naval mutiny in Scotland.

Any bets on what will trigger the collapse of Bretton Woods II? I wager that it will be a decision by the Gulf states to break their dollar pegs, leading to a temporary surge of euro purchases. That will tip Mr Sarkozy over the edge.

The DM says: Some commentators are starting to argue that the Euro would be a safe haven for Britain in the current crisis. They never give up.

Germany gives chilly welcome to EU calls for €200bn fiscal boost

European Union plans for a €200bn (£165bn) fiscal boost to head off a severe recession have already begun to unravel as Germany and other Northern states dig in their heels over extra spending.

By Ambrose Evans-Pritchard, Daily Telegraph Business, 26 Nov 2008

Jose Manuel Barroso, the European Commission's president, said Europe is facing an "exceptional crisis" that calls for unprecedented measures. "If we do not act now, we risk a vicious recessionary cycle of falling purchasing power and tax revenues, rising unemployment and ever wider budget deficits," he said.

The package is worth 1.5pc of GDP of Europe's GDP, exceeding the 1pc plan unveiled by Britain's Chancellor Alistair Darling this week. It includes €30bn of direct spending by the EU's own institutions, amounting to a significant step towards the creation of an "EU treasury".

European Union Plans

Under the proposals - to be submitted to EU leaders next month - each country can choose its own mix of tax cuts and extra spending. Mr Barroso said those countries with budgets in good health - chiefly Germany, the Netherlands, and Scandinavian states - will be expected to make a "much bigger offer" in terms of overall stimulus than they have provided so far. "Those that used the good times to achieve stable public finances have most room for manoeuvre," he said.

German Chancellor Angela Merkel poured cold water on the plans yesterday and insisted that Berlin would not follow Britain's lead in cutting VAT. "We should not get into a race for billions. Germany is very strong," she said.

Berlin has dragged its feet over the calls for a fiscal boost, sticking to orthodoxy despite a blizzard of dire data. The economy is already in recession and may face the worst slump next year since 1949, according to the Bundesbank. Most of the Germany's €50bn "stimulus" comes from the private sector.

The slow response reflects scepticism in Germany over the value of Keynesian spending plans, but it has nevertheless caused heated debate in Germany itself. "The government still fails to understand the gravity of the situation," said Gesinde Lotzsch from the Left Party.

Volkswagen is mulling plans to shut its main plant at Wolfsburg for three weeks before Christmas, suspending 16,000 workers. "We have never before seen this type of crisis, " said Martin Winterkorn, VW's chairman.

BMW is laying off 8,000 workers worldwide. BMW's chairman Norbert Reithofer said his company was facing the "biggest crisis in its history".

Traders said it was disturbing that BMW had to tap the bond markets for €750m last week at a punitive yield of 540 basis points above benchmark lending rates. It is a sign that the firm is struggling to raise money from banks, and may have had to rescue suppliers frozen out of the credit markets entirely.

France is considering a cut on car sales taxes as part of a €19bn package to shore up the country's key industries. Paris is planning to use its firepower in a more focused way than Britain, fearing that a broad VAT cut will do little to nurse vital productive plant through the crisis.

Mr Barroso said the stimulus should be "targeted, timely and temporary". The `exceptional circumstances' clause of the Maastricht treaty has been invoked to permit states to breach the limit of 3pc of GDP on budget deficits -- up to a point -- creating leeway for Italy, France, and other countries pressing up against the barrier.

This will not lets Britain off the hook given that the UK deficit will soon spiral up to 8pc - the worst in the developed world.

"The measures member states are introducing should not be identical, but they need to be co-ordinated. It would be a complete mistake for the Commission to propose a harmonised response while there are different points of departure," said Barroso.

The plan includes €5bn for "green" cars from the European Investment Bank, the EU's project arm. The EIB is already the world's biggest multilateral lender. It will now expand its annual borrowing from €55bn to €70bn , even though it has already seen a sharp rise in its "Watchlist" of problem loans.

Crucially, Brussels is using a plethora of EU bodies to spread money around, in effect using these institutions for the first time as a tool for managing the economic cycle. This is a major new departure. The commission issued a €2bn bond under its own authority for the first time this week - using its Macro-Financial Assistance (MFA) programme.

It is clear that Brussels is now taking advantage of the crisis to greatly extend its role in macroeconomic policy, a shift that is likely to raise eyebrows in eurosceptic circles.

The DM says: The European Union is not yet the country it aspires to be, but it keeps trying.

France demands £7bn EU farm subsidies before talks begin

EXCLUSIVE: France is preparing to "stitch up" Britain by blackmailing the European Union into guaranteeing farm subsidies worth more than £7 billion a year.

By Bruno Waterfield in Brussels; Daily Telegraph 25 Nov 2008

President Sarkozy, who has bitterly attacked plans to cut Europe's farm spending, has summoned EU agriculture ministers to a special meeting to discuss 'the future of the Common Agriculture Policy' Photo: AFTP/ GETTY IMAGES
Restricted documents seen by The Daily Telegraph, show Paris will demand subsidies to French farmers are protected before agreeing to allow global free trade talks to take place next month.

The development threatens to break promises made three years ago when the former Prime Minister Tony Blair gave up a chunk of Britain's annual rebate from Brussels on the understanding there would be a cut in farm subsidies after 2013.

The recent meeting of G20 leaders called on the EU to come to a quick agreement on World Trade Organisation negotiations aimed at cutting farm subsidies and dismantling import barriers.

But diplomats say France, which currently holds the EU's rotating presidency, is using its position to hold the EU to ransom by linking protection for French farmers to the reopening of talks.

President Sarkozy, who has bitterly attacked plans to cut Europe's farm spending "while 800 million people are dying of hunger", has summoned EU agriculture ministers to a special meeting on Friday to discuss "the future of the Common Agriculture Policy" (CAP).

According to officials and diplomats, France is planning to take the issue to a summit of European leaders in 16 days time, even threatening to call heads of government back off their Christmas holidays on Dec 29 unless agreement is reached.

"It is a pretty transparent attempt to stitch up the CAP so France can carry on subsidising food and farms," said one diplomat. "It is alarming how much support the French have."

A classified internal French document praises the CAP as a "strategic asset" based on principles laid down in the Treaty of Rome over 50 years ago.

It goes on to urge that it should be continued beyond 2013, the date when a new five year EU budget period begins.

"It is necessary for the EU to continue to have after 2013 a common and sufficiently ambitious agricultural policy," state "draft Council conclusions".

By seeking agreement "on the CAP after 2013", France appears to be trying to ring-fence its lion's share of annual EU farm budgets worth £42 billion, spending that costs the average British household £322 a year.

Jim Paice MP, Conservative spokesman for agriculture and rural affairs, said: "When Blair gave up rebates worth £7 billion in 2005 it was on the basis that there would be substantial reform of the CAP."

British, Dutch and officials from other countries committed to CAP reform are particularly concerned that the French paper insists on retaining Brussels jargon such as "Community preference" and "market stabilisation".

This is wording that will preserve favouritism, price and production subsidies for EU farm products over agriculture imports from the developing world, trade barriers a new WTO deal aims to end.

Alarm bells have also rung over a demand for the EU to guarantee "the wholesomeness of its products for consumers by promoting ambitious health standards both inside and outside the Union".

This move and the language used is widely regarded as spelling a new form of protectionism that will limit imports by demanding that non-European food producers in Latin America, Asia or Africa abide by all the EU's health, environment, workplace and animal rules before food can be exported.

To get the measures through, Mr Sarkozy will need to win over the German Chancellor Angela Merkel who he met with yesterday.

In 2002, the former French President Jacques Chirac did a deal with Chancellor Merkel's predecessor, Gerhard Schröder to maintain the high levels of CAP spending.

Six years later, amid a recession, say diplomats, Germany, the EU largest economy and budget contributor, is not enthusiastic about guaranteeing subsidies that benefit French farmers.

The DM says: Back to business as usual at the European Union. These people are not our friends and allies - why do we let them rule us?

Irish Economy: Lenihan says mini-Budget may be necessary - Euro was major cause of Irish housing bubble

The Minister for Finance Brian Lenihan, warned on Tuesday that further cuts in public spending and tax increases may be necessary to get the Exchequer's Budget deficit under control. He conceded that what in effect would be a mini-Budget, is likely and he said that membership of the Euro system was the major cause of the Irish housing bubble.

Lenihan was in Brussels for a Eurogroup finance ministers' meeting, which coincided with the an announcement from the European Commission, that it would trigger a deficit procedure against Ireland for breaching the 3% of GDP (Gross Domestic Product) annual deficit limit.

EU Economy and Monetary Affairs Commissioner Joaquín Almunia, said that he had began the deficit procedure against Ireland because its budget deficit is expected to hit 5.5% this year and 6.5% in 2009.

Almunia said that Ireland's public finance position had "deteriorated very, very rapidly."

"There has been a very rapid deterioration in the Irish economy in the last year and the Commission have acknowledged that they have been taken by surprise by the rapidity of the deterioration. So you can't lay that at the door of the Government," said Lenihan when asked if Government policy was to blame for the housing bubble and the recession.

ITV Tonight Programme; 20 October 09

ITV's Tonight programme, hosted by Sir Trevor McDonald, staged an EU referendum in Luton, North London. Three thousand local residents voted 'Yes' or 'No' to the Lisbon Treaty, and whether to stay in or come out of the EU. The Democracy Movement' Marc Glendening led the 'No' side.

63% said they would vote against the Lisbon Treaty, with 27% in favour. 54% voted to leave the EU, with 35% voting to stay in. No wonder the politicians are against referendums.

According to ITV, 3.1 million people watched the programme - tremendous publicity for the case against today's EU. The result reflects major disatisfaction not just with the prospect of further decision-making being passed to the EU but also with the extent of the EU's current powers, its costs and the damaging effects of its activities.

There was a particularly notable contribution to the debate by Eddie Izzard, who said: "There is a chance for the whole world to work if the EU can work, then everyone can have jobs and security, and we won't have poor people. The EU is the future of human beings." It's difficult to know whether to laugh or cry.

The financial crisis could be the euro's death knell ... and even end the shambolic EU

At the very moment when Europe's banking system is teetering on the edge of collapse and national economies are in freefall, we might, perhaps, have expected the EU finally to live up to its more grandiose pretensions as the ' government of Europe'.

Yet what have we seen by way of the EU's response to what is undoubtedly the most testing crisis in its history? A few perfunctory fine words and empty gestures - and then the national leaders flapping off like so many headless chickens to pursue their own national interests, regardless of all those laws and principles which in easier times they were apparently so happy to sign up to.

Irrelevance of the Euro

Shambles: The EU members engage in more pointless talk. The shoddy body is riddled with corruption, red tape and national self-interest
The truth is that this massive banking crisis has exposed the hollowness, the impotence and the hypocrisy of the European Union like nothing before in its history. This present emergency is the first real ordeal that the euro - that supposed symbol of European economic unity - has had to face as a major international currency.

Yet, without a central united government to give it proper political clout, it has seemed strangely irrelevant to a financial meltdown that has seen all the 13 countries which use it more concerned about their own national economies than a supranational currency.

The fact is that when a crisis occurs, we are all concerned about our own nation - not our neighbours. But what is doubly worrying about the EU in the current crisis is not just the questions it raises over the single currency, but the spectacular inability of the whole creaking edifice to respond in any meaningful way.

First, last week, we saw Nicolas Sarkozy of France, as the EU's acting president, calling for an EU-sponsored bail-out of its banks, in pale emulation of the attempted bail-out of the U.S. banking system which was dominating the world's headlines - an empty political gesture which melted away almost as soon as he had proposed it.

Then we saw the Irish government, faced with the imminent collapse of its own major banks, pledging a 100 per cent state-backed guarantee of all customers' deposits. This was in flagrant breach of EU law, but it just happened that the Brussels commissioner in charge of financial services was Charlie McCreevy, an Irishman who cheerfully observed that he could see no problems with his country's scheme.

On Saturday, President Sarkozy invited Chancellor Angela Merkel of Germany, Prime Minister Silvio Berlusconi of Italy and Gordon Brown to Paris for an 'emergency summit' to discuss the crisis. 'It is of the essence,' said Mr Sarkozy, 'that Europe should exist and respond with one voice.'
This, in itself, was odd enough. Why were only these four governments represented - along with the president of the European Central Bank, the man in charge of the euro? What about the leaders of the other 23 countries making up the EU, many of whom were deeply disturbed at being excluded from this cosy get-together?

European Union Impotence

It was far from clear that anything emerged from Mr Sarkozy's summit other than their alarm at the precedent set by the Irish government in guaranteeing those bank deposits, which had already led to a drain of billions of pounds into Irish banks from countries which did not offer their customers such protection. And what happened next, when Chancellor Merkel scurried back to Berlin to find the German banking system on the edge of its own meltdown?

First, she shocked her EU colleagues by appearing to offer an Irish-style guarantee to all the customers of Germany's banks. Then, as Denmark and Austria jumped to follow suit, it emerged that Mrs Merkel was backtracking on her proposal. Chaos swiftly descended into farce.
So what on earth is going on? What does all this shambles tell us about the EU, the whole point of which was to set up a supranational government designed to allow Europe to speak with 'one voice' and armed with a mass of laws and treaties to ensure that nation states could no longer operate on their own to pursue their own selfish national interests?

The contrast has already been drawn between what we saw in America last week when day after day, amid the full glare of publicity, Congress agonised over whether or not it should pass that famous bail-out Bill. At least that was democracy visibly in action, as senators and congressmen were besieged by their constituents urging them to vote one way or the other.

All we could offer in Europe was the spectacle of four national leaders briefly huddled together behind closed doors in Paris, without even a proper communique to tell us what they had discussed.

As every day passes, it becomes ever more obvious not just that the much-vaunted 'European monetary union' system is wholly incapable of providing any solution to this crisis, but that the crisis might itself be the trigger to the cracking apart of the entire structure.

Astonishingly, it was only yesterday, when the EU's 27 finance ministers gathered for an emergency meeting in Luxembourg, that we saw the EU's first concerted attempt to respond to the crisis. And top of their agenda was a little-noticed issue which has put the EU in the hot seat as not so much a potential saviour but as having been itself a major contributory cause of the crisis in the first place.

Right at the heart of the paralysis which has gripped the banking systems of the Western world has been a new set of rules which came into force last year, drastically tightening up on the ability of banks to lend to each other - the very lifeblood of the banking system. It is this freezing of liquidity which more than anything has triggered the present crisis, as has been widely recognised in America, which is why last week's Congressional Bill approved the suspension of the rules which are creating so much havoc.

European Union Bureaucracy to the Rescue

But what did the EU ministers in Luxembourg agree yesterday? Well, they, too, agreed it was a top priority that these disastrous new rules should be suspended. But that is not enough to mean they will be suspended. No. First, the ministers' proposals will have to win the agreement of the full European Council when it meets next week and then they will have to go through all the tortuous procedures involved in changing the directives by which the new rules were made the law of the EU. The whole process could take months and meanwhile economies are collapsing.

While every other nation is free to pursue its own agenda, it seems that we are at the mercy of a secretive, cumbersomely bureaucratic system of government which is wholly incapable of mounting a flexible, effective response to the challenge. Those countries most passionate about creating a 'United States of Europe' established the euro ten years ago as the supreme symbol of their desire to weld Europe together in full 'economic and monetary union'.

As we face a crisis as serious as most of us have seen in our lifetimes, it might not be just the euro which falls apart, but that entire over-ambitious experiment in supranational government which the EU represents. Our banks might be tottering, but it might eventually be the EU itself which falls.

Financial Crisis: Where were you when Europe's leaders had their cosy little chat?

According to Nicolas Sarkozy, the leaders of the Big Four countries of Europe are "united" on the need to call all the leading nations of the globe together to "create a new financial world". Well, modesty has never been a big feature of European Union rhetoric. Mr Sarkozy's great world summit is to include, in addition to the G8, China, India, South Africa, Brazil and Mexico.

This enormous gathering, encompassing countries with wildly differing economic conditions and directly conflicting competitive goals, is somehow to reach agreement on the creation of a New Financial World, even though the Big Four of the EU were unable to agree on anything last weekend except an emergency slush fund (to be dispensed by, and accountable to, whom?) and the need to call another meeting.

They could not even agree in Paris on a bail-out package similar to the one that had just been approved in Washington, and the closest they got to co-operation on a new regulatory system for banks was Gordon Brown's proposal for something called a "college of regulators" - which, if it ever saw the light of day, would surely be one more job creation scheme for well-fed Eurocrats.

EU Voters Ignored

And the leaders of Britain, France, Germany and Italy managed to achieve this stupendous failure to agree on anything much at all without even the hindrance that faced the US Congress: the manifest and noisy involvement of the electorate.

Where were you and I during last weekend's Grand Day Out for the EU leaders? Who was listening to our views and arguments about the future of our savings and our investments, our employment prospects and our security?

If the dear leaders had managed to carve out a deal that determined the financial possibilities and constraints of every citizen of their respective countries, what power would any of us have had to counter it, or even to register our objections?

Where was the channel for public debate to influence their deliberations? In that bloody, partisan struggle that took place in America, which everybody in Europe is so anxious to avoid emulating, there was no question in anybody's mind whose opinion had to be won over before an agreement could be reached: it was the electorate, stupid.

US legislators were simply not prepared to hand over the tax dollars of their furious constituents, who were besieging them with protests, without a damn good fight. (One Congressman reported that his telephone callers were running about "half and half": half of them said "no" and the other half said "hell no".) So in the US they fought themselves to an exhausted standstill and in the end they got a result which may or may not work - but at least it was a course of action.

Even more important, the paralysis was a temporary, constructive phase that eventually guaranteed the complaints and the misgivings of voters would be taken into account. It was ugly and pig-headed, at times it was ludicrous, but it was also magnificent.

And it was all played out in full view of the voters, and the world.
But in Paris, behind closed doors, the negotiations failed (and make no mistake, they did fail) to produce anything of significance without any help from public outrage.

European Economic Union is a Myth

France, Germany, Italy and the UK could not agree on a single course of action because - as Mr Sarkozy effectively admitted in a characteristically irritable press conference performance - they all have different economic circumstances and needs. He described this as having "different cultures", but it adds up to the same thing: France and Germany do not have property-owning traditions that produce house-price booms and busts, the UK population has much greater credit liabilities than the French, etc, etc.
We are very different nations with very different economic habits and there will never be a one-size-fits-all solution to our economic problems. Which is what some of us have been saying all along about the impossibility (and danger) of imposing economic union on disparate countries.

Mercifully, in a crisis, they could all see the impossibility of a unified solution: when the chips were down, they were not actually going to jeopardise their own national economies for the sake of some phantasm called economic union. But that didn't stop them talking a lot of blather about co-operation and joint action.

The joint action they seemed to relish most was the threat of some fiendish punishment for Ireland and Greece who had had the temerity to behave "unco-operatively" by offering guarantees to savers which would have the effect of sucking capital out of the banks of their European partners. Well, whatever next? An elected government puts the needs of its own national economy first in a world crisis.

The EU Four warmed themselves cosily with the prospect of preventing countries from "acting unilaterally" to guarantee bank deposits in a way that would hit their neighbours' economies - only for Germany to do exactly the same thing last night.

And what is meant by acting unilaterally? Engaging in competition so that the would-be investor has a chance to protect himself? Rather than agreeing to plunge over the cliff in collective camaraderie with your neighbour states? Would you as a depositor like to have the option of moving your savings to a safer banking regime or would you prefer a deal to be done on your behalf by the Big Four that might or might not support your home banking industry? You might feel that there are arguments for both these possibilities, but nobody asked you before or during the Paris summit, did they?

European co-operation in this case, as in so many, seems to amount to conspiracy between the political classes of EU countries to prevent individual citizens from making choices that might jeopardise - what? Why, European co-operation, of course - which is a good in itself, even if it works against the interests of the individual or even all the individuals of a nation.

I cannot remember a time when the absurdity of the concept of economic union has been made so demonstrably clear, or when the democratic deficit of the EU - the way it does business with utter disregard for the opinions of its populations - has been so palpable if only by vivid contrast with the awkward, vulgar thrashing out of public policy that characterises the robust mass democracy across the pond.

Within the foreseeable future, we will know which of these governing philosophies was able to produce the economic goods. But if neither of them produces an immediate working solution, I know which one is more likely to have the flexibility and the popular support to adapt and survive.

The DM says: The European Union has never been a democracy. The sooner we leave it the better.

Germany takes hot seat as Europe falls into the abyss

We face extreme danger. Unless there is immediate intervention on every front by all the major powers acting in concert, we risk a disintegration of global finance within days. Nobody will be spared, unless they own gold bars.

Investors will learn today whether the Paulson bail-out - fattened to $850bn (£480bn) by Congress - can begin to halt the death spiral in the credit system. So far, the response looks terrible.

Germany is now in the hot seat. The collapse of a rescue deal for Hypo Real Estate on Saturday threatens a €400bn (£311bn) bankruptcy that nearly matches the Lehman Brothers debacle for sheer scale.

Chancellor Angela Merkel has been forced to pull her head out of the sand, guaranteeing all German savings, a day after she rebuked Ireland for doing much the same thing. Reality intrudes.

During the past week, we have tipped over the edge, into the middle of the abyss. Systemic collapse is in full train. The Netherlands has just rushed through a second, more sweeping nationalisation of Fortis. Ireland and Greece have had to rescue all their banks. Iceland is facing an Argentine denouement.

The US commercial paper market is closed. It shrank $95bn last week, and has lost $208bn in three weeks. The interbank lending market has seized up. There are almost no bids. It is a ghost market. Healthy companies cannot roll over debt. Some will have to sack staff today to stave off default.

As the unflappable Warren Buffett puts it, the credit freeze is “sucking blood” out of the economy. “In my adult lifetime, I don’t think I’ve ever seen people as fearful,” he said.

We are fast approaching the point of no return. The only way out of this calamitous descent is “shock and awe” on a global scale, and even that may not be enough.

Drastic rate cuts would be a good start. Central bankers still paralysed by a misplaced fear of inflation – whether in Europe, Britain, or the US – have become a public menace and should be held to severe account by our democracies. The imminent and massive danger is now self-feeding debt deflation.

The lesson of the 1930s is that any country trying to reflate in isolation will be punished. The crisis will ricochet from one economy to another until every one is crippled. We are seeing it play again in this drama as our leaders fail to rise above their narrow, parochial agendas.

The European Central Bank – which raised rates into the teeth of the crisis in July – has played a shockingly destructive role in this enveloping slump. Its growth predictions this year have been, and still are, delusional. Neglecting its global role, it has vastly complicated the fire-fighting efforts of Washington.

It could have offered “cover” to the US Federal Reserve this spring when Ben Bernanke was forced by events to slash rates to 2pc. It could at least have signalled an end to monetary tightening. That is how an ally ought to behave.

Instead, it stuck maniacally to its Gothic script, with equally unhappy consequences for both sides of the Atlantic, as well as for China, Japan, and India. The euro rocketed yet further, which it turn set off an oil shock as crude metamorphosed into an anti-dollar with leverage.

The ECB policy was self-defeating, even on its own terms. It merely drove headline inflation even higher, while deeper forces of underlying debt deflation pulled the real economies of Germany, Italy, France, and Spain into a recessionary vortex.

Far from offering reassurance, the weekend mini-summit of EU leaders served only to highlight that nobody is in charge of this runaway train. There is still no lender of last resort in euroland. The £12bn stimulus package is risible.

Angela Merkel has revealed her deep limitations. It was she who vetoed French efforts to launch a pan-EU rescue package, suspecting that any lifeboat fund would prove to be Trojan Horse – a way of co-opting German taxpayers into colossal transfers of wealth to Latin Europe.

In that she is right, but it is too late now for dysfunctional EU political games. By demanding that those who caused the damage should pay for it, she crossed the line into caricature, or worse.

Her comments echo word for word the “we’re alright Jack” attitudes of Euro-pols during the first US banking crises in 1930-1931, until the storm hit Europe and the entire cast was swept away by furious electorates, or simply shot. Thankfully, this EU stupidity is at last drawing serious criticism.
“We have to make sure Europe takes its responsibilities, like the US: action must be taken quickly and in a concerted manner,” said IMF chief Dominique Strauss-Kahn.

As for the US itself, it has not yet exhausted its policy arsenal. It can escalate further up the nuclear ladder. The Fed can cut interest rates from 2pc to zero. If that fails, it can let rip with the mass purchase of US debt.
“The US government has a technology, called a printing press,” said Fed chief Ben Bernanke in November 2002. (His helicopter speech).

In extremis, the Treasury/Fed can swoop into any market to shore up asset prices. They can buy Florida property. They can even buy SUV guzzlers from the car lots in Detroit, and mangle them in scrap yards. As Bernanke put it, the Fed can “expand the menu of assets that it buys.”
There is a devilish catch to this ploy, of course. It assumes that foreign creditors will tolerate such action.

Japan entered its Lost Decade as the world’s top creditor, with a vast pool of household savings to cushion the slump. America starts its purge with net external liabilities of $3 trillion, and a savings rate near zero. Foreigners own over half the US Treasury debt, and two thirds of all Fannie, Freddie, and other US agency bonds.

But the risk of a dollar collapse is one for the distant future. Right now the world faces the opposite problem. There is a wild scramble for dollars as a $10 trillion pyramid of global lending based on dollar balance sheets “delevers” with a vengeance.

This is a “short squeeze” on those who have used the dollar for a vast global carry trade. International banks are facing margin calls on their dollar leverage. It is why the Fed is having to provide $1.25 trillion in dollar liquidity for the entire global system, according to estimates by Brad Setser from the Center for Geoeconomic Studies.

The crisis engulfing Europe, Asia and emerging markets, makes life easier for Washington. The United States is becoming a safe-haven again.
The Fed can now hope to pursue monetary stimulus “a l’outrance” without being slapped down by the currency, debt, and commodity markets. Take comfort where you can.

The DM says: The Euro has always been a risky experiment for political reasons - to promote a federal Europe

Financial Crisis: So much for tirades against American greed

Ambrose Evans-Pritchard says it is ironic that European banks have turned out to be deeper in debt than their US counterparts.

It took a weekend to shatter the complacency of German finance minister Peer Steinbrück. Last Thursday he told us that the financial crisis was an "American problem", the fruit of Anglo-Saxon greed and inept regulation that would cost the United States its "superpower status". Pleas from US Treasury Secretary Hank Paulson for a joint US-European rescue plan to halt the downward spiral were rebuffed as unnecessary.

By Monday, Mr Steinbrück was having to orchestrate Germany's biggest bank bail-out, putting together a €35 billion loan package to save Hypo Real Estate. By then Europe was "staring into the abyss," he admitted. Belgium faced worse. It had to nationalise Fortis (with Dutch help), a 300-year-old bastion of Flemish finance, followed a day later by a bail-out for Dexia (with French help).

Within hours they were all trumped by Dublin. The Irish government issued a blanket guarantee of the deposits and debts of its six largest lenders in the most radical bank bail-out since the Scandinavian rescues in the early 1990s. Then France upped the ante with a €300 billion pan-European lifeboat for the banks. The drama has exposed Europe's dark secret for all to see. EU banks took on even more debt leverage than their US counterparts, despite the tirades against ''le capitalisme sauvage'' of the Anglo-Saxons.

We now know that it was French finance minister Christine Lagarde who begged Mr Paulson to save the US insurer AIG last week. AIG had written $300 billion in credit protection for European banks, admitting that it was for "regulatory capital relief rather than risk mitigation". In other words, it was underpinning a disguised extension of credit leverage. Its collapse would have set off a lending crunch across Europe as banking capital sank below water level.

It turns out that European regulators have allowed even greater use of "off-books" chicanery than the Americans. Mr Paulson may have saved Europe.

Most eyes are still on Washington, but the core danger is shifting across the Atlantic. Germany and Italy have been contracting since the spring, with France close behind. They are sliding into a deeper downturn than the US.

The interest spreads on Italian 10-year bonds have jumped to 92 points above German Bunds, a post-EMU high. These spreads are the most closely watched stress barometer for Europe's monetary union. Traders are starting to "price in" an appreciable risk that EMU will break apart.
The European Commission's top economists warned the politicians in the 1990s that the euro might not survive a crisis, at least in its current form. There is no EU treasury or debt union to back it up. The one-size-fits-all regime of interest rates caters badly to the different needs of Club Med and the German bloc.

The euro fathers did not dispute this. But they saw EMU as an instrument to force the pace of political union. They welcomed the idea of a "beneficial crisis". As ex-Commission chief Romano Prodi remarked, it would allow Brussels to break taboos and accelerate the move to a full-fledged EU economic government.

As events now unfold with vertiginous speed, we may find that it destroys the European Union instead. Spain is on the cusp of depression (I use the word to mean a systemic rupture). Unemployment has risen from 8.3 to 11.3 per cent in a year as the property market implodes. Yet the cost of borrowing (Euribor) is going up. You can imagine how the Spanish felt when German-led hawks pushed the European Central Bank into raising interest rates in July.

This may go down as the greatest monetary error of the post-war era. The ECB responded to the external shock of an oil and food spike with anti-inflation overkill, compounding the onset of an accelerating debt deflation that poses a greater danger. Has it committed the classic mistake of central banks, fighting the last war (1970s) instead of the last war but one (1930s)?

After years of acquiescence, the markets have started to ask whether the euro zone has the machinery to launch a Paulson-style rescue in a fast-moving crisis. Who has the authority to take charge? The ECB is not allowed to bail out countries under EU treaty law. The Stability Pact bans the sort of fiscal blitz that has kept America afloat. Yes, treaties can be ignored. But as we are learning, a banking system can implode in less time than it would take for EU ministers to congregate from the far corners of euroland.

France's Christine Lagarde called yesterday for an EU emergency fund. "What happens if a smaller EU country faces the threat of a bank going bankrupt? Perhaps the country doesn't have the means to save the institution. The question of a European safety net arises," she said.
The storyline is evolving much as eurosceptics predicted, yet the final chapter could end either way as the recriminations fly. Germany has already shot down the French idea. The nationalists are digging in their heels in Berlin and Madrid. We are fast approaching the

Euro 'will be dead in five years'

The euro will have broken up before the end of this Parliamentary term, according to the bulk of economists taking part in a wide-ranging economic survey for The Sunday Telegraph.

By Edmund Conway, Telegraph Business, 5 Jun 2010

The survey's findings underline suspicions that the new Chancellor, George Osborne, will have to firefight a full-blown crisis in Britain's biggest trading partner in his first years in office The single currency is in its death throes and may not survive in its current membership for a week, let alone the next five years, according to a selection of responses to the survey – the first major wide-ranging litmus test of economic opinion in the City since the election. The findings underline suspicions that the new Chancellor, George Osborne, will have to firefight a full-blown crisis in Britain's biggest trading partner in his first years in office.

Of the 25 leading City economists who took part in the Telegraph survey, 12 predicted that the euro would not survive in its current form this Parliamentary term, compared with eight who suspected it would. Five declared themselves undecided. The finding is only one of a number of remarkable conclusions, including that:

• The economy will grow by well over a percentage point less next year than the Budget predicted in March.

• The Government will borrow almost £10bn less next year than the Treasury previously forecast, despite this weaker growth.

• Just as many economists think the Bank of England will not raise rates until 2012 or later as think it will lift borrowing costs this year.

But the conclusion on the euro is perhaps the most remarkable finding. A year ago or less, few within the City would have confidently predicted the currency's demise. But the travails of Greece, Spain and Portugal in recent weeks, plus German Chancellor Angela Merkel's acknowledgement that the currency is facing an "existential crisis", have radically shifted opinion.

Two of the eight experts who predicted that the currency would survive said it would do so only at the cost of seeing at least one of its members default on its sovereign debt. Andrew Lilico, chief economist at think tank Policy Exchange, said there was "nearly zero chance" of the euro surviving with its current membership, adding: "Greece will certainly default on its debts, and it is an open question whether Greece will experience some form of revolution or coup – I'd put the likelihood of that over the next five years as around one in four."

Douglas McWilliams of the Centre for Economics and Business Research said the single currency "may not even survive the next week", while David Blanchflower, professor at Dartmouth College and former Bank of England policymaker, added: "The political implications [of euro disintegration] are likely to be far-reaching – Germans are opposed to paying for others and may well quit."

Four of the economists said that despite the wider suspicion that Greece or some of the weaker economies may be forced out of the currency, the most likely country to leave would be Germany.

Peter Warburton of consultancy Economic Perspectives said: "Possibly Germany will leave. Possibly other central and eastern European countries – plus Denmark – will have joined. Possibly, there will be a multi-tier membership of the EU and a mechanism for entering and leaving the single currency. I think the project will survive, but not in its current form."

Tim Congdon of International Monetary Research said: "The eurozone will lose three or four members e_SEnDGreece, Portugal, maybe Ireland e_SEnD and could break up altogether because of the growing friction between France and Germany."

The recent worries about the euro's fate followed the creation last month of a $1 trillion (£691bn) bail-out fund to prevent future collapses. Although the fund boosted confidence initially, investors abandoned the euro after politicians showed reluctance to support it wholeheartedly.

New Open Europe research finds that EU regulation has cost UK economy £124 billion since 1998;

UK laws are on average around 2.5 times more cost effective than EU laws

Open Europe last week published the most comprehensive study to date on the costs of regulation to the UK economy since 1998. Based on over 2,300 of the Government's own impact assessments, Open Europe has found that regulation has cost the UK economy £176 billion since 1998. Of this amount, £124 billion, or 71 percent, had its origin in EU legislation.

The cost of regulation in 2009 stands at £32.8 billion. Of this 59 percent, or £19.3 billion, stems from EU legislation. Since 2005, when the UK Government launched its 'better regulation' agenda, the cost of regulation has doubled - although both the Government and the EU Commission have taken some positive steps to address overly burdensome laws.

The research also estimates the average benefit/cost ratio of EU regulations at 1.02, and UK regulations at 2.35. In other words, for every £1 of cost, EU regulations introduced since 1998 have only delivered £1.02 of benefits, meaning that on average it is 2.5 times more cost effective to regulate nationally than it is to regulate via the EU.

Following the publication of Open Europe's report, some argued that the exercise was futile, because UK and EU laws are not comparable and Whitehall would have regulated some issues anyway in the absence of the EU. (Economist: Charlemagne blog, 31 March)

It is true that the EU often produces regulations, the benefits of which are hard to quantify, such as environmental or health and safety laws. It is also true that the EU and member states sometimes regulate different parts of the economy. However, importantly, there are also a huge number of areas where the EU and UK share power, and where laws are therefore comparable, to a lesser or greater extent.

What's more, the Lisbon Treaty codifies a new category of so-called 'shared competence', further blurring the line between national and EU power, for example in social policy, financial services (via internal market legislation), environment, energy, consumer protection and transport. In these areas, a comparison between UK and EU laws is not only appropriate, but also essential, as one of the central questions when discussing EU policy must always be: at what level of government is it most cost effective and most democratic to legislate?

Crucially, our research reveals that in areas of shared competence, such as environmental policy, financial services and agriculture, EU regulations tend to generate higher costs, relative to the benefits, than UK laws. A discrepancy is not surprising, given that EU laws are one-size-fits all solutions which, by definition, cannot fully account for member states' individual circumstances. In addition, since it is very difficult to change EU laws once they've been agreed - as it requires agreement amongst 27 member states and the European Parliament - these laws can continue to generate heavy and unnecessary costs year after year.

Our research therefore provides further evidence that, when feasible, it is better to legislative as close as possible to the citizen.

Open Europe quote of the fortnight:

"The biggest member state, which has for so long silently been the guarantee of the EU, has now openly expressed that it is no longer prepared to pay any price for European unification. The present Euro crisis is more than a monetary matter. It changes the political rules of the game in Europe."

Brussels can keep its economic governance

Telegraph View: We are facing EU plans that could corrode our economy

26 Mar 2010

Alistair Darling has a habit of presenting blindingly obvious facts as manifestations of his canny insight. He did so again in his Budget speech on Wednesday. "As I have said on many occasions, the world economy is still in a period of great uncertainty," he declared. In the next sentence, however, he said something of genuine importance. He warned us that "in the absence of government action to support the economy, the weakness in some of our overseas markets, particularly Europe, could result in a substantial downward revision of our growth prospects".

Those words "particularly Europe" stand out like a sore thumb this weekend. The day after the Budget, France and Germany demanded sweeping new powers to control the economies of EU states, by giving Herman Van Rompuy, the new European Council President, responsibility for the "economic government of Europe". The ostensible reason for doing so was the economic chaos in the eurozone. But you do not have to be a paid-up Euro-sceptic to suspect that this is an excuse for a federalist power-grab.

The truth is that the bail-out of Greece has raised fundamental questions about the viability of the eurozone and the EU. France and Germany have been persuaded to prop up the single currency, but in return they are demanding an even greater degree of centralisation. And we cannot be confident that the new structures of "government" will be confined to the eurozone. At a time when British politicians should be planning unprecedented cuts to British government spending, to be placed before the British electorate, we are once again being forced to confront EU plans that could potentially corrode our economy and sovereignty.

One thing is clear: we must not rely on our current Prime Minister to lead us through the newly laid minefield of the Franco-German bail-out scheme. On Thursday, European leaders were talking grandly about plans that, translated into plain English, referred to the "economic government" of Europe. On Friday, following protests from Gordon Brown, the word "government" was changed to "governance" in English translations of the summit conclusions. True, the resonances of the two words are different; but they will not make the slightest difference to Mr Van Rompuy, who does not appear to believe in national sovereignty. And, as he pointed out, there has been no change to the French translation, which remains gouvernement.

We do not know to what extent this new structure threatens Britain. Certainly we should yet again breathe a sigh of relief that we held off joining the euro (the best decision of Mr Brown's career, taken despite hysterical cheerleading from Europhiles in Labour and BBC). We cannot be forced to pay directly into a European Monetary Fund that will allow the EU to bail out eurozone countries without having to consult voters. We may even think such a fund is necessary, given that the EU has no mechanism for expelling rogue states from the euro. Bail-outs, however, should be the eurozone's problem, not ours. But it would be naive to assume that Brussels will not try to spread the burden of future bail-outs to countries outside the eurozone. After all, Britain will hand over £6.4 billion to the EU this year, more than twice the figure for last year and mysteriously higher than projected.

William Hague, the shadow foreign secretary, said on Thursday that "talk of economic governance should in no way restrict Britain's ability to determine our own economic policies and the Government should make that absolutely clear". Fine words. But, if the Conservatives win the election, Mr Hague will be the foreign secretary who has to make that clear. How will he do so? We do not know, because we do not know what "economic governance" – or "governance" – really means. What we do know is that our next British government will have no money to subsidise panic-stricken rescue packages for the eurozone.

An ever weaker union

Far from being ready to take on banking regulation, the EU may yet struggle to keep its currency union together.

Telegraph View; 25 Feb 2009

José Manuel Barroso, the European Commission president, has proposed a pan-European regulatory system which would cover the City of London and all other financial centres. He wants to see sweeping changes to how banks, insurers and markets are supervised to apply lessons from the credit crunch. Characteristically, the Commission has simply not caught up with what is happening inside the EU. The member states are not coming together like circling wagons under attack in the Wild West; rather, the Union is fragmenting. The eurozone itself is under threat.

These are not merely the observations of a newspaper that has always been deeply sceptical about the European single currency. The evidence of its unsustainability is growing daily and is causing serious alarm even among the most ardent supporters of the EU. Earlier this week, Jean-Claude Trichet, president of the European Central Bank, conceded that the eurozone is under extreme economic strain. Weaker countries, he admitted, are feeling the pressure of staying within the currency's parameters.

While no one in the eurozone wishes to contemplate it, the possibility is growing that one or more countries will leave, dealing a severe blow to the concept of "ever closer union". Germany, as the eurozone's surplus economy, should be bailing out those in difficulty; but the Germans have made it clear they do not intend to do so. In a gloomy speech to the London School of Economics on Tuesday, Joschka Fischer, the former foreign minister of Germany, said European nations are retreating into their nationalist shells in the face of the crisis. But it was always going to be thus. The euro was conceived when the global economy was booming and its true test was always going to be in a time of want. That time has come.

Greek saga won't kill the euro but the end may begin here

Could the endgame of this Greek tragedy be a eurozone break-up? The single currency's supporters maintain that such an outcome is mere mythology.

By Liam Halligan, Sunday Telegraph, 13 Feb 2010

Greece accounts for only 3pc of the 16 member states' combined GDP, they say, and has lower debts than some of the banks bailed-out during sub-prime. A loan of €20bn (£17.5bn) would do the trick, we're told. That's less than the British government injected into either Lloyds or the Royal Bank of Scotland.

Such analysis sounds vaguely plausible. But its naïve and politically dishonest. Then again, the single currency was built on political dishonesty. That's because, at the heart of the eurozone project there was always a fundamental contradiction – one that the architects of monetary union never dared to address. Now its being highlighted for them, whether they like it or not.

While the European Central Bank controls eurozone interest rates and the money supply, the size of each country's fiscal deficit results from the spending and taxation decisions of its own sovereign government.

How can you enforce collective fiscal discipline in a currency union of individual sovereign states, each answerable to their own electorate? The truthful answer is you can't – not unless you subjugate the autonomy of democratically-elected politicians and, by proxy, their voters.

Voters don't like that. Neither do politicians. Faced with a choice between seriously annoying their own voters and seriously annoying the ECB, the most ardently "pro-European" lawmakers, even those with years of Brussels trough-nuzzling under their belt, will always side with their own. That's why the eurozone will ultimately break-up – whether Greece is bailed out or not.

The eurocrats blame "speculators" for the single currency's woes. That's a bit like sailors blaming the sea. The eurozone is ultimately doomed because, in the end, economic logic wins and the will of each country's electorate bursts through. This current Greek saga won't end the eurozone – but future historians will identify it, perhaps, as the beginning of the end.

Many have said it's hardly surprising that Greece e_SEnD with its history of financial profligacy and capital flight e_SEnD has emerged as the eurozone's Achilles heel. A more germane observation is that, while fiscally wayward, Greece is also the birthplace of democracy. If the Greek population wants to get upset, throw out its elected politicians and reject austerity, it must be allowed to do so. I think they'd be mad, but it must be their choice.

If Berlin and Brussels try to impose their own view on Greece and the "cuts" come from outside, the situation will become absolutely incendiary. Protests will turn into fully-blown riots. Greece will endure very serious social unrest. Deep-seated rivalries and suspicions between countries will be re-ignited. And for what?

Greece is running a budget deficit of 12.7pc of GDP. The real number could be 15pc or more as Greek politicians have lied for years about the extent of their country's liabilities. They're not the first European leaders to do so and they won't be the last. But Greece was, almost uniquely, assisted in its fiscal cover-up by Brussels – with the usual "convergence criteria" being bent to allow Greek euro entry.

As recently as September 2008, the euro seemed to be going well, despite the massive variation between member states. The five-year Greek credit default swap spread was less than 50 basis points. In other words, buying insurance against Greece reneging on its sovereign debt cost only slightly more than insuring German government bonds. Those, such as this columnist, who continued to warn that the eurozone was "dangerous and inherently unstable" were dismissed as cranks, xenophobes or worse.

Then sub-prime hit in earnest. Insuring against Greek default suddenly became a lot more expensive, the CDS spread rising six-fold in eight weeks. The same risk measure is now around 400 basis points, the cost of insuring against Greek default no less than 20 times higher than it was in January 2008. Default risks are growing in Portugal and Spain too, the eurozone's fourth biggest economy.

The problem is that default dangers in Greece – where €20bn of debt falls due in April and May – are making creditors think twice about lending to other cash-strapped governments. Even if Greece avoids default, this latest crisis means governments everywhere will have to pay more for their finance, which in turn will push up borrowing costs for everyone – right across the eurozone and beyond, including in the UK. This is so-called "contagion".

The Greek government has been desperately trying to convince the rest of the world – the Germans in particular – that it will keep its promise to reduce the deficit in its still-shrinking economy to 8.7pc of GDP next year and less than 3pc by 2012. Yet this would amount to the most severe fiscal contraction in the history of modern Europe. It simply won't happen.

The reality is that Greece has two choices – both disastrous for the eurozone. One is to default, leave the euro and re-establish the drachma at a rate low enough to stimulate exports and growth. To write this is heresy. But with general strikes now in the offing, and the Greek public-sector unions resurgent, such a scenario is possible.

For years, the ECB has set rates low to suit France and Germany. This has made life difficult, causing dangerous debt bubbles, in smaller and more inflation-prone eurozone members. Were Greece to take the exit route, the governments of several other single currency members would come under intense pressure to do the same. The eurozone's vital cohesion would be seriously undermined. Its ultimate break-up - or, at least shrinkage to a Franco-German rump - would only be a matter of time.

The other, more likely, option is that Greece accepts a German-led bail-out and "muddles through". But even that would spark an eventual eurozone split. On extending assistance, Berlin and Brussels would talk tough and Greece would promise to behave. Anything less wouldn't be tolerated by German voters. After the horrors of inter-war hyperinflation, Germany has spent more than 50 years building policy credibility. Backing a Greek bail-out would be a massive step – the first time in decades Germany has departed from its fiscal and monetary hard line.

Yet the German government will do it. Refusing to bail-out Greece would risk being labelled "bad Europeans" – something anathema to Germany's post-war elite. Berlin also has a massive financial stake in the euro's status as the world's second most-used reserve currency.

Although Greece will be presented as a one-off e_SEnD a "very exceptional" case e_SEnD once that line has been crossed there is no going back. Other eurozone countries will want a bail-out. Why should Portuguese, Estonian or Spanish workers endure austerity and unemployment, while those in Greece were spared? Why them and not us? If big banks can compete for bail-outs, walking the line of "moral hazard", political leaders will do so too. A Greek rescue by the Germans would spark repeated bail-outs.

In the end, voters in the big eurozone economies, faced with their own fiscal problems will say enough is enough. Europe's monetary union will collapse, just like every other currency union in the history of man. The exception is America – yet the US, as the eurocrats hate to acknowledge, had been through a century and a half of political union before the Federal Reserve was founded in 1913.

That's the key difference. America is a political union, with a system of explicit inter-regional fiscal transfers, and the eurozone isn't. That's why the single currency will ultimately split and be exposed as what it is – a triumph of European hubris and political vanity over unavoidable economic logic.

The Greeks must be rueing the day they whacked the drachma

If Hellenic pride is currently at a low ebb, just wait until the EU steps in, says Boris Johnson.

By Boris Johnson, Telegraph 15 Feb 2010

It was late last night and I was rifling through the sock drawers for euros to fund the annual half-term skiing. There were all sorts of useless coins – Uzbek som, Iraqi dinars, 2d bits – and there it was, like a sudden Proustian blast from our childhood. It was a 50-drachma piece, with Homer on one side and a boat on the other. It was dull and scuffed and technically as worthless as all the other coins in my hoard. But as I turned it over in my hand it seemed to glow like a pirate's doubloon, radioactive with political meaning. This coin was more than just a memento of beach holidays when 50 drachmas was five ice creams. This was the history of Greece in the palm of my hand. When Socrates asked Crito to buy a cock and kill it for Asclepius; when Sappho bought her Lesbian girlfriend a Lydian hat; when his listeners rewarded old, blind Homer for chanting by the fire – how did they all pay?

They paid in drachmas, a currency that served the people of Greece for at least 3,100 years, until they junked it for the euro. And the object I had in my hand, therefore, was a symbol of the economic freedom the Greeks gave away for the sake of national prestige. When they whacked that drach, they thought they were showing a new economic maturity. They thought they were sitting down at the top table. They thought that by merely using the same currency as the Germans they would somehow imbibe Teutonic habits of thrift and fiscal rigour. Or at least that was what they pretended at the time. By fudging their debt figures and adding income from the black market and prostitution on to their GDP the Greeks brilliantly limbo-danced under the Maastricht criteria – and then got on with borrowing and spending in the time-honoured Greek fashion, blissfully protected by euro membership from the penalty of higher interest rates.

By October last year the deficit had risen to 12.7 per cent of GDP, and the gig was up. The free-riding came to an end. It wasn't enough to be a member of the eurozone. The markets stopped believing that the Greeks were good for their $419 billion debts, and they started charging them extra; and the higher the cost of borrowing, the more dreadful the Greek fiscal position became – until people started warning that the Greeks might actually default, and bilk their creditors. And that, more or less, is where we are now – with other European countries wondering how to throw Greece a lifeline without being pulled under.

There are several possible endings, none of them good. The first is that Greece could simply go bust. Athens could come Acropolis, as they say, and the financial tsunami would move into its second phase. Having taken out the weakest of the banks, the short-sellers would take out the weakest of the states that bailed out the banks, with horrific consequences. Onward the tide of destruction would roll, engulfing not just other heavily indebted eurozone countries – Portugal, Italy, Spain: the group now known as "Pigs".

Do not think Britain would escape. How could we, when British banks have such vast loans outstanding to Greece?

Alternatively, the Greeks could take radical action, slashing spending and raising taxes in so fierce a way that the markets were convinced the budget was really being brought under control. Would that work, or would it send the Greek economy into
a further tailspin? Look at the seething mob on the streets of Athens. Could the government of George Papandreou really make such savage cuts? Could any government?

The final possibility – and the most likely – is that there will be some sort of effort to bail out the Greeks, either by the other EU countries or the IMF or a combination of both. Greece will become a kind of Northern Rock, rescued with vast subsidies from elsewhere in order to stop a general collapse of the system. If and when this rescue happens, we will be in new and extraordinary political territory. By scrapping the Maastricht rules against bail-outs, the EU will have set up a hideous moral hazard.

Profligate countries will have an incentive to be profligate, in the knowledge that they stand to be supported by Uncle Sugar in Brussels. Those who have taken huge pain to cut their own deficits – such as the Irish – will wonder why they bothered. Above all, this bail-out will come at a serious political price. It is absurd to expect the Germans to write out a colossal cheque for Greece, without giving Berlin some say over how that money is spent. I am not saying we are going back to 1941, with German gauleiters in the Athenian finance ministry.

I do not say that there will be some vast German towel all over the Greek beach. But already the EU commission is talking about an "economic government of Europe", and be in no doubt what that means. It means diluting the ability of Greek politicians to set tax and spending priorities. It means the end of the myth that you can have monetary without political union; and at a time of growing electoral disillusion, it means a further erosion of democracy.

There is, finally, one option that will not be pursued. Even though it would give them a vital chance to devalue, even though it is the obvious way to regain competitiveness, the Greeks will not leave the euro. For Athens it would be too big a blow to their pride; for the other euro countries, it would be too big a shock for the still-young single currency. My drachmas will remain in the sock drawer, an unused escape hatch and a reminder of the days when Greece was free. What do we feel in Britain, as we watch this Greek tragedy?

We feel the correct Aristotelian emotions of pity and fear. There but for the grace of God goes Britain, which also has a 13 per cent deficit. Every day that this crisis endures we should give thanks that we avoided that awful Procrustean bed of pain. Thank heavens we stayed out of the euro.

Hubris and why chickens are coming home to roost for the euro's deluded cheerleaders

Will the Eurozone still be around in five years' time? With Greece, Italy, Portugal and Spain now suffering a severe financial crisis and with the euro seriously weakening, I think the prospect that it survives in its present form is most unlikely.
Indeed, the single currency looks like weakening further as a result of record levels of short-selling - the controversial system in which traders make a killing by 'selling' euros they don't actually own and buying them back at a later date more cheaply.
The crisis has echoes of 1992, when the financier George Soros made $1 billion by selling sterling and drove the pound out of the ERM.

These four so-called 'Club Med' countries have been finding it desperately hard to borrow. Their effective credit ratings are dire.
Of course, there's nothing novel about the causes. The countries' governments have spent too much and borrowed too heavily. This sort of policy, which Gordon Brown characterises so cheekily as providing economic 'support', can only end in disaster.

Germany and France (the core countries in the 16-member Eurozone) are suitably alarmed. In response to their stern demands, the Greek government has instituted tough plans for a freeze of public pay and a reform of taxes. These proposals have not convinced everyone.
Other Club Med governments hope - and, indeed, believe - that the rich and powerful Germany will somehow foot the bill. However, Berlin yesterday refused to countenance a bailout, albeit for the moment.

An economic crisis and soaring state debt in Greece have resulted in tough government measures, including salary freezes and tax hikes
How this crisis is managed over the next few days is vitally important. Here we have the world's second largest currency in real trouble. A double dip in the recovery from the credit crunch has always been probable, certainly for Britain.
But if a currency the size of the euro is no longer trusted, international markets are likely to prove more unstable. A consequent desire to play safe would then prolong the recession.
For some of us writing at the time of the Eurozone's formation just over a decade ago, the current crisis has been all too predictable. Other currency unions, we pointed out, had been tried in history and always fallen apart.

A particular flaw in having a 'one-size-fits-all' currency covering the rich and the poor, the cautious and the feckless, is that no member nation has its own currency which it can devalue or revalue in an attempt to extricate themselves from this crisis.
At least devaluation would, among other things, provide a breathing space while better financial management was gradually put together.
However, the only way a country could devalue would be if it left the Eurozone. This may sound dramatic, but such a move would be no more drastic in administrative terms than joining in the first place.
But if the four Club Med countries were to break free, or even do no more than just threaten to leave, all sorts of questions would be raised about other fringe members of the Eurozone or those expecting to join.
In other words, the whole United Europe project, aiming at one currency, one financial authority, one set of employment polices and one foreign policy would come under threat.
There are other countries, apart from the Club Med four, which are hovering on the fringe of the Eurozone and for whom the current crisis offers a sudden reality check.
For example, the Danes (who are more sensible than their government) have no enthusiasm for the single currency, but their leaders seem intent to try to end the country's opt-out and launch a new bid join the Eurozone.
Meanwhile, the influence of the Eurozone spreads further, with Montenegro using the currency - even though it is not a member. Estonia, Latvia and Lithuania are supposed to join soon. Poland has expressed an interest.
All these countries will be having second thoughts about becoming members of a system which is now fraying at the edges.
Once, it seemed so attractive to countries' leaders to wrap the strength of a world currency around their nation. But not so now.
Victims of hubris, the Eurozone's original cheerleaders deserve this current crisis. When they began to recruit member countries for the single currency, they laid down a set of basic rules about the soundness of national budgets before they could qualify to join. These were sensible enough.
But in their eagerness for enlargement (as part of their pursuit of a United Europe in which they would be the main voices), the founder members allowed these rules to be broken.
The problems were visible from the outset. For example, neither Greece nor Italy's national finances were in a good enough condition to merit joining. But the greater ideal of a Eurozone prevailed over financial common sense. Economics gave way to politics, as it so often does. Proof, also, that creative accounting is not confined to dodgy public companies.
With the euro now under siege and the financial markets betting heavily that Greece's crushing debt could drag down the existing single currency system, it is possible that the world would actually be a better place without the Eurozone.
Just imagine: the main national currencies would still have their independence and command respect.
Admittedly, Italy and Greece would be suffering financial problems - which would have old sages sighing and saying they never much liked the lira or the drachma anyway, nor perhaps the Spanish peseta. But the rest of the world would get on as best it could.
But by having signed up a basket of dubious currencies, the Eurozone provided a classic example of how the weakness of one nation's finances can spread to another.
Of course, all this makes one wonder what sort of position Britain would be in now had we joined the Eurozone, as almost came to pass.
Tony Blair was keen, but Gordon Brown, warned off by some Treasury studies, argued it was a step too far.
Had we become members, we would have lost our financial independence and would now be under the supervision of the European Central Bank.

If the Eurozone is wilting under its first real test, what does it say about the EU in general? No country has ever left, because politicians believe it gives them a much valued seat at the top table.
This explains why the euro has always been popular with politicians. But EU power has always been in proportion to its apparent economic strength. With that now waning as Europe frantically seeks a way out of its debt crisis, the EU will command less unity and less power.
Countries will divide between those who think that any sacrifice - especially a bail-out from Germany rather than their own drastic belt-tightening - is worthwhile to preserve the system and the great European plan.
Meanwhile, for Britain, membership of the EU has done nothing much more than spawn countless regulations which are part of a grand design to have the same laws, however futile, operating throughout all member countries.
I am convinced that no trade or other agreements have been achieved through EU membership which would not have been achieved through normal inter-government agreements.
By contrast, the costs of our EU membership remain both financially and politically high.
The costs would, of course, be even higher had we joined the Eurozone, as the EU enthusiasts wanted, and which would have meant that we, too, would be now involved in rescuing the Club Med and dreading the markets'

Greece under EU protectorate as funds shift fire to Portugal

The European Commission has ordered Greece to slash public spending and spell out details of its austerity plan within "one month", invoking sweeping new EU Treaty powers to impose a radical shake-up of the Greek economy.

By Ambrose Evans-Pritchard, Telegraph Business,3 Feb 2010

Greece's labour federation immediately called a general strike for February 24, dashing hopes that Europe's provisional backing for Greek crisis policies would restore investor confidence.

Joaquin Almunia, the EU economics commissioner, said tough measures were "extremely urgent" to prevent a further flight from Greek debt. "The huge imbalances from which the Greek economy is suffering are not sustainable in the long run. The fact of the matter is that markets are putting on pressure. This pressure cannot be ignored."

Mr Almunia said concerns have spread beyond Greece to other eurozone countries where public finances are spinning out of control, chiefly Spain and Portugal. "In these countries we have seen a constant loss of competitiveness ever since they joined the eurozone. The external financing needs are quite big," he said.

Yields on 10-year Portuguese bonds jumped 21 basis points yesterday as funds switched their fire to the next "domino", questioning whether the government of Jose Socrates can deliver spending cuts without a parliamentary majority. "The lightning rod has been passed to Portugal: who is next – Spain?" asked Marc Chandler, from Brown Brothers Harriman.

George Papandreou, the Greek premier, has agreed to a rise in fuel taxes and a partial freeze in public wages to stop the country "falling off a cliff". Even this will not be enough to satisfy Brussels – itself under pressure from Germany and the European Central Bank. The EU's hard-line faction is afraid that fiscal discipline will break down altogether across "Club Med" nations unless Greece first suffers public flagellation.

Brussels invoked new EU powers under Article 121 of the Lisbon Treaty, allowing it to reshape the structure of pensions, healthcare, labour markets and private commerce – a step-change in the level of EU intrusion.

The EU told Greece to "spell out the implementation calendar of (budget) measures within one month". Athens must be ready to "adopt additional measures if needed" and to submit quarterly updates.

To cap the humiliation, the EU is taking Greece to court over past falsification of budget figures. "This is the first time we have established such an intense and quasi-permanent system of monitoring," said Mr Almunia. The Greek Left said the measures reduce Greece to an economic protectorate

The gap between what EU demands and what ordinary Greeks seem willing to accept is so wide that it may prove extremely hard for Mr Papandreou carry the country. The top union bloc said the government had "succumbed to the will of the markets" but would now have to face the stronger will of the people.

Samir Patel, from the consultancy BH2, said austerity plans will "almost certainly send Greece into a deflationary spiral", and tip its banking system "into the Mediterranean Sea". Greece is being told to carry out IMF-style retrenchment without the IMF cure of devaluation.

One banker described events as eerily similar to market confusion before the failure of Bear Stearns and Lehman Brothers in 2008, this time involving sovereign states rather than banks. It is assumed that Europe must in the end rescue Greece, but Germany is so far sticking to its "no bail-out" mantra and nobody knows for sure how the drama will end.

The legal and political structure is simply not ready to cope with an escalation of the crisis and the problems spreading to Spain, should that occur. Spain's budget deficit reached 11.4pc last year, and is on a worrying trajectory for a country that has lost so much intra-EMU competitiveness and cannot let the currency take the strain. Spanish bank BBVA shocked markets last week with a 94pc fall in profits, largely due to property losses. Spain's mortgage association said days later that the "real estate sector is bankrupt" and threatened the financial system.

Spain's total public and private debt is over 300pc of GDP, much higher than Greek debt. With unemployment already above 4m – or 4.5m including regional jobless schemes – Madrid will not react well to the sort of austerity imposed on Athens. Fears that the slow fuse on Spain's political crisis may soon detonate a timebomb is creeping into the markets.

The DM says: Presumably the EU has the power to impose similar disciplines on Britain if they consider it necessary and we won't fall into line. I don't recall voting to give them this power - do you?

Should Germany bail out Club Med or leave the euro altogether?

Germany faces a terrible dilemma. Either Europe's paymaster agrees to underwrite a Greek bail-out and drops its vehement opposition to a de facto EU economic government, treasury, and debt union, or the euro will start to unravel, and with it Germany's strategic investment in the post-war order.

By Ambrose Evans-Pritchard, Telegraph Business, 31 Jan 2010

The German cabinet met last week in Berlin. It's not clear whether the different parties will all back a bail-out of Greece
The spike in yields on 10-year Greek bonds to 400 basis points above German Bunds has been shockingly swift – a warning to Britain, too, that markets can suddenly strike any country that takes creditors for granted.

We can argue over whether Greece, Portugal, or Spain are at risk of being forced out of the euro. But there is another nagging question: whether events will cause Germany and its satellites to withdraw, bequeathing the legal carcass of EMU to the Club Med bloc.

This is the only break-up scenario that makes much sense. A German exit would allow Club Med to uphold contracts in euros and devalue with least havoc to internal debt markets. The German bloc would enjoy a windfall gain. The D-Mark II would be stronger. Borrowing costs would fall. The North-South gap in competitiveness could be bridged with less disruption for both sides.

To be sure, Germany is happily placed in the current EMU system. By compressing wages for a decade it has stolen a march on EMU. Critics unfairly call this a beggar-thy-neighbour policy. It is simply the way Lutheran society operates, in deep contrast to the way Latin society operates – a cultural clash that should have given pause for thought before Europe's elites launched headlong into their adventure.

German goods are flooding the South. In the 12 months to November, Germany-Benelux had a current account surplus of $211bn: Spain had a deficit of $82bn, Italy $74bn, France $57bn, and Greece $37bn. German industry will not give up this edge lightly. However, the matter will in the end be decided by democracy. German citizens were given a pledge by their leaders in the 1990s that loss of the D-Mark would not lead to monetary disorder, or leave them liable for Club Med debt. That is the sacred contract of EMU.

"Politically," said Bundesbank chief Axel Weber, "it's not possible to tell voters that they are bailing out another country so that it can avoid painful austerity measures that they themselves have gone through. Such aid, whether conditional, or – even worse – unconditional, is counterproductive."

Dr Weber is right on both counts. Fresh loans for Greece can achieve nothing useful at this stage. Greece already has a public debt hurtling towards 138pc of GDP by 2012 (Standard & Poor's). It is already in a debt compound spiral. The EU elites have yet to acknowledge that Greece and much of Club Med need gifts – not loans – akin to transfers paid to East Germany after unification, or North Italian perma-subsidies to the Mezzogiorno.

Athens has promised to slash the budget deficit by 10pc of GDP over three years, though the country is sliding deeper into slump, faces 20pc unemployment by the year's end, has a tottering banking system, and has already lost control of its streets before spending cuts have even begun. Such a policy is economically self-defeating – since it risks tipping the country into depression, and causing tax revenues to collapse – but will it be tolerated by Greek society?

The Papandreou government has craftily invited the European Commission to set up a vice-regal inspectorate in Athens, to become the focus of popular fury. The media talks of "guardianship". Ta Nea, an Athens newspaper, writes of "ultimatums" and "suffocating deadlines" for wage and pension cuts. "Either we obey the commands of unprecedented austerity and face the risk of widespread social unrest or we refuse to implement the orders."

Spain's troubles are less immediate, but it lost as much competitiveness during the early EMU boom, that debt trap of negative real interest rates. External corporate debt is dangerously high. The budget deficit was 11.3pc of GDP last year. Madrid has drawn up €50bn of cuts to sweeten the markets, even though unemployment is already 19pc. The jobless typically receive 50pc to 60pc of former earnings for around 18 months, then the axe falls. The social distress hits with a lag. How much more tightening can Spain endure before Catalan, Basque, and Galician seperatism rocks the Spanish state?

Fiscal austerity in these circumstances without monetary and exchange stimulus to offer a lifeline is incoherent. These policies must fail because they are based on EU wishful thinking that high-debt nations can regain competitiveness within EMU against a zero-inflation Germany. Such a strategy will drive them into a debt-deflation spiral.

Europe will have to embrace "fiscal federalism" if it is to hold monetary union together. That is when we will probe the limits of EMU solidarity. Hedge funds are betting that Berlin will pay to ensure stability. No doubt Chancellor Angela Merkel is of that mind, but the Free Democrats are not, nor are Bavaria's Social Christians, or the Bundestag's finance committee. Economy minister Rainer Bruderle said last week that there would be "no bail-outs" regardless of risks to EMU. Is that just brinkmanship?

EMU architects were warned in the early 1990s that monetary union would prove unworkable as constructed. They scoffed, sure that any crisis could be exploited to force the pace of economic union. Commission chief Romano Prodi later admitted as much. "The euro will oblige us to introduce a new set of economic policy instruments. It is politically impossible now. But some day there will be a crisis and new instruments will be created."

We will soon learn if this gamble will pay off, or prove catastrophically wrong.

Funds flee Greece as Germany warns of "fatal" eurozone crisis

Germany has triggered a near-panic flight from southern European debt markets by warning that there will be no EU bail-outs, even though it fears the region's economic crisis has turned dangerous and could prove "fatal" for the entire eurozone.

By Ambrose Evans-Pritchard, Telegraph Business, 28 Jan 2010

The yield on 10-year Greek bonds blasted upwards by over 40 basis points to 7.15pc in a day of wild trading. Spreads over German Bunds reached almost four percentage points, by far the highest since Greece joined the euro, and close to levels that risk a self-feeding spiral. Contagion hit Portuguese, Spanish, Irish, and Italian bonds.

George Papandreou, the Greek premier, said in Davos that his country had been singled out as the weak link in a "attack on the eurozone" by speculators and political foes. "We are being targeted, particularly by those with an ulterior motive."

Marc Ostwald, from Monument Securities, said the botched syndication of €8bn (£6.9bn) of Greek debt earlier this week has made matters worse. Many of the investors were "hot money" funds that bought on rumours that China was emerging as a buyer, offering them a chance for quick profit. When the China story was denied by Beijing and Athens, these funds rushed for the exit.

However, a key trigger yesterday was testimony in Germany's parliament by economy minister Rainer Brüderle, who said there would be "no bail-outs" for struggling debtors and no move to a "European economic government".

"A few European nations are exhibiting dangerous weaknesses. That could have fatal consequences for all countries in the eurozone," he said. Despite the warning, he said each country must solve its own problems.

"Germany is not in a mood to be the deep pocket for what they consider profligate, southern neighbours," said hedge fund doyen George Soros.

Mr Brüderle's hard line contradicts a report in Le Monde that Franco-German officials are discussing a rescue for Greece in order to keep the International Monetary Fund at bay.

The paper cited a source saying that EMU partners were ready to "help" Greece. "It is a question of credibility for the eurozone. The IMF might want to impose monetary conditions."

Le Monde's story was shot down by Berlin and Paris, but there is little doubt that certain officials have been trying to build momentum for a rescue. It is clear that the EU family is split on the issue. Jean-Claude Juncker, head of the Eurogroup of finance ministers, backs "assistance", with support of EU integrationists hoping to nudge the EU towards full fiscal union.

This is fiercely opposed by Berlin, and the German-led bloc at the European Central Bank. There are reports that Berlin is deliberately bringing the crisis to a head, hoping to lance the boil early and force the Club Med states to reform before it is too late. If so, this is a risky strategy. German banks have huge exposure to Greek, Spanish, and Portuguese debt.

Hans Redeker, currency chief at BNP Paribas, said Greece will face "great trouble" if it has to pay 7pc rates for long. Athens must raise €53bn this year, mostly in the first half. It has a been relying on cheap short-term debt to fund the budget deficit of 13pc of GDP, but this raises "roll-over risk".

Tim Congdon, from International Monetary Research, said the danger is that wealthy Greeks may shift money to bank accounts abroad if they lose confidence (akin to Mexico's Tequila Crisis in 1994-1995). This would set off a banking crisis and become self-fulfilling.

Greece has been financing current account deficits – 15pc of GDP in 2008 – through its banks, which have built up €110bn foreign liabilities. "If foreign creditors want their money back, defaults and/or a macroeconomic catastrophe appear inevitable," Mr Congdon said.

Adding to worries, Moody's has issued an alert on Portugal's "adverse debt dynamics", saying Lisbon needs a "credible plan" to reduce a structural deficit stuck at 7pc of GDP rather than "one-off measures".

The deeper concern is Spain, where youth unemployment has reached 44pc and the housing bust has a long way to run. Nouriel Roubini – the economist known as 'Dr Doom' – said Spain is too big to contain. "If Greece goes under that's a problem for the eurozone. If Spain goes under it's a disaster," he said.

Jose Luis Zapatero, Spain's premier, replied wearily: "Spanish public debt (52pc of GDP) is 20pc lower than Europe's average; our treasury spends 5pc of revenues on debt costs, less than France and Germany. Nobody is going to leave the euro," he said

ECB prepares legal ground for euro rupture as Greek crisis escalates

Fears of a euro break-up have reached the point where the European Central Bank feels compelled to issue a legal analysis of what would happen if a country tried to leave monetary union.

By Ambrose Evans-Pritchard, Telegraph Business, 17 Jan 2010

The economic struggle facing Greece caused riots in December 2008 “Recent developments have, perhaps, increased the risk of secession (however modestly), as well as the urgency of addressing it as a possible scenario,” said the document, entitled Withdrawal and expulsion from the EU and EMU: some reflections.

The author makes a string of vaulting, Jesuitical, and mischievous claims, as EU lawyers often do. Half a century of ever-closer union has created a “new legal order” that transcends a “largely obsolete concept of sovereignty” and imposes a “permanent limitation” on the states’ rights.

Those who suspect that European Court has the power pretensions of the Medieval Papacy will find plenty to validate their fears in this astonishing text.

Crucially, he argues that eurozone exit entails expulsion from the European Union as well. All EU members must take part in EMU (except Britain and Denmark, with opt-outs).

This is a warning shot for Greece, Portugal, Ireland and Spain. If they fail to marshal public support for draconian austerity, they risk being cast into Icelandic oblivion. Or for Greece, back into the clammy embrace of Asia Minor.

ECB chief Jean-Claude Trichet upped the ante, warning that the bank would not bend its collateral rules to support Greek debt. “No state can expect any special treatment,” he said. He might as well daub a death’s cross on the door of Greece’s debt management office.

This euro-brinkmanship must be unnerving for the Hellenic Socialists (PASOK). Last week’s €1.6bn (£1.4bn) auction of Greek debt did not go well. The interest rate on six-month notes rose to 1.38pc, compared to 0.59pc a month ago. The yield on 10-year bonds has touched 6pc, the spreads ballooning to 270 basis points above German Bunds.

Greece cannot afford such a premium for long. The country must raise €54bn this year – front-loaded in the first half. Unless the spreads fall sharply, the deficit cannot be cut from 12.7pc of GDP to 3pc of GDP within three years. As Moody’s put it, Greece (and Portugal) faces the risk of “slow death” from rising interest costs.

Stephen Jen from BlueGold Capital said the design flaws of monetary union are becoming clearer. “I don’t believe Euroland will break up: too much political capital has been spent in the past half century for Euroland to allow an outright breakage. However, severe 'stress-fractures’ are quite likely in the years ahead.”

As Portugal, Italy, Ireland, Greece, and Spain (PIIGS) slide into deflation, their “real” interest rates will rise even higher. “It is tantamount to hiking rates in the already weak PIIGS,” he said. This is the crux. ECB policy will become “pro-cyclical”, too tight for the South, too loose for the North.

The City view is that the North-South split may cause trouble, but that there will always be a bail-out to prevent a domino effect. “If a rescue turns out to be necessary, a rescue will be mounted,” said Marco Annunziata from Unicredit.

It comes down to a bet that Berlin will do for Club Med what it did for East Germany: subsidise forever. It is a judgement on whether EMU is the binding coin of sacred solidarity, or just a fixed exchange rate system like others before it.

Politics will decide, and in Greece it is already proving messy as teams of “inspectors” ruffle feathers. The Orthodox LAOS party is not happy that an EU crew dared to demand an accounting from the colonels. “The Ministry of Defence is sacrosanct,” it said.

Greece alone in Western Europe treats the military budget as a state secret. Rating agencies guess it is a ruinous 5pc of GDP. Does the country really need 1,700 battle tanks, 420 combat jets, and eight submarines? To fight NATO ally Turkey? Merely to pose the question is to enter dangerous waters.

Who knows what the IMF surveillance team made of their mission in Athens. The Fund’s formula for boom-bust countries that squander their competitiveness is to retrench AND devalue. But devaluation is ruled out. Greece must take the pain, without the cure.

The policy is conceptually foolish and arguably cynical. It is to bleed a society in order to uphold the ideology of the European Project. Greece’s national debt will be 120pc of GDP this year. S&P says it will reach 138pc by 2012. A fiscal squeeze – without any offsetting monetary or exchange stimulus – will cause tax revenues to collapse. Debt will rise higher on a shrinking economic base.

Even if Greece can cut wages without setting off mass protest, it lacks the open economy and export sector that may yet save Ireland in similar circumstances. Greece is caught in a textbook deflation trap.

Labour minister Andreas Loverdos says unemployment would reach a million this year – or 22pc, equal to 30m in the US. He broadcast the fact with a hint of menace, as if he wanted Europe to squirm. Two can play brinkmanship.

Why The EU Is Like The Old USSR

Many people now believe that the EU is, in many critical ways, indistinguishable from the old Soviet Union.

In a speech delivered at the House of Commons in 2002, Vladimir Bukovsky noted the following similarities between the old USSR and the EU. I have paraphrased and expanded on his thoughts below:

1. Anyone who opposes or deviates from the socialist system will be ostracised. For example, when the Austrian people had the temerity to elect `the wrong sort of Government' (it was considered too nationalistic and right wing by the EU) the EU pronounced the new Government unacceptable. With apparent magnanimity, the EU announced that it would `accept' an Italian President elected by the Italian people. All sorts of tricks are used to isolate and marginalise those who opposed the EU. Those questioning the EU are often portrayed as insular and parochial.

2. Like the USSR, the EU is governed by a group of people who appoint one another, are unaccountable to the public, enjoy generous salaries, massive perks and huge pensions, are pretty much above the law and cannot be sacked. The EU, like any committed socialist government, operates without any real feedback from the people, and certainly without any concern for what the people think. The state must always come first. The only people who benefit (as with all socialist and fascist organisations - and the two are, of course, interchangeable) are those who have put themselves and their friends in charge. The workers never really benefit from socialism. The profits of the hard working, the creative and the thrifty are redistributed to the bureaucracy: the lazy, the unthinking and the wasteful.

The central planners (in the case of the USSR they were in Moscow, in the case of the EU they are in Brussels) insist on making all the judgements and decisions but their lack of experience means that they get everything wrong so there are constant shortages and black markets.

State socialism in the EU has not led to affluence, equality and freedom but, effectively, to a one-party political system. (All three main parties in Britain support the EU and the destruction of Britain). The fascist EU has,inevitably, created a massive bureaucracy, heavy-handed secret police, government control of the media and endless secrecy and lies.

The socialist bureaucracy of the EU is run by people who arrogantly believe that they are the only ones who need to know and that they always know best.

3. There was one political party in the USSR (and no opposition) and the same is true of the EU. Political parties which don't support the EU are denied the oxygen of financial support. Politicians who do support the EU can look forward to good jobs (when they retire or leave domestic politics they may, like Neil Kinnock or Chris Patten, get jobs as EU commissioners). The system looks after its own. When the EU constitution was being debated, the main sticking point among delegates was not the sovereignty of their individual nations, or the rights of the voters, but the number of delegates each country would be allowed to send to EU meetings. Each nation's individuality was pushed to one side as irrelevant and inconsequential, in favour of the rights of politicians to attend regular, all expenses paid beanos.

4. Like the USSR, the EU was created with little or no respect for normal democratic principles. Much of what has happened within the EU has happened secretly and without the normal principles of democracy being considered or applied. What has happened over the last few decades has happened largely in secret.

5. Instead of information about the EU we have been fed a good deal of propaganda. The bureaucrats organise and control people and they try to control the availability of knowledge. The people are always controlled with lies and misinformation. (Today these are known as `spin'.) Anyone who dares to oppose the EU or to promote England is likely to be described as a `racist'. My book England Our England has proved enormously popular with readers (and was, within the first year, reprinted numerous times) but advertisements for the book were banned by a number of publications. Although the book is one of Britain's bestselling books on politics, it has never been reviewed in any national newspaper.

Very few Britons realise exactly what has already happened, how what has happened has already affected their lives and how things will now develop unless we do something very soon. A poll quietly taken for Britain's Foreign Office showed that a quarter of Britons did not know that their country was already a member of the EU. Astonishingly, 7% of Britons thought that the USA was a member. This ignorance isn't unique to Britain. A poll in Germany showed that 31% of the public had never heard of the European Commission.

The bureaucrats realise that until there is more awareness of and interest in what has happened, and what is happening, there are unlikely to be any protests.

6. The former USSR was renowned for its vast number of laws, rules and regulations. But the USSR was nothing compared to the EU. The EC has become a law factory covering everything imaginable and enabling small petty-minded bureaucrats to hound small businesses and flex their puny muscles. One law on fire regulations alone cost UK businesses £8 billion. New regulations have poured out governing every aspect of our lives, and businessmen have been swamped by an avalanche of red tape.

The rise of Germany belies the chaos a strong euro is causing

The super-strong euro is having sharply varying effects on the different countries in the eurozone and causing the rift between north and south to widen further, according to a new report by Standard & Poor's (S&P).

By Ambrose Evans-Pritchard, Telegraph Business, 21 Dec 2009

Jean-Michel Six, the agency's Europe economist, said Italy, Spain, Greece and Ireland have all seen sharp deteriorations in their real effective exchange rates since 2005.

This is likely to reach the pain barrier soon if rate rises by the European Central Bank (ECB) push the euro to $1.70 against the dollar by the end of next year, as S&P expects. "Anticipate some lively debates among eurozone policymakers about the level of the euro in 2010," Mr Six said.

The exchange forecast is contentious. BNP Paribas and Morgan Stanley expect the euro to weaken for a while as America's recovery gathers pace, leaving Europe behind with a debt crisis in Greece and hamstrung banks that have yet to come clean on their losses.

The headache for the ECB is that Germany seems well able to cope with a strong currency after screwing down wages and raising productivity, even if Club Med is squealing. German firms have gained some 18pc in labour cost competitiveness against Italy and 15pc against Spain since 2005, and far more going back to the mid-1990s when the exchange rates were set in stone.

Jobs are already telling the story. Unemployment fell slightly to 7.5pc in Germany in October, but continued rising in Spain to 19.3pc. The underlying rate in Greece has jumped to 18pc with the expiry of workfare schemes.

The slow-burn damage of sliding competitiveness in the Club Med bloc was concealed for a long time, at first because Germany entered monetary union at an over-valued rate, then because the credit boom masked all sins.

Mr Six said that weaker EMU states are being hit on every front at once. They face de facto appreciation both within the EMU against Germany and outside against the majority of the world's currencies.

Sterling and Sweden's krona have crashed. So have the Russian rouble, the Turkish lira and a host of East European currencies. China has kept the yuan rigidly tied to the dollar since the crisis began, piggy-backing on Greenback devaluation by intervening massively in the exchange markets.

The weak pound and wage compression in the UK have given British firms a big trading advantage. S&P said UK unit labour costs have fallen more than 35pc against Italy since mid-2007, and by 18pc against Germany.

It typically takes two to three years for the full effects of such currency shifts to become evident. Even so, signs are already emerging in Eurostat industrial data. UK output was down 7.9pc in October from a year earlier, compared to -11pc for the eurozone as a whole.

S&P said that other powerful forces are at work. America is rapidly regaining its edge against Europe. US productivity rose at an 8pc rate in the third quarter of this year, while unit labour costs fell 2.5pc.

Almost exactly the opposite has occurred in Europe, where job support schemes have encouraged firms to hold on to surplus workers, leading to sharp falls in productivity. This prevents the Schumpeterian process of "creative destruction" that clears dead wood with each cycle and nurtures economic dynamism.

EU laws to cost UK £184bn by 2010, think tank says

The top 100 most costly European Union regulations introduced in the UK since 1998 will cost the economy £184bn by 2020, according to Open Europe.

By Angela Monaghan, Telegraph Business,21 Dec 2009

The think tank said that without laws including the working times regulations - the most costly according to Open Europe - the Government could eliminate its entire Budget deficit.

It conceded that some of the regulations in question were beneficial for the UK, but argued that many new laws originating in Brussels were overly prescriptive and burdensome.

UK's payments to EU jump by 60 per cent"Despite some attempts at reform, the cost of EU regulation continues to rise year on year. Some of these regulations might be helpful but far too often the cost of EU rules outweigh the benefits," said Mats Persson, research director at Open Europe.

"The UK is facing a massive public deficit, so the Government should be doing everything it can to save money. Targeting even just a few of the most costly EU regulations could save taxpayers and business billions every year."

Open Europe said that based on the Government's own assessments, the most costly regulations were the climate change act, energy performance certificates for buildings, and temporary agency workers directive.

Mr Persson said 72pc of the total cost of UK regulation now originates in Brussels. "The next UK Government must take a new, radical approach to cutting red tape, and this means getting smarter and tougher when negotiating in Europe," he said.

Eurozone chickens come home to roost

It is far too early to write off the euro as a failed experiment, but only lax accounting is keeping it alive

Telegraph, 14 Dec 2009

These are testing times for the eurozone, the group of 16 EU countries that subscribe to a single currency and the diktats of the European Central Bank. In Ireland, Spain and now Greece, the system is under the greatest strain since it came into being 10 years ago. While Greece is not about to fall out of the euro, its government is putting in place a terrible austerity package to rescue the country's economy, and it is predicted that prolonged civil unrest will follow. This seems an appropriate moment to remember that, for political reasons, the rules governing eurozone membership were bent to facilitate the entry of countries that were unsuited to the financial rigour required.

Advanced accounting and economic jiggery-pokery let countries with weak economies into what, if it was to work at all, should have been an exclusive club with very tough membership criteria. Political imperatives trumped economic common sense, and the consequences are now being felt. There is little clear understanding of what might happen next.

It has taken the eurozone's first recession to make fully apparent the contradictions in the design and implementation of the currency. Fast-growing and immature economies such as Spain, Greece and Ireland gained instant monetary policy credibility when they were admitted. But they needed to be able to set higher interest rates than their mature cousins in Germany and France, in order to deter unsustainable booms. Because they could not do so, their bubbles grew too large; now that these have burst, their crises are worse. Greece, Ireland and Spain need desperately to devalue as part of wider efforts to right their economies, but, again, are unable to do so.

It is far too early to write off the euro as a failed experiment. The costs and risks of a break-up remain considerable and the currency has seen off numerous predictions of its demise. However, yet again it is being forced to rely on accounting laxity. During the current crisis, the European Central Bank has allowed members to break the agreed rules on budget deficits. The Greek deficit is 12 per cent of output, against a benchmark of 3 per cent; there are, doubtless, further unofficial amendments to the rule book to come.

Angela Merkel, the German Chancellor, has been talking about the collective responsibility of euro members, implying a bail-out to prevent Greece from defaulting on its debts. Mrs Merkel, the head of the eurozone's healthiest and largest economy, has recently been returned to office – which may be just as well, since she now faces the tricky task of persuading her countrymen that the price of European unity is one that they will have to pay.

Greece defies Europe as EMU crisis turns deadly serious

Euroland's revolt has begun. Greece has become the first country on the distressed fringes of Europe's monetary union to defy Brussels and reject the Dark Age leech-cure of wage deflation.

By Ambrose Evans-Pritchard, Telegraph, 13 Dec 2009

George Papanderou, the Greek prime minister, faces potential riots if he cuts spending to address the deficit While premier George Papandreou offered pro forma assurances at Friday's EU summit that Greece would not default on its €298bn (£268bn) debt, his words to reporters afterwards had a different flavour.

"Salaried workers will not pay for this situation: we will not proceed with wage freezes or cuts. We did not come to power to tear down the social state," he said.

Were we to believe that a country in the grip anarchist riots and prey to hard-Left unions would risk its democracy to please Brussels?

Mr Papandreou has good reason to throw the gauntlet at Europe's feet. Greece is being told to adopt an IMF-style austerity package, without the devaluation so central to IMF plans. The prescription is ruinous and patently self-defeating. Public debt is already 113pc of GDP. The Commission says it will reach 125pc by late 2010. It may top 140pc by 2012.

If Greece were to impose the draconian pay cuts under way in Ireland (5pc for lower state workers, rising to 20pc for bosses), it would deepen depression and cause tax revenues to collapse further. It is already too late for such crude policies. Greece is past the tipping point of a compound debt spiral.

Ireland may just pull it off. It starts with lower debt. It has flexible labour markets, and has shown a Scandinavian discipline. Mr Papandreou faces circumstances more akin to those of Argentine leaders in 2001, when they tried to cut wages in the mistaken belief that ditching the dollar-peg would prove calamitous. Buenos Aires erupted in riots. The police lost control, killing 27 people. President De la Rua was rescued from the Casa Rosada by an air force helicopter. The peg collapsed, setting in train the biggest sovereign default in history.

Economists waited for the sky to fall. It refused to do so. Argentina achieved Chinese growth for half a decade: 8.8pc in 2003, 9pc in 2004, 9.2pc in 2005, 8.5pc in 2006, and 8.7pc in 2007.

London bankers were soon lining up to lend money (our pension funds?) to the Argentine state – despite the 70pc haircut suffered by earlier creditors.

In theory, Greece could do the same: restore its currency, devalue, pass a law switching internal euro debt into drachmas, and "restructure" foreign contracts. This is the "kitchen-sink" option. Such action would allow Greece to break out of its death loop.

Bondholders would scream, but then they should have delved deeper into the inner workings of EMU. RBS said the UK and Ireland have most exposure, with 23pc of Greek debt between them (mostly for global clients). The French hold 11pc, Italians 6pc.

Remember, Athens holds the whip hand over Brussels, not the other way round. Greek exit from EMU would be dangerous. Quite apart from the instant contagion effects across Club Med and Eastern Europe, it would puncture the aura of manifest destiny that has driven EU integration for half a century.

I don't wish to suggest that Mr Papandreou – an EU insider – is thinking in quite such terms. Full membership of the EU system is imperative for a country dangling off the bottom of Balkans, all too close to its Seljuk nemesis. But Mr Papandreou cannot comply with the EU's deflation diktat.

No doubt, EU institutions will rustle up a rescue. RBS says action by the European Central Bank may be "days away". While the ECB may not bail out states, it may buy Greek bonds in the open market. EU states may club together to keep Greece afloat with loans for a while. That solves nothing. It increases Greece's debt, drawing out the agony. What Greece needs – unless it leaves EMU – is a permanent subsidy from the North. Spain and Portugal will need help too.

The danger point for Greece will come when the Pfennig drops in Berlin that EMU divergence between North and South
has widened to such a point that the system will break up unless: either Germany tolerates inflation of 4pc or 5pc to prevent Club Med tipping into debt deflation; or it pays welfare transfers to the South (not loans) equal to East German subsidies after reunification.

Before we blame Greece for making a hash of the euro, let us not forget how we got here. EMU lured Club Med into a trap. Interest rates were too low for Greece, Portugal, Spain, and Ireland, causing them all to be engulfed in a destructive property and wage boom.

The ECB was complicit. It breached its inflation and M3 money target repeatedly in order to nurse Germany through slump. ECB rates were 2pc until December 2005. This was poison for overheating Southern states.

The deeper truth that few in Euroland are willing to discuss is that EMU is inherently dysfunctional – for Greece, for Germany, for everybody.

Daniel Hannan: EU is 'in a democratic mess'

The European Union is an economic, demographic and democratic mess, writes Daniel Hannan.

Sunday telegraph, 21 Nov 2009

"It's all very well to criticise, Hannan, but what would you do if you were in Van Rompuy's shoes?" So asked a euro-enthusiast friend when I had finished tearing into Thursday night's stitch-up.

It's a fair question, and it won't quite do to answer that I wouldn't be starting from here. The EU is in an economic mess: its share of world GDP will fall from 26 per cent to 15 per cent in 2025. It is in a demographic mess: 40 years of low birth rates have left it with a choice between depopulation and mass immigration. And it is in a democratic mess, with turnouts plummeting.

So what would I do? Step one is easy: I'd abolish the Common Agricultural Policy, thereby giving a greater boost to Europe's economies than any number of bail-outs and stimulus packages. Food prices would fall sharply: the average family would save more than £1,000 a year in grocery bills, with the greatest savings being made by those on the lowest incomes. Scrapping the CAP would also be the single greatest gift Europe could give the Third World. It would remove the main barrier to a full WTO agreement. Oh, and it would take a penny off income tax into the bargain.

With the CAP out of the way, it would be easy enough to dismantle the rest of the Common External Tariff. I'd phase out all structural, cohesion and social funds, releasing armies of consultants and contractors to more productive work. Ditto the staffs of dozens of euro-quangos: the European Monitoring Centre for Drugs, the European Food Safety Authority, the European Chemicals Authority, the European Foundation for the Improvement of Living and Working Conditions and so on.

Now the biggie: deregulation. According to the Commissioner for Enterprise, Gunther Verheugen, the benefits of the single market are worth around 180 billion euros a year, while the cost of complying with Brussels rules is 600 billion euros. In other words, by its own admission, the EU costs more than it's worth. The solution? Heap the bonfire with pages of the acquits communautaire: the EU's amassed regulations. Scrap the directives that tell us what hours we can work, what vitamins we can buy, how long we can sit on tractors, how loudly we can play our music. Return power to national governments or, better, to local authorities – or, best of all, to individual citizens.

I would confine the EU's jurisdiction to matters of a clearly cross-border nature: tariff reduction, environmental pollution, mutual product recognition. The member states would retain control of everything else: agriculture and fisheries, foreign affairs and defence, immigration and criminal justice, and social and employment policy.

The European Commission could then be reduced to a small secretariat, answering to national ministers. The European Court of Justice could be replaced by a tribunal that would arbitrate trade disputes. The European Parliament could be scrapped altogether; instead, seconded national MPs might meet for a few days every month or two to keep an eye on the bureaucracy.

You will, of course, have spotted the flaw in my plan: it would put an awful lot of Eurocrats out of work. Which, sadly, is why it won't happen. For, whatever the motives of its founders, the EU is now chiefly a racket: a massive mechanism to redistribute money to those lucky enough to be on the inside of the system.

Herman Van Rompuy and Baroness Ashton: the EU's perfect couple of nobodies

The big winners in last week's EU carve-up may not have famous names or stellar CVs – but that's what made them ideal candidates for their new jobs, says William Langley.

By William Langley, Sunday telegraph, 21 Nov 2009

After all the years of doubt and hesitation, the European Union's 490 million inhabitants were finally united last week, if only by the realisation that they were now being ruled by two people they had never heard of.

Herman van Rompuy, a serenely uncontroversial, 63-year-old Belgian centrist, became the EU's first president, but the big winner was Baroness "Cathy" Ashton, an obscure New Labour quangocrat who landed the job of High Representative for Foreign Affairs. From the far corners of the couple's unruly new empire came an encouragingly harmonious chorus of: "Qui?" "Wer?" "Chi?" "Who?"

In any language, this was a tough one to answer. Van Rompuy's year-long stint as Belgium's 66th prime minister has gone unnoticed even by most Belgians, while Lady Ashton's only previous triumph of note was winning the 2006 "Politician of the Year" award from the gay rights group Stonewall. "You would not believe," she said upon receiving it, "how much this means to me."

What her latest elevation might mean for the future of Europe remains anyone's guess. Frantic to shed some light on her trajectoire météoritique, the EU-friendly Brussels daily Le Soir was able only to tell its readers that since arriving in town a year ago, she had signed a trade agreement with South Korea, and was "sur le point" of ending a wrangle over customs duties on South American bananas. "She has no experience of foreign affairs," the paper reassuringly quoted a colleague, "but she probably learns quickly."

Back home, we didn't even know that much. As tends to be the case with those who have risen far and fast under New Labour, Cathy's curriculum vitae is a spirit-sapping recitation of posts held and causes served, far from the rigours of the real world. Born in Lancashire, she has been a "vice chair" of the Campaign for Nuclear Disarmament, founded an organisation to promote equality in the business world, and served as vice president of the National Council of One-Parent Families. Given a life peerage in 1999 by Tony Blair, she was sent to Brussels last year as a replacement for Peter Mandelson. Married to the former journalist Peter Kellner, now head of a polling organisation, she has two children and three stepchildren.

"Baroness Ashton is ideal for her new role," says Nigel Farage, leader of the UK Independence Party. "She has never had a proper job, and has never been elected to public office."

Yet it isn't quite as simple at that. In terms of what the EU was looking for, both the baroness and Van Rompuy are spectacularly well qualified. "Neither has any sort of international profile or background," says Marco Incerti, the communications head of the Brussels-based Centre for European Policy Studies. "It may look like the appointment of two nobodies, but this is what happens when the EU tries to please everyone."

Behind the scenes, the Eurocrat elite had already established a detailed template for the two top jobs. One would be a man, the other a woman; one from the Left, the other from the Right. One would hail from the EU's inner realm, the other from the mutinous outer territories. Above all, both would be relatively unknown, and preferably nonentities, whose new powers – formidable under the terms of the Lisbon Treaty – would not go to their heads.

These parameters were essentially fashioned by the French president Nicolas Sarkozy and the German chancellor Angela Merkel, whose flourishing alliance is founded upon the sharing of real control between Paris and Berlin, and are the reason why Tony Blair, an early front-runner for the top job, never really had a chance. Blair was too big a name, too controversial, too keen to take it on.

So, instead, we have Van Rompuy, known to hardened Eurosceptics as "the Belgian waffler", a mild-mannered economist, consumed with Catholic piety, who spends one day a month in a monastery among an order of silent monks. In an interview earlier this year with Paris Match, he claimed never to lose his temper, but his sang-froid was tested when his sister, Christine, a member of a fringe Maoist party, helped to design a poster showing him dressed as a circus clown. They have not spoken since.

People who have met him in better circumstances, and can still recall the experience, use such words as "modest", "introverted" and "self-effacing", and point to the fact that while his better-known, more glamorous rivals for the job were glad-handing their way around the capitals of Europe, Herman and his wife Geertrui were chugging through the Australian Outback in a battered camper van.

According to Richard Whitman, an associate fellow at Chatham House, the London foreign affairs institute, Van Rompuy's main qualification for the EU job is "being a conciliator, and not being associated with anything that divides the states" – save, perhaps, his recent call for pan-European green taxes.

Certainly, politics would appear to be a secondary calling. Herman studied economics at the Catholic University of Leuven, found a job at Belgium's central bank, and later joined the centre-Right Christian Democrat party, progressing through the next two decades with near-invisibility. According to Geertrui, with whom he has four children, when King Albert II, begged him to become Belgium's prime minister last year, "he did everything he could to get out of it", but felt he had to accept. At the time, the country appeared to be disintegrating, riven by the long-running feud between French and Dutch speakers, and the sense, shared by both, that the EU's host country had no identity of its own.

When he isn't trying to hold the place together, Herman writes Japanese-style haiku poems and an agonised blog wallowing in solitude, pessimism, and mortality, leading Belgian cartoonists to portray him as an elderly black-robed cleric bent beneath the burdens of conscience and duty. "All human beings must, at some point in their lives, choose between mystery and absurdity…" he mused recently.

Happily, the EU combines both qualities in abundance. The mystery flows from its famously opaque workings – and the absurdity, from appointments such as last week's.

Herman Van Rompuy: Europe's first president to push for 'Euro tax'

Herman Van Rompuy, Europe's first president, is to join forces with the European Commission to push for sweeping new tax raising powers for Brussels.

By Bruno Waterfield and Justin Stares in Brussels and Colin Freeman
Sunday Telegraph, 22 Nov 2009

Herman Van Rompuy, Europe's first president, is to join forces with the European Commission to push for sweeping new tax raising powers for Brussels. Photo: REUTERS
Within days of taking office in January, the former Belgian prime minister will put his weight behind controversial proposals already floated by the commission's head, José Manuel Barroso, for a new "Euro tax".

He will add credence to Mr Barroso's plans, to be formally tabled in the New Year, by arguing for a Euro-version of a "Tobin Tax" – a levy on financial transactions already floated by Gordon Brown as a solution to the international banking crisis. It would result in a stream of income direct to Brussels coffers, funding budgets that critics say are already rife with waste and overspending.

Mr Van Rompuy, 62, who was appointed to the newly-created £320,000-a-year post at last week's special EU summit, set out his stall on direct Euro-taxes during a private speech at a recent meeting of the Bilderberg group of top politicians, bankers and businessmen. The group officially meets in secret, but when selected details of his remarks leaked out, his office was forced to issue a public statement on his behalf.

"The financing of the welfare state, irrespective of the social reform we implement, will require new resources," he said. "The possibility of financial levies at European level needs to be seriously reviewed."

Mr Barroso, whose commission acts as the European Union's executive arm and civil service, has set out alternative plans for a Euro tax that would involve Brussels taking directly a fixed percentage of VAT and fuel duties. While these taxes already help to fund EU spending – set at £121 billion next year – they are currently gathered by the treasuries of individual nation states, from which varying sums are paid into EU coffers.

A new Euro tax could appear on all shopping and petrol station receipts, showing the amount of VAT or fuel duty creamed off directly to Brussels. Supporters say it would take a fixed proportion of the existing tax revenue rather than increase it overall, and make the cost to taxpayers of running the EU more transparent. Critics argue this could backfire by increasing anti-Brussels sentiment.

Mr Van Rompuy has not set out in detail exactly which tax raising mechanisms he favours most, but after the Bilderberg meeting his spokesman said he would look favourably on either green taxes or a version of the Tobin Tax, originally proposed in 1972 by the US economist James Tobin as a tax on currency speculation.

Mr Brown floated this earlier this month as a way of financing future bail outs of the banking system, although he meant it for global rather than purely European purposes.

But whichever revenue-raising mechanism was used, the backing of two of Europe's most senior apparatchiks for the idea in principle will give it extra momentum.

Opponents of the idea could also underestimate Mr Van Rompuy's determination to get his own way. Ostensibly chosen for his new job because of his skill as a consensus-builder, he is also known as a skilled and ruthless political operator, who is happy to play rough as well as smooth. Last year he ordered the locks to be changed on a chamber in the Belgian parliament in order to prevent deputies holding a politically disruptive debate. According to Belgian newspaper De Morgen, van Rompuy told colleagues a few weeks ago that to achieve a top EU function you must "not ask for high office, but become a grey mouse, and offers will come."

Mr Barroso, meanwhile, has just been reappointed to his post by member states for a second five year term, freeing him to push his tax agenda in bolder fashion than before. Any move towards Euro taxes, however, will encounter bitter opposition from British Conservatives.

"Any kind of harmonised tax system will remove control over our national tax systems," said Timothy Kirkhope, leader of the Britain's Conservative MEPs. "Competition in Europe depends on member states being allowed to have competitive tax regimes."

In opposing any Euro-tax plans, the Tories will find an unlikely ally in Mr Van Rompuy's sister Christine, 54, a left-wing nurse who joined the Marxist Belgian Workers' Party after witnessing the Belgian government's privatisation of the health service. She is now one of her brother's staunchest political critics, and the brochure used by her party features a picture of her brother dressed as a clown.

"I disagree with my brother's ideas for a green tax," she said. "Any new taxes would be paid by the poor. We need to tax the rich."

We must have a referendum – and not just on the EU

By Daniel Hannan Politics November 4th, 2009

It’s not chiefly about Europe – it’s about democracy. Regular readers will know that I have always seen the repatriation of jurisdiction from Brussels as a means to an end. Having got the powers back, we should pass them down to local authorities or, better yet, to individual citizens. I want decisions to be decentralised, diffused, democratised. I want open primaries, popular initiative procedures, elected sheriffs, self-financing councils, an end to quangos, recall mechanisms and, yes, referendums – lots and lots of referendums.

I have been campaigning since I was 18 years old for a referendum on Britain’s relationship with the EU - the referendum that David Cameron has now ruled out for the duration of the next Parliament. I can see his point of view: he doesn’t want to be distracted from the Herculean task of reducing the budget deficit. (I am sure, by the way, that this is a sincere motive. The assertion, made by some half-clever journalists, that the Tory leader was secretly relieved by the implementation of the European Constitution Lisbon Treaty, is false. I know for a fact that he did his best to retard Lisbon’s ratification until after our general election.)

Then again, as I say, this issue goes beyond Europe. The legitimacy of our representative institutions is at stake. Out of 646 MPs in Westminster, 638 were elected on the a promise of a referendum. True, the Lisbon Treaty is now in force. But there is nothing to prevent us having a referendum on whether we, as a country, participate in its provisions. After all, the 1975 referendum was a retrospective ballot, held to ratify the “better terms” negotiated by the Wilson ministry. I made the case for a referendum on Lisbon in this blog two years ago, and I haven’t changed my mind. (If you’ve forgotten what is so dreadful about the European Constitution Lisbon Treaty, by the way, read this).

We need a broad movement within the Conservative Party that will push for referendums, citizens’ initiatives and the rest of the paraphernalia of direct democracy. I don’t just mean a referendum on Europe - though, naturally, that is the obvious place to start. I mean full-on Helvetic people power, as adumbrated in this best-selling publication. I have returned to the back benches in order to concentrate on building such a movement.

Don’t misunderstand me: I voted for David Cameron as leader, I like him, and I reckon he’d be a million times better than Gordon Brown as Prime Minister. One of his strengths is that, unlike Gordon Brown, he doesn’t mind people disagreeing with him. Well, then. This Conservative is for a referendum: a proper, deep-cleansing referendum that will settle whether our country remains subordinate, or becomes self-governing. Now who will stand on either hand and keep the bridge with me?

The DM says: Good for you, Dan - we will do what we can to support you. It will be an uphill struggle - the quotation from Horatius is apt. David Cameron's behaviour, on the other hand, calls to mind an alternative version of that quotation: "Lo, we will stand on thy right hand, and sell the pass with thee."

David Davis urges Cameron to hold referendum on Europe within three months of coming to power

Up until now no big beast within the Conservative Party had stood up to demand some sort of new referendum pledge from David Cameron. That changes this morning with David Davis calling on the Tory leadership to hold a 'mandate referendum' even though the former Shadow Home Secretary agrees with Mr Cameron that there's no point in having a vote on the now ratified Lisbon Treaty.

Mr Davis - the man most trusted by the Tory grassroots to lead Britain's negotiations in Europe - makes his case in the Daily Mail:

"Referendums terrify the European Commission and the political elites who run Europe. They are clear statements of the popular will. They force issues to be stated in clear and unambiguous terms. They are impossible to ignore. That is why the European reaction to referendums is to make concessions. Look at the history. After Ireland's first rejection of the Lisbon Treaty, the European Council conceded legally binding protocols pledging to keep the treaty out of taxation policy, family and social issues (such as the right to life, abortion and euthanasia), and Ireland's traditional military neutrality. Denmark has obtained similar opt-outs after a referendum, and the defeat in the French and Dutch referendums led to the rewrite of the original European Constitution."

Mr Davis then goes on to list the range of powers that should be restored to Britain:

"The sort of things we might include are: recovering control over our criminal justice, asylum and immigration policies; a robust opt-out of the European Charter of Fundamental Rights; serious exemptions to the seemingly endless flood of European regulations which cost the UK economy billions of pounds each year; a recovery of our rights to negotiate on trade; exemption from European interference into trade in services and foreign direct investment rules; and an exemption from any restrictions on our foreign policy."

He calls for this 'mandate-to-negotiate referendum' to be "the first piece of legislation in the new parliament, and should be held within three months of the election."

ConHome's poll of grassroots members shows that most agree with David Davis. We found that two-thirds of Tory members want some sort of referendum.

The DM says: David Davis is absolutely right in calling for a "mandate referendum". David Cameron in his statement tried very hard to play it down by using language like "made-up referendum" and "phoney referendum", but that is just avoiding the argument, not refuting it. The point of a referendum is that it would be absolutely clear-cut and it would be overwhelming. We wouldn't be surprised in the support for repatriating powers was around 80%, and the support for just a free-trade relationship wouldn't be much lower. Others may think otherwise, but let's bring it on and see, once and for all, who is right.
A so-called mandate from a general election would be much less clear-cut. People would vote Conservative or Labour for all sorts of different reasons, and it wouldn't be at all clear how strong public feeling about the EU is. Neither Cameron nor the EU could ignore an overwhelming referendum vote against the EU, and that's why we won't be getting one.

EU Lisbon Treaty: David Cameron promises vote on future EU changes

David Cameron, the Conservative leader, has pledged to change the law so that no further powers can be transferred to Brussels without the approval of the British people in a referendum.

Telegraph, 4 Nov 2009

He acknowledged that his campaign for a referendum on the Lisbon Treaty was over after it was signed by all 27 members of the European Union.

Mr Cameron said that the Tories' campaign for a UK referendum on the Lisbon Treaty was over after the Czech Republic became the final EU member state to sign the document on Tuesday.

"It's no longer a treaty, it's been incorporated into EU law," he said, adding that the new posts of president and foreign minister were now being created.

"We cannot hold a referendum and magically make those posts or the Lisbon Treaty itself disappear, any more than we could hold a referendum to stop the sun rising in the morning," he went on.

He said that people would "resent" the fact that there would not be the referendum that was promised by Tony Blair and Gordon Brown.

A Conservative government would amend the European Communities Act 1972 to prohibit the transfer of power to the EU without a referendum.

That would cover any future attempt to take Britain into the European single currency, he said.

"We will give the British people a referendum lock to which only they should hold the key, a commitment very similar to that which exists in Ireland," Mr Cameron added.

"This is a major constitutional development, but I believe it's now the only way to reassure the British people that powers cannot be given away without their explicit approval in a referendum."

Lisbon ends the 200 year old experiment in democracy

So that’s it then. The Lisbon Treaty passes into law and brings an end to the great two hundred year old experiment in modern western democracy. And you never got to have your say on whether you were prepared to give up on the idea of government of the people, by the people and for the people. We are back to benign oligarchy at last – the condition with which western European elites feel most comfortable: protected from the vulgar impulses of the Mob, unaccountable to anyone but their own peers.

Nobody ever got round to asking if you, like the pliant peoples of European countries whose own democratic history has been – to put it kindly – rather patchy, were happy to cash in your birthright. The right to make that decision was promised by everybody and, in the end, delivered by nobody. (Not that I blame David Cameron and William Hague for making the decision that they have made in the immediate circumstances: what would the post facto referendum question have been: “How would you have voted if this vote had actually mattered?”)

Mr Cameron will make a plausible stab at defending all those precious principles which have been forsaken. I have no doubt that the rhetoric will be quite fine: it had better be. But it will be a funeral oration not a practical policy outline. There will be time later to argue and debate about the possible future. But for the moment, we must pause and grieve.

Lisbon Treaty: power drains to European Union as treaty gets go-ahead

Britain’s power to govern itself is to be increasingly surrendered to Brussels after the European Union’s Lisbon Treaty was finally ratified.

By James Kirkup and Bruno Waterfield, Telegraph,4 Nov 2009

The treaty, which will come into force within weeks, will create the first president of Europe, as well as a European foreign minister, and will end Britain’s right to veto new EU rules in more than 40 areas of policy.

Supporters say it will make the EU more efficient and give it greater influence in world affairs but critics insist it cedes too much further sovereignty to Brussels.

The Czechs are the last of the 27 EU states to sign, and their move forced the Conservatives to abandon a pledge to hold a British referendum on Lisbon.

William Hague, the shadow foreign secretary, called it “a bad day for British democracy”.

David Cameron, the Tory leader, has been accused of breaking his promise on a referendum and betraying the British people. He will today set out plans for an alternative Tory promise to renegotiate parts of Britain’s membership of Europe, to win back control over social and employment laws.

One option will be to guarantee a referendum under a Tory government were any more national powers in danger of being ceded, it is understood.

Gordon Brown hailed the Czech signature as “a historic step” and European leaders said it would create a more powerful EU. Despite the scale of the changes, the British people have never been directly consulted. The document was ratified in a Commons vote and signed by Mr Brown in 2007.

Lisbon is based on the European Constitution, begun at a summit in Brussels in December 2001. Labour won the 2005 election after promising a referendum on the constitution but then argued that Lisbon was a different document.

After Mr Klaus signed the text, they admitted they would not offer voters a say on Lisbon after all.

Mr Hague said: “Now that the treaty has become European law and is going to enter into force, that means that a referendum can no longer prevent the creation of the president of the European council, the loss of British national vetoes, these things will already have happened, and a referendum cannot unwind them.”

He attempted to blame Labour for the treaty’s passage, saying: “People have never been consulted or voted in a general election for this.”

Daniel Hannan, a Tory MEP and Eurosceptic, called the signing a step to a superstate. “The boot continues to stamp on the human face,” he said in a reference to George Orwell’s 1984.

Mr Brown insisted it should be celebrated: “Today is a day when Europe looks forward, when it sets aside years of debate on its institutions, and moves to take strong and collective action on the issues that matter most to European citizens: security, climate change, jobs and growth.” Angela Merkel, the German Chancellor, said: “The EU will become stronger and more capable of acting.”

EU leaders will meet this month to pick a first political president of Europe. Mr Brown has backed Tony Blair, his predecessor, but other leaders are leaning towards a low-key “chairman”. Herman Van Rompuy of Belgium and the Dutchman Jan Peter Balkenende are favourites.

The treaty will give the EU its own diplomatic corps and a foreign minister – the “high representative”. David Miliband, the Foreign Secretary, is a candidate.

José Manuel Barroso, the president of the European Commission, said the EU could now start acting as a global player. “The new external profile for the European Union will be felt immediately,” he said.

Twenty Years after the Fall of the Berlin Wall, the EU is a
Reincarnation of the Former Soviet Union

Now that the Czech Republic has announced it will ratify the Lisbon Treaty, the EU will be even closer yet to becoming a unified monster state, with more than half a billion inhabitants. Inhabitants is the correct term, since "citizens" would indicate a set of political rights. The people living in the EU should rather be called "subjects," since they have no influence whatsoever on the
constitution of the centralized European government, the "European Commission." The Europeans are allowed to vote for members of the European Parliament, but this body has about as much political power as the ineffectual German parliament meeting at Frankfurt in 1848. Political power in the EU is firmly in the hands of the European Commission, which is set to obtain even more power under the Lisbon Treaty. This infamous treaty does not hold the peoples of Europe in high regard. As a matter of fact, it is only halfway through the treaty (originally presented as a "Constitution") that one finds the first references to the people.

The first impression one gets while reading through Chapter III of theLisbon Treaty (the so-called reader-friendly text), is a rather
favorable one. This so-called Charter of the Fundamental Rights of the European Union " places the individual at the heart of its activities, by establishing the citizenship of the Union and by creating an area of freedom, security and justice." That really sounds grand and reassuring, does it not? Reading on, one clause seems even more impressive than the other.

For instance, article 1 is wonderful: "Human dignity is inviolable. It
must be respected and protected." So is article 3:1: "Everyone has the right to respect for his or her physical and mental integrity." What about article 6: "Everyone has the right to liberty and security of person." And look at article 8:1 "Everyone has the right to the protection of personal data concerning him or her." Or what did you think of article 11: "Everyone has the right to freedom of expression. This right shall include freedom to hold opinions and to receive and impart information and ideas without interference by public authority and regardless of frontiers."

The list goes on and on. The Lisbon Treaty obviously is an effort to put together the most enlightened elements of all existing European constitutions. Therefore, as far as these "fundamental civil rights" are concerned, the Lisbon Treaty may be regarded as having taken effect already, at least in most of the EU.

It is quite enlightening to take a look at the way the lofty articles
cited above are being put into practice. Take "human dignity," for
instance. As a result of the benefits Neoliberal Capitalism has been showering on Europe since the fall of the Berlin Wall, by day the streets of most European cities have become a living room for
increasing numbers of homeless. At night these streets are transformed into open-air bedrooms, with the homeless making themselves comfortable on mattresses made out of flattened cardboard boxes. The streets seamlessly convert into dining rooms whenever the homeless are hungry. Then they go about scavenging for leftovers among the rubbish in dustbins and garbage containers.

And what about the CIA rendition flights to secret torture centers in EU member states Poland and Romania, with most other EU member states giving clearance for these flights through their sovereign airspace? So far, some 80.000 individuals are believed to have been abducted in this way, many of these with the full collaboration of the EU and its member states.

Clearly in the EU, "human dignity" is not inviolable, nor is it being
respected or protected. The treatment meted out to EU citizens
suspected of terrorism is a violation of articles 3:1 and 6. Their
physical and mental integrity is not respected in any way, and their right to liberty and security of person is trampled on, courtesy of all 27 EU member states.

All talk about human dignity, physical and mental integrity, and
liberty and security of person is empty. It is empty because the
security of the state (the EU and its member states) is deemed to have priority. You can find proof in the Lisbon Treaty, Title II, article 67:2 " The Union shall endeavour to ensure a high level of security through measures to prevent and combat crime, racism and xenophobia, and through measures for coordination and cooperation between police and judicial authorities and other competent authorities, as well as through the mutual recognition of judgments in criminal matters and, if necessary, through the approximation of criminal laws." The clause seems bland, but it means state security (however defined) takes precedence over the rights of individuals.

Article 8 is also very interesting. It would seem to state that one's
personal data are safe. But are they? Under current EU regulations, member states are required to keep records of all e-mail traffic and all telephone conversations. In fact it is as if the government would be reading all your letters. Many EU member states, the government can enter your computer at will and change data and records on your computer without your knowing it. All this snooping and spying is, of course, in the interest of state security, to "fight terrorism!" It all looks as if the Nazi slogan "Du bist nichts, dein Volk ist alles!" (You are nothing, your people is everything) were put into effect in today's EU.

Ah, and then there is, of course, freedom of expression. Article 11
establishes this unequivocally. Currently, all 27 EU member states
have such a provision in their constitutions. Yet on at least two
issues, EU citizens do not enjoy this freedom of speech. In a number of member states (Germany, Belgium, Austria, France, the Czech Republic) it is a criminal offense to publicly wonder whether six million Jews were killed by the Nazis during World War II. Even if you would believe that, say, no more than 4.5 million Jews were
exterminated, this could land you in jail for years. It is effectively
prohibited to conduct research into this topic (to try to establish
how many Jews were killed during WW II), because it makes you a "Holocaust denier."

Nor is it allowed in some states to make any sort of remark
criticizing islam. This will immediately cause you to be prosecuted
for what in the US is called "hate speech." This is happening to Dutch politician Geert Wilders, who will be put on trial next January for making allegedly disparaging remarks about islam, whereas what he really did was assemble a movie using available footage, to demonstrate the violent nature of islamic teachings.

Free speech, or freedom of expression is really a very simple issue, a clear-cut case. Either you have free speech, in which case you may say ANYTHING at all, or you have no free speech. It is like being pregnant: either you are, or you aren't. It is impossible to be a "little bit pregnant," just as it is impossible to have "some free speech."

Thus in the EU today, there is NO free speech. Nor will there be any when the Lisbon Treaty takes effect. The EU crackdown on "illegal" downloads, threatening anyone caught downloading copyrighted items more than three times with lifelong exclusion from internet access, can be interpreted as an indication that a major offensive against one of the few remaining vestiges of freedom is underway.

I am afraid the EU "constitution" (rejected by European voters
wherever it was subjected to an honest, fair referendum) in its warmed over version called "Lisbon Treaty" is no more than a useless piece of paper. It is about as meaningful as the old Soviet and East German (GDR) constitutions which, come to think of it, are surprisingly similar to the Lisbon Treaty.

Article 50 of the 1977 Soviet Constitution granted all citizens
freedom of speech. But whoever dared voice criticism of the system in any coherent, vocal way, was severely punished. Punishments included loss of job, domestic exile (nuclear scientist Andrei Sakharov), and assignment to a mental hospital. There was no free speech in the old Soviet Union, like there is no free speech in Europe today.

Similarities between the Lisbon Treaty and its communist predecessors are quite remarkable, for instance in the clauses on equality before the law.

Article 34 of the 1977 Soviet Constitution proclaimed full legal
equality for all: "citizens of the USSR are equal before the law,
without distinction of origin, social or property status, race or
nationality, sex, education, language, attitude to religion, type and nature of occupation, domicile, or other status." The East German Constitution echoes this. Article 20:1 reads: Independently of his nationality, race, religious ideas, social background and position, every citizen of the German Democratic Republic enjoys the same rights and duties. Freedom of religion and belief are guaranteed. All citizens are equal before the law." Coincidentally, the Lisbon Treaty is strikingly similar: " Everyone is equal before the law " (article 20), and " Any discrimination based on any ground such as sex, race, colour, ethnic or social origin, genetic features, language, religion or belief, political or any other opinion, membership of a national minority, property, birth, disability, age or sexual orientation shall be prohibited" (article 21).

And just to remind you, in the former communist world of Europe, basic human rights such as these were formulated in the Soviet and East German constitutions, were violated on a daily basis. Henckel von Donnersmarck's shocking movie "The Lives of Others" (2006) shows this in a most penetrating way. The Stasi, inheriting brutal, effective Gestapo methods, was keeping tabs on most of the East German population. Under the pretext of fighting terrorism, it listened in on all telephone conversations, opened all envelopes and read all letters. It kept controls on anyone entering or leaving the country. An army of almost 100,000 secret agents, helped by 200,000 civilian collaborators, spied day and night on East Germany's 16 million citizens. Most European governments today are using time-honored Stasi techniques to keep their citizens under surveillance. However, technology has advanced so impressively since the fall of the Berlin wall in 1989, that today's government spooks glean more information on
unwitting civilians than the most fanatical Stasi agent would have
hoped for in his wildest fantasies.

As recently as 2006, a most eloquent and insightful warning against the EU and the Lisbon Treaty's precursor, the ill-fated
"constitution", was given by former Soviet dissident Vladimir
Bukovsky. Traumatized by the experience of living in the Soviet Union, Bukovsky noted the deeply disturbing similarities between the old Soviet Union and the blueprints for the EU super state. The European Commission, he noted, was the exact equivalent of the old Soviet Politbureau, in terms of the secretive way power was exercised, the recruitment and personalities of its members and the scope and reach of its decisions. The "European Parliament" today (and under the terms of the Lisbon Treaty) is a mere rubber stamp institution, just like the "Supreme Soviet" of the old USSR.

As a matter of fact, there are so many similarities between the old Soviet Union and the EU that mere coincidence is unlikely. Bukovsky argues the EU was designed to be like the old USSR. The architects of the EU? Mostly social democrats, whom Stalin quite aptly called "Social Fascists."

Most Europeans have not yet understood this. Most are still
indifferent, but their indifference will soon vanish when the full
weight of repressive EU policies and EU taxation doing its destructive work will be felt.

Sooner than anybody now thinks, the only way to vent criticism of the EU will be in the form of jokes. No doubt many of the characteristic old Soviet jokes will be dusted off and given an anti-European Commission twist.

By that time, all Europeans except for the privileged class of
"eurocrats" will be prisoners in the EU. However, they will certainly have a wonderful Constitution.

EU Lisbon Treaty: William Hague confirms Tories will not hold referendum

William Hague, the shadow foreign secretary, has conceded that a Conservative government will not hold a referendum on the EU Lisbon Treaty.

Telegraph, 3 Nov 2009

Mr Hague said it was "no longer possible" to put the treaty to a popular vote after Vaclav Klaus, the Czech president, removed the last obstacle to full ratification.

"Now that the treaty is going to become European law and is going to enter into force, that means a referendum can no longer prevent the creation of the president of the European Council, the loss of British national vetoes," he said.

Mr Hague said David Cameron, the Conservative leader would set out "in detail how we will now go forward in European matters" in a speech to be delivered at 4pm on Wednesday.

He denied that the party had broken any promises by dropping the European Union referendum pledge.

"A British referendum until this very day would have meant that the Lisbon Treaty wouldn't enter into force if people voted no. The position of president of the European Council, the foreign minister of Europe, would never have been implemented," he said.

"We were very clear that our promise applied to those circumstances. After today, those things will come into force and a referendum can't change them, it can't unwind them, it can't prevent those things being created.

"That is why we are now in new circumstances and David Cameron will set out very clearly tomorrow how we now intend to proceed."

Earlier, the deeply Eurosceptic President Klaus announced he had signed the treaty after the Czech Constitutional Court finally rejected an attempt to block its implementation.

The move threatens to throw the Tories into a renewed round of turmoil over Europe after years of relative peace.

The Conservative leadership has been signalling for some weeks that it would not be able to go ahead with a referendum if the treaty was ratified by the time a Tory government came to power.

However, for Tory Eurosceptics it has become an article of faith after Mr Cameron gave a "cast iron guarantee" two years ago that he would give the British people a chance to vote on the treaty.

He is now expected to announce a general election manifesto commitment to "repatriate" powers from Brussels, including control of social and employment policies - a long-standing Tory aim.

David Miliband, the Foreign Secretary, denounced Mr Cameron's position as "false and dangerous" as he would not be able to deliver his promised concessions from Brussels.

"So much for David Cameron's cast iron guarantee to hold a referendum on the Lisbon Treaty," he said.

"But he is still not being honest with people. The fact is you can't simply opt out of treaty obligations because to do so you need the agreement of the 26 other member states.

"David Cameron's position on Europe is false and dangerous. He is willing to risk Britain's standing and the rights of British people because he is still not prepared to stand up to the right of his own party."

UK Independence Party leader Nigel Farage said: "Mr Hague says it is 'no longer possible' to have a referendum.

"Well, to me and millions of others it is apparent that it is no longer possible to trust the Tory party or David Cameron when they make promises about Europe."

Bill Cash, a eurosceptic Conservative MP, said he had written to Mr Cameron urging him to "reconsider" his decision not to hold a referendum, saying the Tory leader had been "badly advised".

Mr Cash said Mr Hague's argument that a referendum could not be held because the Treaty was now law "doesn't stack up", and insisted the issue can still be put to a vote.

"I think a referendum at least gives people a chance to exercise their democratic choice to decide which way they want to go on this matter and I think that is the fundamental question," the MP for Stone told Sky News.

Writing on his Telegraph.co.uk blog before Mr Hague's announcement, Tory MEP Daniel Hannan said : "Alright, a referendum on the Lisbon Treaty might no longer be the most logical option: it's hardly for us to tell the Belgians or the Slovenes what institutions they should work under.

"But a referendum on European integration - ideally on the broad repatriation of powers - is essential."

A black day for Britain

UKIP website, 3rd November 2009

As Czech President Vaclav Klaus finally agreed to sign off on the Lisbon Treaty, UKIP Leader Nigel Farage dubbed today "a black day for Britain and a black day for Europe".

Mr Farage said: "Today the last signature was placed upon the Lisbon Treaty. Today will be marked as the day on which the scales finally started falling from the eyes of the British people.

"Today as we can see from the actions of the big three parties not one of them holds our countries interests at heart.

"Today marks the day in which people will have to start asking themselves what it is they want for the future of their country.

"Do they want a land that is second in the affections of its rulers? A land whose laws are made by those who neither live here nor care about our citizens? A land who is governed by those who, be they ever so decent, have no sympathy for our ways, our traditions, our quirks, our foibles.

"Or do they wish to live in a land of which they can be proud of? One that is a friend to those who wish to be its friends but is prepared to stand up for what it believes is right.

"Today that choice, a choice so long put off comes into focus. Today must be the start of our long haul back to freedom.

"We have known for weeks that Vaclav Klaus would in the end sign the Lisbon Treaty.

"It is truly extraordinary that David Cameron is not able to tell us immediately what he will do. It is incredible that the wannabe Prime Minister of this land was praying that he would be saved by a man in Prague Castle.

"It was never his job. We in this country will only be saved by our own efforts. We cannot and should not rely on the goodwill of others.

"And as we certainly cannot rely upon the good will of our political class. We will have to do it for ourselves."

Irish 'No' vote architect plans Europe-wide 'referendum' on Lisbon Treaty

The man who delivered an historic "No" vote in Ireland against the EU's Lisbon Treaty has revealed far-reaching plans to give voters throughout Europe a peoples' referendum on the handover of power to Brussels.

Declan Ganley is planning to field more than 400 candidates in next June's European Parliament elections, in the 26 countries – including Britain – where voters have had no direct say on the treaty. The energy and rhetoric of Mr Ganley, a multimillionaire businessman, was widely credited with persuading the Irish to reject the treaty, even though every leading Irish political party apart from Sinn Fein was urging voters to say "Yes".
Now he wants to give British voters a chance to deliver a bloody nose to both the Brussels establishment and to Gordon Brown, whose party first promised and then refused a referendum in Britain.

In an interview with The Sunday Telegraph, Mr Ganley disclosed that he was starting to raise £75 million from online donations to run candidates in all 12 of Britain's European Parliament constituencies, and in seats throughout the EU. He will turn his pressure group, Libertas, into a party with just one policy: to fight the Lisbon Treaty, which many see as the rejected European Constitution by the back door.

"We will tell people that Libertas is the box you put your X in if you want to vote 'No' to the Lisbon Treaty. It's clear, it's simple," he said.
"The message will be: we are now giving you a referendum and it's going to take place in June of next year at the European elections.

"People across Europe will have the chance to send the same resounding clear message that Brussels cannot continue with this treaty that the Irish people have rejected. For this to provide a meaningful opportunity for this to be a referendum, you'd have to run at least 400 candidates across Europe."

Mr Ganley spoke as the French president, Nicolas Sarkozy, whose country currently holds the rotating EU presidency, prepared for a visit to Ireland to assess the fall-out from June's rejection vote. The French leader, who will arrive in Dublin tomorrow, is a key supporter of the treaty and has already infuriated Irish euro-sceptics by suggesting that they "will have to vote again". Yesterday Mr Sarkozy said he would listen to Irish objections to the treaty, but added that the views of the 23 countries that had adopted the treaty already could not be overlooked.

Mr Ganley has previously flirted with the idea of expanding his campaign. But he has never before disclosed his ambition to run so many candidates in what could in effect be a Europe-wide "people's referendum" on the treaty.

He accused Mr Brown of ratifying the document without the referendum Labour once indicated it would offer: "It's not just undemocratic, it's anti-democratic," he said. "It's an absolute disgrace that the British Government offered a referendum and then took it away. Power belongs to all the citizens of the UK and you loan that power on the condition that it is used wisely. You don't lend it to politicians to give away to someone who never has to ask you for a vote. That is what Gordon Brown has just done in just ratifying this treaty."

His plans will unsettle the Brussels establishment, which was at first dismissive of his efforts and then humiliated by his success in Ireland.
Mr Ganley, 39, made his fortune in the telecoms industry, but now runs Rivada Networks, a defence contractor with offices in Ireland and America, which supplies emergency response equipment to the military. A devout Catholic and teetotaller, who is said to work 18-hour days, he was born in London to Irish parents, but has returned to his family's roots in Co Galway, where he now lives in the former home of the folk singer Donovan with his American-born wife Delia and four children.

Mr Ganley said that campaigning on a single issue would enable voters to deliver "a clear, unequivocal message" that Europe's elites would not be able to misinterpret. In the past, EU leaders have claimed that "No" votes on the constitution in France and the Netherlands were the consequence of domestic political issues.

Mr Ganley hopes to win more than 80 seats in Strasbourg, creating a Europe-wide voting bloc which would have a strong mandate to block passage of the treaty. "There's no national party that can provide that sort of punching power in the European Parliament. The voters will have mandated candidates to go in and ensure that there will be no attempts to resuscitate the Lisbon Treaty."

Unlike many Tory eurosceptics, Mr Ganley says he supports the European Union but objects to the 287-page treaty document – which he says is far too long and complicated to be comprehensible.

The DM says: At last the European Union is starting to face an organised opposition to its plans for a federal Europe

The Europhiles are not the future, Mr Obama

Most US Presidents share the common American view that Europe will naturally evolve into a United States of Europe

It begins to look as though the real presidential election in the United States may have been the primary battle between Barack Obama and Hillary Clinton. Senator Clinton's passionate fight for the nomination will still be remembered in a generation's time. As a result, Senator Obama, having defeated Mrs Clinton, looks almost unbeatable in the presidential race itself.

Of course, unexpected upsets happen in elections. No US presidential election becomes a certainty until the Electoral College has voted. But the McCain campaign, though refreshingly decent and rational, has attracted little attention. Americans admire John McCain as a war hero, but that is not enough. He seems cast to play the role of Pompey to Obama's Julius Caesar. The Fates, having taken their decision, are reluctant to change the cast list.

That makes Mr Obama's visit to the Middle East, Afghanistan and Europe particularly important. He is being treated as virtually the President-elect. He will inevitably form first impressions that may remain with him in his years of power. There will be foreign statesmen who impress him, and others who do not. He will make his own judgment of the prospect of success in Afghanistan and Iraq. He will better understand that the problems of the Middle East and Europe are more complex than they had seemed in the briefing rooms of Washington.

the United States of Europe

Most US Presidents start with a preconception about Europe. They usually share the common American view that Europe is destined to follow American constitutional development, and will become the United States of Europe. The European nations will progressively transfer power to the EU and the European Court of Justice, just as the individual states transferred their sovereignty to the federal government and the Supreme Court of the United States.

Over time, most Presidents come to see the limitations of this view. They have to recognise that such a Europe would not be a particularly reliable partner for the US. They come to understand the serious cultural hostilities to the US, particularly in France. They are taught by events - as in Afghanistan - that Britain is the only European power that can be relied on as an ally which possesses significant military capacity.

In his visits to European countries, Mr Obama will meet very few critics of this federal concept of European development. He is not likely to meet many Eurosceptics, though, in David Cameron, he will meet a party leader opposed to the federalist Lisbon treaty, and, in Gordon Brown, a Prime Minister who as Chancellor blocked Britain joining the euro. But in general he will meet Europhiles who are unlikely to tell him of the true hostility to this European project among the European voters.

European Constitution

American policy towards European integration should be based on the principles of the American Declaration of Independence and the US Constitution. Americans should not help European bureaucrats to impose on us a European constitution that they would not dream of accepting for themselves. Thomas Jefferson, an over-ardent advocate of the French Revolution, even during the Terror, defined the American Constitution in terms of liberty and democracy.

The EU admits to a democratic deficit which has not been made good by the Constitutional treaty or by the Lisbon treaty. The essential facts that Mr Obama needs to know are that the Constitutional treaty was rejected by referendums in France and the Netherlands, that the Irish rejected the Lisbon treaty, with much the same content, and that the British have been refused a referendum on the Lisbon treaty despite manifesto promises at the last general election. Eighty per cent of British voters want a referendum; the British feel cheated by their Government.

The Lisbon treaty

The Lisbon treaty is the one European constitutional proposal still on the table. Since the Irish voted “no”, it has been kept alive on the pretext that the Irish - the only nation to have had a referendum - can be forced to change their minds. Despite the pressure from Nicolas Sarkozy of France, that is unlikely to happen, if only because of the timing. The French are already in their six-month term in the chair of the EU. President Sarkozy only has until the end of this year to make the Irish change their vote. France will be succeeded in January by the Czech Republic, which is relatively Eurosceptic, and has neither the will nor the power to change the Irish vote.

Next June will see European elections, in which Declan Ganley, the man who organised the successful Irish “no” campaign, is considering running 400 candidates as a Europe-wide referendum against the Lisbon treaty. In May 2010, there will probably be a British general election, in which the Conservative Party will be committed to a British referendum on Lisbon, if European ratification is not complete. Britain is a big European power and will almost certainly vote “no”.

Constitution for Europe

No one can know how events can develop. It is not necessary, or desirable, for Mr Obama to take an immediate view. The constitution for Europe is a matter for Europeans, as the Eurosceptics argue. Yet it is important that the senator should not take the wrong view. It would be a serious mistake for the US to base its policy on the expectation that the Lisbon treaty will in the end be ratified; there is at least an even chance that it never will be. Or it might disrupt Europe's vulnerable unity.
The next President of the United States may have to deal with the Europe of Brussels or with the Europe of the Nations. He may have to deal with a looser Europe or with a core of European countries moving to an exclusive federation, led by France and Germany. He might even receive a proposal for a European free trade area to join Nafta. He should keep an open mind and open options on these European issues.

Europe’s Tory nightmare

Brussels is not prepared for what might hit it if Britain’s Conservative Party wins the next election

A COMPLACENT calm reigns in Brussels a month after Irish voters rejected the Lisbon treaty. Eurocrats seem persuaded that Lisbon can be salvaged quickly if other countries are pushed to keep ratifying it, so that an isolated Ireland feels bound to hold a second vote. The maddest optimists have started talking of a new Irish referendum next March, allowing Lisbon to come into force before the European elections in June 2009.

Madder still are hotheads in the federalist camp who seem to yearn for Ireland to rule out a second vote. For they too have a plan ready: a two-speed Europe, with Ireland “invited” to move out of the way into the slow lane. Oddly, there is little debate about a third possibility that is surely more likely than either of these. What will EU leaders do if Ireland’s prime minister tells them this autumn that he is not ruling out another vote, but wants to delay? There is a recession, he might note, and the polls are iffy (say 49% for a yes); we rush this at our peril.

Here is another thought to dampen the confidence of the Brussels set. If opinion polls are to be believed, the Conservatives will form the next British government by the spring of 2010. As a Tory victory draws closer, two things may happen: the Irish will become harder to isolate; and talk of a two-speed Europe will become more dangerous and destabilising for the EU. In truth, for the two-speed Europe camp, little Ireland is barely a prize. But pushing a sullen Britain into an outer circle would clear the way for all sorts of Euro-integration. Such federalists have their mirror-opposites in Britain. Eurosceptic hardliners dream that Britain could negotiate a nice free-trade pact with the EU, like a giant Norway or Switzerland (but without as much fish or cheese). The odds are still against Britain walking out. But the country has changed in ways that Brussels underestimates. A cool-headed majority on both sides would surely regret it if Britain accidentally fell out of the union, without proper debate.

Today’s Conservatives would form the most Eurosceptic government since Britain joined the club in 1973. Unlike previous Tory bosses, David Cameron does not have to accommodate pro-Europeans in the party, let alone in his inner circle (just three Tory members of Parliament voted with the government on the Lisbon Treaty in March, and all were over 60). It is true that Mr Cameron does not want to “bang on” about Europe, alienating voters whose distaste for the EU is matched only by their desire never to hear anything about it. Indeed, the EU is unlikely to be one of Mr Cameron’s top three campaign themes. But once elected, a Conservative government is sure to pick some fights.

European Parliament

In the European Parliament, the Tories are committed to severing their formal link with the other main centre-right parties in the European People’s Party, and to set up a new formation of more sceptical parties, taking in allies from the ex-communist east. Pro-European Tories fret that they will fail to find such allies and end up on the independent benches, denied the influence enjoyed by those in formal groups. But voters could not care less about influence in Strasbourg (in one poll, 88% of Britons could not name their members in the European Parliament).

On the Lisbon treaty, a new British government will face one of three scenarios. In the first, seen as easiest by the Conservatives, they come to office to find Lisbon abandoned, because the Irish have convinced other countries that they cannot hold a second vote. Even this may not be plain sailing. Other governments might start “cherry-picking” bits of Lisbon that can be implemented without a new treaty—including pushing ahead with scrapping national vetoes on some areas of cross-border justice, police and immigration policy. There would be calls to give greater legal force to the charter of fundamental rights, a sweeping catalogue of social and civil rights. Mr Cameron would swiftly find himself in the familiar territory of British opt-outs. As it happens, Lisbon offered Britain hefty opt-outs on both justice and the charter, which might well be offered again—but the Conservatives have already dismissed these as inadequate.

The Lisbon Treaty

In a second scenario, Lisbon has not been ratified by all 27 countries when a Conservative government takes office. Outsiders assume this would be tricky for the Tory high command, forcing a knotty European dilemma onto their agenda. But insiders say it is quite simple: Mr Cameron would hold a referendum and campaign for voters to reject the treaty. Britain would then withdraw its ratification and Lisbon would be dead. One stunned EU diplomat says that “nuclear is not a strong enough word” to describe this option, and hopes that the Tories do not mean it. Conservatives say that they sincerely want Lisbon stopped.

It is a third scenario that is the trickiest: one in which all 27 countries have ratified Lisbon, including Ireland, so that it is already in force as the union’s rulebook when the Tories come to power. Anti-EU absolutists would push Mr Cameron to hold a referendum anyway, as a prelude to Britain renegotiating the treaty. Mr Cameron and his shadow foreign secretary, William Hague, have already promised that if they come to office to find the treaty in force, they will “not let matters rest there”.

This assertion is a bluff. A post-ratification referendum would be a legal nightmare, with open-ended political consequences, and Tory leaders know it. More likely, they will push for something else: a repatriation of powers from Brussels in the field of social and employment laws (ie, more opt-outs). Though awkward, this might be doable given enough political will. But everything has a price in Brussels: Britain could end up losing over the EU budget, say, or its access to the single market might be compromised (it is not a level playing-field, rivals would grumble).

Europe faces a time of instability, in which Britain and other players do not have the measure of each other. That makes the calm that reigns in Brussels more than complacent: it is baffling.

The DM says: Don't hold your breath on this. There is no evidence that Tory leaders are Eurosceptic at all, let alone as boldly Eurosceptic as the Economist thinks. Many of us think that Cameron's delay in leaving the EPP, the only promise he had made during his election campaign, was a prelude to abandoning it altogether in due course. We shall see.

Polish President wrecks Nicolas Sarkozy's day by refusing to ratify Lisbon Treaty

The French President admitted that his six months at the head of the EU were going to be tougher than expected

Nicolas Sarkozy wants to reunite the European family. But yesterday, on his first day as its patriarch, he found himself presiding over a tribe squabbling about everything from defence to tax to climate change. The French President admitted that his six months at the head of the EU were going to be tougher than expected and on Day 1 his grand plans were already looking over-optimistic.

He conceded that the community faced deadlock over the Lisbon treaty and that winning acceptance for his ideas on issues such as immigration and trade could be complicated. “The goals of the French presidency are to solve the institutional crisis, to find a solution despite the deadlock that we are currently facing,” he told journalists at the Elysée Palace. “We are also trying to find solutions on issues such as immigration and \ environment. But, believe you me, negotiating energy and climate change in the European Commission is not easy.”

Plans to encourage Ireland to reverse its rejection of the treaty by urging the remaining 26 EU members to ratify took a knock when President Kaczynski of Poland declared that signing would be pointless until the final Irish outcome was clear. Paris sought to play down Mr Kaczynski’s move, saying that it did not reflect Poland’s wishes. “It doesn’t appear to be of importance,” Jean-Pierre Jouyet, the Europe Minister, said. “I have confidence in the European spirit of the polls and what counts is that their parliament and Government remain engaged.”

Mr Kaczynski’s stance followed that of Vaclav Klaus, the Eurosceptic Czech President, who also has the role of completing his country’s ratification but who declared the treaty dead after the Irish vote. President Köhler of Germany has also refused to sign while his country’s Constitutional Court considers the document, although his assent is considered a formality.
There were signs of growing frustration with the Czechs, who will take on the EU presidency after France. A senior Elysée source said: “If they dig their heels in over ratifying the treaty, they are going to start their presidency in a state of isolation.” In the clearest indication that France wants to see a rerun of last month’s Irish referendum, a senior source said: “We need some kind of vote to get out of this situation — Parliament or referendum, I don’t know. But when democratic society says ‘no’, you need some sort of democratic solution.”

The fight against flagging enthusiasm for the treaty threatens to divert Mr Sarkozy from the key aims of the French presidency — which are also dividing the EU.

Stagflation grips Eurozone as interest rates look set to rise

By Ambrose Evans-Pritchard, International Business Editor, Daily Telegraph 01/07/08

Eurozone inflation surged to an all-time high of 4pc in June despite worrying signs of a slump in manufacturing, confronting the European Central Bank with the toughest challenge since its creation a decade ago. Soaring oil and food prices guarantee a quarter-point rise in interest rates to 4.25pc on Thursday, further widening the gulf in rates between Europe and America.

The only question is whether the ECB opts for a "one-and-done" move or sets the course for yet more rises in the autumn. Jean-Claude Trichet, the bank's president, has warned of an "acute risk" of a wage-price spiral unless inflation is wrung out of the system.

But a growing chorus of critics fears that overkill could tip the eurozone into a severe downturn at this delicate juncture, and risk a dangerous chain of political events in southern Europe and Ireland - where voters have already thrown the EU into chaos by rejecting the Lisbon Treaty.
The Irish economy contracted at a rate of 1.5pc in the first quarter and is now facing the worst recession since the crash of the mid-1980s. Investment fell 19.1pc. House prices have now fallen for 15 months in a row.

Spanish premier Jose Luis Zapatero was forced to reassure his nation's media this weekend that he was still on speaking terms with his finance minister Pedro Solbes, who has refused to endorse the government's economic crisis plan.

Both Mr Zapatero and Italy's Silvio Berlusconi have lashed out at the ECB in recent days, but even Germany's finance minister Peer Steinbrück has begun to question Frankfurt's hard-line policy. "An interest rate increase could have a pro-cyclical impact at a point when the economy is slowing down," he said.

The comments come after five months of falling orders in Germany, the worst run since the early 1990s. Siemens, Volkswagen and other big industrial exporters have begun to cut jobs.

The ECB has held rates steady at 4pc since the credit crunch began last summer, even though Euribor lending rates have jumped 120 basis points. The euro has rocketed against the dollar, sterling, yen and yuan.

The full effects of the monetary and currency squeeze will feed through the eurozone over the next year or so. There is a risk that the impact could hit just as the global economy slows sharply.

France's finance minister, Christine Lagarde, praised the apparent policy shift in Berlin. "For the first time my German colleague, who was resolutely determined to back the ECB whatever it does, is telling Mr Trichet, 'Be careful. There is more than one indicator. There is inflation, certainly, but there is also growth. Quite a few of us would like Mr Trichet to keep his eye on both barometers. Until now he has had only inflation on his radar," she said.

Her choice of words is significant. EU ministers have the ultimate power - under Maastricht Article 109 - to shape the eurozone exchange rate, giving them a backdoor means of forcing a change in the ECB's policy. The implicit threat to invoke this clause is a warning to ECB hawks that independence has limits.

The remarks by Paris and Berlin come as US Treasury Secretary Hank Paulson prepares to visit both Mr Trichet and Bundesbank chief Axel Weber today. The Bush administration is reportedly furious with the ECB for undercutting US efforts to stabilise the dollar and halt the oil spike in very dangerous circumstances.

The ECB is playing with fire, forcing the US to pursue a more restrictive monetary policy than it might think safe at a time when the financial system is already in dire trouble. The dispute has echoes of the Transatlantic rift before the stock market crash in October 1987.
Oil jumped $16 a barrel in two days earlier this month on the back of a rising euro after Mr Trichet signalled an ECB rate rise. The market response was a prize exhibit for those who argue that hedge funds have now run amok on the oil markets, using crude futures as a sort of "anti-dollar" currency - with multiple leverage.

It also revealed that ECB tightening in this environment is counter-productive since it pushes inflation even higher. Critics say the bank is chasing its own tail, failing to adapt to the complexities of the modern global economy.

Stephen Lewis, chief strategist at Insinger de Beaufort, said the ECB is right to raise rates, despite the risks. "If they were to back off now after signalling a rise it would cause a catastrophic loss of credibility that would further harm global stability," he said.

"The bank cannot formulate policy on the basis that this might be a short-term price spike. It would destroy consumer confidence and blast economic growth prospects if it lets inflation run ahead."

The DM says: Another illustration of the folly of the Euro - one interest rate and monetary policy for the very diverse set of countries forming the European Union.

Our EU masters have no sense of shame

Guinness and oysters combined can make for a dreadful hangover. Celebrating the Irish way, after the good citizens of the republic had bravely rejected Lisbon and all its works, seemed like a good idea at the time. But after the party that followed such a rare piece of good news for Euro-sceptics, comes the blistering hangover.

Irish voters may have thought they had killed the treaty, but, in the European Union, no never quite means no; or rather no seems not to matter. And, our peers also bulldozed it through the Lords.

There has been something staggering and infuriating about the events of the past few days. The response to the latest setback has been so brazen from the European elite that wants full integration, it proves those involved have passed beyond a point where they might feel the slightest embarrassment about appearing not to be good democrats. In reality, they are now actively anti-democratic in pursuit of their master plan, revelling in a refusal to acknowledge that voters might be anything other than sheep needing to be led in the right direction.

The word is that Ireland's veto is not worth the same as a French veto of the previous constitution, and that the Irish are being given time to reflect.
The sense is that Irish voters, bless them, are the most simple of souls, appearing not to know what they were up to when they voted. Their bog-ridden land was rescued from the economic dark ages by the EU, and Dublin, previously a cultural backwater peopled by pygmies such as James Joyce, was only turned into a great European city when the EU, or EEC, pitched up.

The implication is appalling: Ireland's economic revival had nothing to do with Irish ingenuity and the nation's celebrated creativity. In that insult is one flickering hope: few peoples like and vote for being told they are stupid.

The Irish have been thoroughly insulted. On hearing of the death of a Turkish ambassador, Talleyrand is supposed to have said: "I wonder what he meant by that?" And so it has been with the Lisbon Treaty. The Irish voted no, but the Eurocrats ask: What did they mean by that? In this case, it appears that they meant they did not relish the centralising aspects of Lisbon.

The realisation that the Euromaniacs would try to plough ahead, by bullying the Irish, produced a feeling on the part of many sceptics of hopelessness and ennui. Admittedly the celebratory Guinness might well have been a contributing factor, but it is clear that the large European powers have decided that Ireland, and the rest of us, can be railroaded. Protesters demanding a referendum were dragged from the gallery of the Lords as Europhiles such as Lord Kinnock rammed the treaty through the Upper Chamber.

Impotent rage is an understandable reaction. Why can those involved not see that their project lacks any popular mandate and is driven by an elitist contempt for opinion across Europe? On and on drives the ratification of Lisbon, and yet there is nothing to be done.

But the situation is not hopeless in Britain. The polls are quite clear: the most recent YouGov survey, conducted for Open Europe this week, showed that just 14 per cent of those polled think our Government should continue ratifying Lisbon. Only 29 per cent of those polled want to continue our current relationship with Europe, while 38 per cent want to stay in the single market but withdraw from the other political aspects of the EU. Almost a quarter want to withdraw completely.

So, while the sense that resistance is futile may prevail, there is also a natural coalition of 62 per cent that wants to withdraw or remodel our relationship with Europe. Rather than getting angry about Lisbon, those of us who want a different kind of Europe should work out ways to get even.
The Government is deaf to this, as it long ago lost a sense of national sovereignty, and there is a danger that the next one (likely to be led by David Cameron) will be equally hard of hearing for different reasons.
Already Cameroons, Euro-sceptic by nature, shake their heads and say that this is difficult indeed, old chap, and, what kind of lunatic would want Europe to wreck his first term? A renegotiation of our terms with our partners might have to "wait for a second term, perhaps". This is an opposition's kiss of death, with "second term" meaning never and "perhaps" meaning perhaps not. If Britain is to shake this curse, pressure must be applied to a wobbly Tory leadership.

Global Vision, a think tank, is handily mapping a path out of this mess for Britain and the Conservative Party, but it needs support. Look at the polls: it is no use screaming that we must get out of Europe completely when the future of the Euro-sceptic argument centres clearly on crafting a calm, clear message to our European partners that, while we want to trade and co-operate, we do not want integration. Tory ministers will have to fly to Brussels on day one to open negotiations.

The European model is propelled by two forces: a sense of Marxist historical inevitability, when in reality we can stop whatever we choose; and an idea that the project embodies modernity.

The first prop can be knocked away by painstaking argument, the second now looks out of date. It is the EU that is out of fashion and reeks of the 1970s. The trend in economics and social policy, as evidenced by the rise of the internet and consumerism, is running in the direction of less central control, not more. To compete in the 21st-century, Britain will have to be fleet of foot and not shackled to a distant 20th-century bureaucracy.

The Irish cheered us Euro-sceptics up for a few days, but be certain they will be swept aside. What is required is a hard-headed, decade-long drive to start our disengagement from this mad process. It will require hard pounding, and pressure on a Conservative leadership that is nervous. But there is no other way if we want to govern ourselves. The Irish said stop; we need to find our reverse gear.

The DM says: The arrogance of European Union leaders knows no bounds. They will have their federal Europe, whatever the public thinks. We must leave the European Union.

What happens after Ireland’s “No”?

By ten o’clock on Friday morning, it was clear that the Noes had it. Ireland’s Europhiles were struggling even in their affluent strongholds within the Pale. In the rest of the country, they were being pulverised.

A jubilant “No” campaigner rang me from Galway, his words tumbling over each other. “It looks like a high turnout, too”, he exulted. “The Eurocrats won’t be able to just carry on as if nothing has happened”. Oh yes this will, I told him, sadly. They did when the Danes voted “No” to Maastricht. They did when you boys voted “No” to Nice. They did when the French and the Dutch voted “No” to the constitution. Just you watch them

We didn’t have long to wait. Even before the result had been declared, José Manuel Barroso, the President of the Commission, announced tetchily that the “No” vote wouldn’t solve the EU’s problems, so ratification would continue.

During the referendum campaign, Mr Barroso had declared that Brussels had “no Plan B”. Many Irish commentators innocently took this to mean that, in the event of a “No” vote, the Lisbon Treaty would be dropped. But what Mr Barroso actually meant was that Plan A would be bludgeoned through, with or without popular consent.

Every EU leader outside the Czech Republic has since confirmed that ratification will continue. Some accompanied their declarations with heroic sophistry. David Miliband argued that Britain ought to ratify the treaty because it was up to Brian Cowen, not him, to pronounce it dead. Nick Clegg announced that his MPs and peers would connive at this revolting necrophilia because doing so would give Britain a stronger voice when it came to discussing where the EU should go next.

Others complained of Ireland’s ingratitude. “We think it is a real cheek that the country that has benefited most from the EU should do this,” said Axel Schäfer, SPD leader in the Bundestag.

Yet others moaned that the little countries were getting uppity. Daniel Cohn-Bendit, leader of the Euro-Greens, snarled: “It is not truly democratic that less than a million people can decide the fate of nearly half a billion Europeans”. Spot on, Danny. So how about letting the other half-billion have referendums, too?

Then there were the attempts to claim that the Irish had misunderstood the question. The Vice-President of the Commission, Margot Wallström, plans to run some Eurobarometer opinion polls to find out what the Irish were really voting against. Let me help you with that one, Margot: they were voting against the Lisbon Treaty.

This is the same Mrs Wallström, incidentally, who, three years ago, opined at the Theresiendstadt concentration camp that “No” voters risked a second Holocaust. Well, three countries have since voted “No” and, so far, there have been no pogroms, no special trains, no invasions of one EU state by another.

My favourite was the reaction by the President of the European Parliament, the amiable Hans-Gert Pöttering. “The ratification process must continue”, he declared, because “the reform of the European Union is important for citizens, for democracy and for transparency” Got that? The reason the EU is tossing aside the verdict of the Irish people is “for democracy”.

Listening to these statements, it suddenly hit me that the speakers didn’t expect to convince anyone. They were simply giving the party line, with all the perfunctory woodenness of Brezhnev-era officials.

Last month, when opinion polls were showing the “Yes” side ahead by 35 points to 18, I wrote in this newspaper that the sceptics would surge in the final week and that, following a “No” vote, the EU would press ahead regardless. I likened the EU’s leaders to the apparatchiks of the Comecon states who, having given up on persuading their electorates, sought compliance rather than consent, acquiescence rather than approval.
Several people emailed me to complain that it was a tasteless parallel: the EU, after all was an association of democracies. True. No one is suggesting that Brussels is about to take away dissidents’ passports or throw sceptics into gulags. But Euro-federalists, like Cold War Communists, believe that their ruling ideology is more important than either democracy or the letter of the law. Eastern Europe’s leaders justified themselves on grounds of anti-fascism: when others had collaborated, they had resisted Hitler. Eurocrats use a similar excuse (see Mrs Wallström’s comments, above). Small wonder that the Communist parties of the former Soviet-bloc states led the campaigns to join the EU.

If you think I’m being too harsh, watch what happens next. First, there will be an attempt to bully Ireland into falling in line. Ratification will go ahead everywhere else in the hope that the Irish will obligingly lie down. When this fails — and, as an Irish friend put it to me during the campaign “sure we didn’t fight off the might of the British Empire just to be bossed about by the Belgians” — the EU will simply implement the Lisbon Treaty.

To a large degree, this has already happened. One of the most contentious proposals in the text was the creation of a European foreign minister with attached embassies. Listening to the arguments of both sides, you would never guess that this is already in place. The EU’s diplomatic corps — the European External Action Service — was brought into being two years ago. Go to any third country and you will find an EU mission that towers over the national legations.

As with foreign policy, so with the other institutions that were established in anticipation of “Yes” votes: the European Armaments Agency, the Human Rights Agency, the External Borders Agency. None of these has a proper legal base, but no one is proposing their abolition.Lisbon would have made the Charter of Fundamental Rights directly justiciable, opening swathes of national life to the rulings of Euro-judges, on everything from family life to strikes. The Commission, the European Parliament and the European Court of Justice (ECJ) have all declared that they will treat the Charter as if it were already legally binding, even though three electorates have now rejected the treaty that would have authorised it.

The great bulk of Lisbon can be implemented through lawyerly creativity. And any disputes will ultimately be settled by the ECJ, which rarely lets the letter of the law stand in the way of deeper integration. Virtually the only things that can’t be shoved through in this manner are the new rules on representation in the Commission and Council. My guess is that these will be agreed at a miniature Inter-Governmental Conference next year, possibly tacked on to Croatia’s accession treaty, since the increase in member states from 27 to 28 will require a rejigging of voting weights. We shall then be told that, since these are changes within EU institutions, rather than net transfers of power to EU institutions, there is no further need for referendums.

The leaders of the EU, in short, have resolved never again to consult their peoples. Public opinion, in their eyes, in an obstacle to overcome, not a reason to change direction. See whether I’m proved right. And then tell me whether my parallel with the apparatchiks is far-fetched.

The Czech Government is the only one to be holding out against attempts to bully Ireland. Please email your support to the Czech Republic’s conservative Prime Minister. See below for details.

Please support the democratic Czechs

It’s Munich all over again. The plucky Czechs are on their own, let down by those on whom they had relied — above all, and most painfully, by the British. Since Ireland’s “No”, the other governments have queued up to announce that implementation of the European Constitution Lisbon Treaty will continue. In a few hours’ time, the Lords, in a revolting act of necrophilia, will vote to ratify the text — thereby ripping away whatever shreds of legitimacy they retain, and hastening their abolition.
I have observed before that the issue of European integration pits the politicians against the people. Sure enough, the various prime ministers have formed a protective testudo, blaming the Irish for voting as they know their own electorates would have done.

Only Mirek Topolánek, the leader of the Czech ODS, is standing up for the rule of law and for democratic legitimacy. “The Irish ‘No’ is not of a lesser impact for us than the French and Dutch ‘No’,” he says. “It signifies that no matter whether the ratification process continues or not, the Lisbon Treaty will not enter into force.”

You can imagine how this is going down with Sarko, Merkel et al. There is a chance that the EPP will instruct their Czech subordinates, a minor party called the Christian Democrats, to withdraw from Mr Topolánek’s coalition, causing his government to fall. If not, the ODS might become the sole exception to Hannan’s First Law of Politics: that no party is ever Euro-sceptic while in office.

Either way, please let Mr Topolánek know that he is not alone. The poor fellow is coming under immense pressure from politicians to reverse his position. It would be nice if he got the odd supportive email from the rest of us. You can reach him at topolanek.mirek@vlada.cz

The DM says: The European Union leaders will not have it all their own way in ignoring public support for a Referendum on the Lisbon Treaty and the EU Constitution.

Irish anger at EU plans to press on with Lisbon Treaty despite No vote

Anger mounted against Brian Cowen, Ireland's Prime Minister, as it became clear other European leaders were prepared to ignore the wishes of the Irish people and go-ahead with the Lisbon Treaty.

On Dublin's O'Connell Street, there was fury that Europe appeared to be prepared to press ahead. "I voted No and they can't go ahead, because there is no agreement in Ireland," said Michael Larkin.

The man who led the successful No Campaign that resulted in 53.4 per cent of the electorate rejecting the Treaty has not ruled out running in next year's European elections.

Declan Ganley, the Libertas leader, said: "I'm not a politician but if our voice was not heard and ignored, then would I as an active citizen do whatever I could to ensure that our voice was heard in my own small way?
"I would most certainly want to do something about that."

Mary Lou McDonald, Sinn Fein MEP for Dublin, said: "Yesterday the Irish people gave the government a clear and strong mandate to renegotiate the Lisbon Treaty.

"At his first European Council meeting as Taoiseach next week Brian Cowen should set out in clear and unambiguous terms the concerns raised by the Irish people and the need for these concerns to be properly addressed."

Despite Ireland's decisive rejection of the pact, there remained confusion over whether a second referendum would be imposed on the electorate in an attempt to overturn the decision. Conor Lenihan, the Minister for Integration, said that although he did not envisage another poll, he did not rule one out. His remarks did little to clear up the issue following Mr Cowen's failure to give a definitive answer when questioned hours after the referendum result was announced. Mr Cowen said he was not prepared to "even surmise on any of that", adding: "I'm not ruling anything in or out or up or down."

The newly-installed Taoiseach woke up to a salvo of damaging headlines, reminding him that he had failed his first major test since he took over from Bertie Ahern. At the European Council's leaders' summit next week, he will have the embarrassing task of explaining to his colleagues why he failed to sell the Treaty to his people.

"No" campaigners have urged him to declare the Treaty dead when he goes to Brussels.

The disastrous start to his premiership has been compared with that of Gordon Brown, another Prime Minister who took over from a smooth operator and was ushered into office on a wave of goodwill.
In some quarters, his nickname of Biffo, which in its most polite form stands for big ignorant fellow from Offaly, is being challenged by another one – Gordon Cowen.

Ireland has been subjected to two referenda before, so there is a precedent. In 2001, the Irish rejected the Nice Treaty when only 34 per cent of the electorate turned out. The decision was overturned the following year with a 50 per cent turn-out.

Even if another referendum is called, the prospect of a similar about-turn appears unlikely given that the 55 per cent turn-out for the Lisbon referendum. This time there does not appear to be a silent "yes" majority waiting in the wings.

William Hague: Gordon Brown must give the British people a referundum on Lisbon Treaty

The referendum in the Republic of Ireland has sent shockwaves across Europe.

The grand political project hatched, nurtured and cherished by Europe's political elite in backroom deals and protectively hidden from public scrutiny had met its one unavoidable test of public opinion and failed dismally.

So now the European Union faces a new crisis: a crisis of democracy.
This, then, is the test for the EU: whether it accepts the people's verdict on this latest effort to push for further integration and lets this treaty die a richly-deserved death or tries to override the people's will. If it is the latter, then it will send a terrible signal about the kind of organisation the EU is.
So what now? Gordon Brown has a rare opportunity to exercise decisive leadership in Europe and speak for Britain, an opportunity he shows every sign of yet again spectacularly flunking. His course of action should be clear: to respect the Irish referendum by stopping ratification of the treaty in Parliament and declare the treaty dead.

Instead, this Labour Government has declared that they mean to press on with it. This is the height of arrogance and shows downright contempt for voters.

Labour ministers have no right to do any such thing. This Government was elected on a manifesto to put the EU Constitution to a referendum. If Gordon Brown and David Miliband insist on driving this treaty forward there is only one honourable course open to them: finally to put the treaty to the British people in a referendum.

A failure to do so will confirm the low opinion voters have of the Government – that it has become a cynical, jaded outfit, disdainful of the people who elected it and certain that it knows better than the voters where their best interests lie.

Overcome by the staleness that comes with being too long in power, this Government does not seem to grasp the tremendous opportunity that lies before Europe, to drop a treaty that claws ever more power from Europe's nation states to Brussels and focus on the issues where Europe's governments, working together, can make a real difference to people's lives: on global warming, global competitiveness and global poverty.
Ireland's vote leaves the euro in limbo again.

The DM says: If only the Conservatives would recognise the great opportunity presented by public hosility to the European Union's relentless drive towards a Federal Europe.

Germans Reject Latin Bloc Euros

To judge from global markets, Ireland's rejection of the Lisbon Treaty is deemed a trivial event. The euro slipped a notch against the dollar in early trading, then recovered. The spreads on Irish bonds nudged up one tick against German Bunds. This is nothing like the earthquake on the currency markets in 2005 when France and the Netherlands threw out the treaty, then known as the European Constitution.

"When France voted No, people were worried that the whole EU would freeze up," said David Woo, currency chief at Barclays Capital. "Germany was the Sick Man of Europe and there was a fear that disenchantment could cause the euro to fall apart. But three years have gone: nothing has frozen, and Germany is strong,"

The truth is that Ireland is considered too small to count. Never mind that Lisbon is legally null and void if one member state fails to ratify. Traders are betting that Europe's clever lawyers will find a way to slip the text through as adjunct to Croatia's accession treaty. But the euro-elites will have to handle yesterday's upset with extreme care. It will rankle if bully the Irish, or move too flagrantly to disregard their verdict. There are already signs that Nicolas Sarkozy plans to use France's EU presidency to steamroll the treaty through by "legal" measures. This sort of behaviour could destroy the union altogether.

Once again, it has been revealed that the EU political class cannot secure popular assent for further advances of the European Project whenever it's put the test. The only two countries to vote on the euro - Denmark and Sweden - both said 'Nej'. The only country to vote on the Nice Treaty - Ireland - said no. Now the only country to vote on Lisbon has said no. The British would almost certainly have done the same, so might the Poles, French, Dutch and Scandinavians.

Wise heads in Brussels - including the European Commission's president, Jose Manuel Barroso - warned against this second attempt to ram through the constitution. They said it was time for the EU to lie low, clean up its act, and do fewer things better. The leaders of France and Germany pressed ahead. They lost their gamble and will have to resort to shabby methods that will further sap the democratic legitimacy of the EU. This is dangerous.
Ireland is now the victim of a triple shock: the soaring euro, the collapse of the credit bubble, and the abrupt downturn in its key markets in North America and Britain.

It was fitting that the first district to report a No vote should have been Waterford, where the ancient glass company is in dire straits. The company sells three quarters of its wares in the dollar and sterling zones. A decade ago, the head of Germany's Bundesbank told the Irish that they could expect no mercy from the European Central Bank if they joined the euro and then got into trouble."The ECB will be blind to Ireland's needs, and deaf to cries of help," he said.

Prescient words. Under EMU, Irish interest rates fell to 2pc and remained below zero in real terms for most of this decade. The result has been a property boom, now turning to bust. Household debt has reached 175pc of GDP. Property prices have already fallen 9pc over the last year. Fitch Ratings predicts a drop of 22pc from top to bottom.

The Irish government cannot do much about it. The ECB calls the shots. It made matters worse last week with talk of rates rises, driving up Euribor by over 30 basis points. This triggered another round of mortgage rises.
"Ireland will not escape a severe recession," wrote Bernard Connolly, global strategist at Banque AIG. The credit system has so far held up well, but the Bank for International Settlements says Irish lenders have become heavily dependent on the ECB since the capital markets seized up. They issued $35bn or euro bonds and notes in the third quarter of 2007 (up from $10bn in Q2), much of it for use as ECB collateral. Irish borrowers have $123bn in cross-border liabilities.

Like Iceland - where the economy contracted at a rate of 3.7pc of GDP in the first quarter - Ireland is a small, open economy with flexible labour markets. Pain will be intense, but recovery swift.

It is too early to tell whether Ireland's protest yesterday will inflict more damage to Europe's monetary union, already torn between North and South. The euro's creators always assumed that Brussels would acquire the apparatus of an economic federal state - with an EU treasury to level the cyclical ups and down of different regions through fiscal transfers, and a debt union to pre-empt the risk of a sovereign default.

The Irish have halted that process yet again, if only for a while. The euro remains in limbo, an orphan currency without a state to back it up, just as the economic downturn engulfs the region.

Support for euro in doubt as Germans reject Latin bloc notes

Notes printed in Berlin have more currency for bank customers who fear a 'value crisis'

Ordinary Germans have begun to reject euro bank notes with serial numbers from Italy, Spain, Greece and Portugal, raising concerns that public support for monetary union may be waning in the eurozone's anchor country.

Germany's Handelsblatt newspaper says bankers have detected a curious pattern where customers are withdrawing cash directly from branches, screening the notes to determine the origin of issue. They ask for paper from the southern states to be exchanged for German notes.

Each country prints its own notes according to its economic weight, under strict guidelines from the European Central Bank in Frankfurt. The German notes have an "X"' at the start of the serial numbers, showing that they come from the Bundesdruckerei in Berlin. Italian notes have an "S" from the Instituto Poligrafico in Rome, and Spanish notes have a "V" from the Fabrica Nacional de Moneda in Madrid. The notes are entirely interchangeable and circulate freely through the eurozone and, indeed, beyond.

People clearly suspect that southern notes may lose value in a crisis, or if the eurozone breaks apart. This is what happened in the US in the Jackson era of the 1840s when dollar notes from different regions traded at different values.

"The scurrilous idea behind this is that if the eurozone should succumb to growing divergences, then it is best to cling to most stable countries," said the Handelsblatt. "There are no grounds for panic. The Italian state is not Bear Stearns," it said.

Germans appear to be responding to a mix of concerns. Many own property in Spain or Portugal and have become aware of the Iberian housing slump. A spate of news articles in the German press has begun to highlight the economic rift between the North and South of eurozone. There is criticism of comments from Italian, Spanish, and French politicians that threaten the independence of the ECB, viewed as sacrosanct in Germany.

But the key concern appears to be price stability. Germany's wholesale inflation rate reached 8.1pc in May, the highest level in 26 years. The cost of bread, milk and other staples has rocketed, adding to the sense that prices are spiralling out of control. Ordinary people are blaming the new currency - the "Teuro" - a pun on expensive - for their travails in the supermarket, even though the recent spike in farm goods and energy prices has nothing to do with monetary union.

Inflation touches a very sensitive nerve in Germany. Holger Schmeiding, from Bank of America, said the country had suffered two traumatic sets of inflation in living memory, first in Weimar in 1923 and then in 1948.
"People suffered a 90pc haircut on financial assets in the currency reform of 1948. The inflationary effects of two world wars were catastrophic," he said.

A group of leading German professors warned at the outset of EMU that the euro would tend to be weaker than old Deutsche Mark, and that it would fuel inflation over time. German citizens were never given a vote on the abolition of the D-Mark, which had become a symbol of Germany's rebirth after the war. Many have kept a stash of D-Marks hidden in mattresses to this day. A recent IPOS poll showed that 59pc of Germany now had serious doubts about the euro.

The DM says: European Union citizens never wanted the Euro - only the politicians.

Britons want looser ties with EU

British voters would back radical moves to negotiate a new, looser relationship with the European Union, a survey has shown.

If the "trade-only" option were offered in a referendum, 64 per cent said they would vote in favour. Asked what should happen if Britain sought to negotiate a looser relationship but other nations blocked the move, 57 per cent said the UK should leave the EU, while 33 per cent said it should stay in.
Ruth Lea, director of Global Vision, said: "A looser relationship, based on trade and co-operation, rather than full political and economic integration, is consistently the option of the British people."

Gordon Brown has said Britain will not get a referendum on the Lisbon Treaty, although the House of Lords will vote on this decision this week.

Stuart Wheeler, the millionaire businessman and major Conservative donor, will make a High Court challenge, also this week, attempting to force the Prime Minister to call a public vote.

Let's talk tough with our EU friends. They might even like it

This is the crunch week for the Lisbon treaty. The Government's attempt to duck its promise of a referendum - by claiming that the treaty is fundamentally different from the EU constitution rejected in 2005 - faces its final challenges. On Monday, the High Court starts hearing a judicial review of that decision, brought by businessman Stuart Wheeler.

On Wednesday, as legislation enacting the treaty goes through its final stages in the Lords, peers vote on whether to enforce that referendum commitment. On Thursday, the people of Ireland, the only country to hold a referendum on Lisbon, have their chance to throw a spanner in the works.
Assuming it survives this triple assault (and a poll last week indicated that the Irish may yet vote No), the treaty will move inexorably towards ratification later this year. So after this week, the debate is likely to focus on what happens next. In particular, what stance should the Conservatives take?

Encouragingly, they are on record as saying that without a referendum, Lisbon will lack democratic legitimacy, and that they would not let matters rest there. That clearly means opening new negotiations - but how, and what might they achieve? Once approved by all EU members and incorporated into the existing EU treaties, the Lisbon treaty itself will no longer be open for renegotiation. Other members will have no interest in reopening those treaties as they apply to the EU as a whole. That does not stop the British government declaring that it is not satisfied with where this has left the UK's relationship with Europe - and, if backed by a strong mandate, setting out to negotiate changes in the way the treaties apply to this country.

What, then, should our objectives be? Clearly, the starting point should be that we want to stay part of the European family, building on free-trade relationships, joining in common programmes in areas such as security and the environment, and helping to foster peace and democracy across the continent. That does not mean signing up to "ever closer" political union and centrist bureaucracy.

We should seek to remove the UK from the provisions of Lisbon that compromise our independence in foreign policy, defence and justice. Any common policy in these areas should remain truly intergovernmental.
No future British government should be tied by common EU positions it inherits, or which arise from a majority vote on a proposal from the EU foreign minister. British courts should adjudicate British law decided by the British parliament.

The Tories have pledged in the past to repatriate control of agriculture and fishing to escape the EU's wasteful and damaging common policies in these areas. They have also pledged to reverse Labour's opt-in to the EU's social chapter in order to stop the flood of regulations that put at risk the competitiveness of British business.

In practice this is likely to mean a substantive change in the UK's compliance with large sections of the new treaties into which these regulatory powers have now been absorbed. At this level of negotiation, we should clear the air with a fundamental restatement of the terms of our membership of the EU, that establishes the kind of cooperative relationship with which the UK is comfortable - while allowing other countries to proceed down the path of greater political and economic union on which they seem set.

Far from being a political risk, this is exactly what the British people support, according to polls for Global Vision, the campaign group I chair. Close to half the population consistently favours a looser relationship for the UK based on free trade and cooperation - which, when added to the quarter who just want to leave, is an overwhelming mandate for change. More than a third of voters across all parties would be more likely to support a prospective Conservative government that pledged to negotiate a change in our relationship; a quarter would be less likely. By more than two to one, the electorate would support such a change if it were put to a referendum.

To strengthen its mandate, a government pursuing this path should promise a referendum on the outcome, seeking a settlement in Europe that it can recommend wholeheartedly to the public. If some in Europe tried to frustrate that wish, they would run the risk that a British majority would favour withdrawal from the EU. Our polls show that is the likely result.

Would Europe accommodate us? There are good reasons for believing so. Europeans have more at stake in terms of exports to the UK than we do in reverse, so in reality our trading relations are unlikely to be affected. More importantly, they would realise that a needless rift with the UK would make it harder to maintain the many areas of cooperation within Europe where we all benefit from working together.

Equally, once they understood that the UK was serious, many European leaders might be glad of a resolution that let the core members of the EU pursue integration without the UK always applying the brake. Giscard d'Estaing has already raised just this possibility.

It is clear that the imposition of Lisbon on the British public need not be the end of the road. It could spur a long-awaited realignment, with which the UK is finally at ease. People are ready. All it takes is a government to give the lead.

Lord Blackwell is chairman of Global Vision. He was head of the Prime Minister's Policy Unit under John Major.

John Bolton: Lisbon Treaty will undermine democracy

The Lisbon Treaty poses a threat to Nato and undermines democracy by handing more power to Brussels, a former senior advisor to President George W Bush has warned.

John Bolton, a former US ambassador to the UN who served under Ronald Reagan and George Bush senior, said the new Treaty could hurt the military alliance between Europe and the US. He was speaking only days before Ireland hold a referendum on the EU Treaty, the only member country to do so, with the latest polls showing the Yes campaign slightly ahead.

But an Irish vote No on Thursday will mean the Treaty, which abolishes dozens of national vetoes and creates the new post of EU president, cannot come into force in any of the 27 member states.

The Treaty is also subject to a High Court challenge in London today (mon) and a vote in the House of Lords on Wednesday.

Mr Bolton has previously warned the deal threatens Britain's special relationship with the United States and yesterday said he would not understand the Irish giving "more powers to bureaucrats." He added: "The only people you elect have a very limited role and I think this treaty will further enhance the power of institutions in Brussels without extending democratic authority to people." Speaking before he delivered a speech on transatlantic relations at University College, Dublin, Mr Bolton warned the Treaty could "undercut" Nato, something that would be a "huge mistake". He argued that if the EU has its own military capability, people will think Nato is redundant and Europe "can take care of their own defence".

The latest referendum opinion poll, published by the Sunday Business Post yesterday, indicated a tight contest with the Yes vote at 42 per cent compared to 39 per cent for the No campaign. The result is a blow for those opposed to the Treaty Â a similar poll conducted on Friday gave them a five-point lead Â but the overall trend is a surging No vote.
Gordon Brown has said Britain will not get a referendum on the Lisbon Treaty, although the House of Lords will vote on this decision this week. But Stuart Wheeler, the millionaire businessman and major Conservative donor, will today (mon) begin a High Court challenge, attempting to force the Prime Minister to call a public vote.

A Global Vison/ICM poll published yesterday found 64 per cent of Britons would back a renegotiated looser relationship with the EU in a referendum, against 26 per cent who would oppose it.

The DM says: The European Union has never been a democracy. The relentless drive towards a federal Europe has no popular support. It must fail in the long run. We will Leave the EU when we see it for what it is.

Irish voters likely to sink EU treaty, poll shows

Dublin lampposts carry posters with conflicting messages as political parties step up their campaigns ahead of the referendum vote on the Lisbon Treaty. The European Union is bracing itself for a fresh bout of doom and gloom as the Irish look increasingly likely to reject the new Lisbon treaty, wrecking years of efforts to reshape the way the community is run.

The latest opinion poll shows those intending to vote against the EU's reform treaty doubling in strength in recent weeks, soaring to a five-point lead over the Yes camp.

A vote against the treaty would sink the ambitions of Berlin, Brussels and Paris to reshape the EU by giving it a sitting president, foreign minister, a diplomatic service, a new voting system and decision-making powers, and streamlining the European commission. After previous negative referendum results in Ireland, France, and the Netherlands over the past seven years, an Irish rejection would also be hailed - at least by Eurosceptics - as a massive vote of no confidence on the way the EU is run.

Ireland's governing and main opposition parties, all strongly in favour of the treaty, were panicking yesterday, despite the news earlier in the week that Ireland's farmers would finally back the treaty.

An Irish Times poll showed the treaty opponents have made meteoric gains, doubling from 17 to 35% in recent weeks, while the treaty's supporters slumped from 35 to 30%. With just five days to go before the only popular vote on the treaty in a union of 27 countries, the Yes camp faces an uphill struggle to reverse the momentum for ditching the treaty.
"The referendum is heading for defeat," said an editorial in the pro-EU Irish Times. "There is a dramatic shift in public opinion towards a No vote ... The government and its allies may find it impossible to turn the tide. The Lisbon treaty may not be passed."

Treaty opponents believe loopholes will mean Ireland loses control in areas such as tax, trade, abortion and military neutrality. Pro-treaty parties have accused them of scaremongering.

As an amending treaty, augmenting and revising previous European treaties, the document is an indigestible compendium of articles, legalisms, and protocols. It matters. But it is not an easy read. This factor is contributing hugely to the No campaign's success in turning the Irish against the new dispensation.

Analysis of Friday's poll results showed that confusion was the key to turning voters against the treaty. Many voters said they were voting no because they could not understand the treaty.

The Lisbon treaty, masterminded last year by Angela Merkel, the German chancellor, and signed by EU leaders in December, is the response to the failed attempt to craft a constitution for Europe, a campaign wrecked by French and Dutch No votes in 2005. The new treaty retains most of the institutional innovations mooted in the draft constitution, but is stripped of the symbolism of constitutionality.

In Brussels, Irish officials are worried the vote will be lost. Dick Roche, the Europe minister, has warned friends his government is in trouble. "He felt it could go badly. He's worried about losing," said a source who spoke to Roche this week. The referendum campaign contributed to the resignation of the Irish prime minister, Bertie Ahern, last month. A No vote could bring down his replacement, Brian Cowen, who said on Friday that he would take responsibility for the result.

Ireland, uniquely in the European Union, is constitutionally bound to stage referendums on EU treaties, meaning that less than 1% of the EU's population of more than 450 million has the power to determine the fate of European treaties.

How the Euro-gravy train hit the buffers

The EU must be made to listen to concerns

Irish referendum could scupper EU treaty

In 1973, when Ireland joined what is now the European Union, it was the poorest country on the continent. Today, thanks in no small part to £32 billion in EU grants, it is the second richest per capita (after Luxembourg).

So the result of a referendum on June 12 on whether to consolidate EU powers by ratifying the Treaty of Lisbon must surely be a foregone conclusion? Think again.

Despite every major political party backing the Yes campaign, support for a No vote is growing daily. The most recent poll put the Yes voters at 41 per cent and the No voters at 33 per cent.

That sounds like a healthy lead until you discover the Yes campaign was polling well over 50 per cent on the eve of another Irish EU referendum – on the Nice Treaty in 2001 – before the electorate delivered a resounding No.

In Brussels, European parliamentarians are twitchy about the future of the EU's 495 million citizens resting in the hands of the one million Irish voters expected to turn out on polling day. Having spent two years rebuilding the Treaty of Lisbon from the scrap parts of the defeated European Constitution, the Eurocrats can only watch as a learner driver takes the wheel of their juggernaut and drives it towards the edge of a cliff.

This scenario has arisen because, while all 26 of the other member states have decided to wave through the treaty via their parliaments (the UK included), Ireland alone has a legal obligation under its constitution to put the matter to a public vote. Because the treaty must be passed unanimously by all 27 member states, an Irish No vote would kill it.

Earlier this week, the European Commission president, José Manuel Barroso, suggested a No vote would be catastrophic for the EU. "We will all pay a price for it, Ireland included," he said, adding that there was "no plan B" if Ireland exercised its veto. Mr Barroso and his cohorts argue that the treaty represents the next glorious stage in the EU's future, creating a new post of full-time European Council president, streamlining the European Commission and redistributing voting powers.

If you don't find these allegedly crucial changes inspiring, you're not alone.
And therein lies the fundamental problem for Ireland's Yes campaigners. Try as they might, they have been unable to come up with anything approaching a coherent, inspirational argument for a Yes.

Most tellingly of all, the new Irish premier, Brian Cowen, has admitted he hasn't read all of the 287-page treaty, and nor has Ireland's EU Commissioner, Charlie McCreevy, who said no sane person could read it from cover to cover.

Asked to sum up why the Irish should support Lisbon, Micheál Martin, director of the referendum campaign for one of the big three parties, Fianna Fáil, said: "First of all, the purpose of the treaty is to ensure that the EU is reformed so that it is more efficient and effective in meeting modern challenges…"

Cue widespread yawns from voters. And the leaders of the other main parties have been equally soporific, leaving an open goal for any No campaigner with the charisma and ability to play on popular fears.
Such a man is Declan Ganley, a multi-millionaire businessman who formed the campaign group Libertas to fight first the European Constitution and now the Lisbon Treaty. Along with such powerful voices as the Irish Farmers Association and leaders of the Roman Catholic Church, he has given voters a dizzying array of reasons to vote No.

The farmers, who have received two thirds of Ireland's EU subsidies, argue that their handouts will be drastically cut, devastating rural areas.
Pro-life groups say Ireland will be forced to relax its abortion laws, pacifists say Ireland's cherished neutrality will be in danger because of provisions for a European army, and patriots say Ireland will be giving up the independence it fought so hard for less than 100 years ago.

On top of all that, there are fears that a centralised taxation system will mean the end of Ireland's favourable 12.5 per cent corporation tax (compared with the UK's 28 per cent), which has helped attract so many businesses.

John McGuirk, a leading member of Libertas, told me: "We will lose huge influence if Lisbon is ratified and we will get nothing in return. It will open the doors for Europe to interfere in our taxation system, and it will place huge restrictions on what rights we have to set our own laws."

While the treaty may yet get a Yes vote – the online bookmaker Paddy Power is offering odds of 1-4 for, 5-2 against – it all depends on whether the voters turn out on the day. There is a real danger that apathy will prevent pro-Lisbon support being transformed into votes.

Éanna Nolan, a 38-year-old civil engineer, told me: "I am tending towards voting Yes, if only because the Yes campaign has the backing of all the major parties, whereas the No campaigners are people like Sinn Fein and [the singer] Dana." Miriam Laird, a 28-year-old accountant, said: "I've always been pro-Europe, so I'm in favour of the treaty."

Yet both of these voters were not sure whether they would even bother to turn out on polling day. In contrast, the No campaign supporters I spoke to were clear about their reasons for turning down the Lisbon Treaty – and about their intention to cast a vote on June 12.

Pádraig De Faoite, 22, a student teacher, said: "We're giving away our democracy and we have no idea what's going on in Brussels. On top of that, migrant workers will be able to come in from all over Europe and undercut Irish workers, so it will cost jobs."

Ide Nic Mhathuna, 24, an office administrator, cited the plight of Ireland's fishing industry, which has all but disappeared under the EU, as one of her reasons for voting No. "A friend of mine who is a fisherman appeared in court this week for catching too many fish in the Irish Sea," she said. “He's going to have a criminal record now, and it's crazy."

If Ireland rejects Lisbon on the basis of what might be termed parochial reasons – say, abortion or farming subsidies – and the vote is close, the country could be given opt-outs that would salvage the treaty. But if it votes No by a substantial margin, and the reasons for doing so are varied, it will be impossible to resuscitate the fatally wounded treaty. The EU will be faced with the prospect of starting all over again with a new document several years hence, or trying to bring in changes one by one.

Such an outcome would not, arguably, be a disaster (the EU has managed to keep functioning despite the 2005 Constitution being rejected) but it would leave European leaders with serious questions about the union's future. The fact that France and Holland rejected the European Constitution in 2005 was a clear warning that support for the project among ordinary people may be waning. This time, only Ireland has dared risk asking what people think. And if a country that has benefited so clearly from EU membership decides to distance itself from Brussels, it would be proof positive of just how far disillusionment with the EU has spread.

Ireland’s EU referendum will be no walkover

Daniel Hannan says that the vote on the Lisbon Treaty is not in the bag for the ‘Yes’ camp, which has no argument to offer. Meanwhile, the ‘No’ campaign is gaining ground every day.

In Brussels, even the smuggest fonctionnaires are starting to look uneasy. After the French and Dutch ‘No’ votes of 2005, EU leaders determined that there should be no more plebiscites. But there was one vote they couldn’t cancel: Ireland’s national constitution requires referendums on any cession of sovereignty. And so, in three weeks’ time, three million Irish voters will cast proxy ballots for 500 million unconsulted Europeans, determining whether the EU gets the Lisbon Treaty, née European Constitution.

The ‘Yes’ side is well ahead in the polls — with 35 per cent to the ‘Nos’ 18 per cent (47 per cent undecided) according to the last survey — but that’s not how it feels. The pattern of all previous Euro referendums has been for the ‘Nos’ to surge in the final week. (‘If you don’t know, vote no!’ is a pretty knockdown last-minute slogan.) While the betting is still on a ‘Yes’ — just — Irish Euro-enthusiasts feel jumpy and baffled. They struggle to explain what is happening and ask — for it is human nature to place yourself at the centre of the universe — how their countrymen can have drifted so far from them.

Their bewilderment is understandable. Pro-Treaty forces — if I can use that loaded term in an Irish context — enjoy every conceivable advantage. The newspapers are unanimously in favour of Lisbon. So are all the parties except Sinn Féin. The Greens, traditionally Eurosceptic, have joined the government and so switched sides, confirming the rule that no party is ever anti-Brussels while in office. The main business organisations — as against actual businesses — have lined up behind the ‘Yes’ campaign, ensuring that it has almost all the money.

It should be a walkover. But the Euro-integrationists are taking no chances. There is a danger that the vote might become a referendum on Bertie Ahern, who has been accused of corruption. What with the EU accounts having not been signed off for 13 years, the last thing the ‘Yes’ side wants is a campaign about what the Irish call ‘gombeenism’ (very roughly ‘sleaze’). So Bertie was persuaded to step aside, ensuring that the vote will be held during the honeymoon of his successor, the Euro-fanatical Brian Cowen, known to his detractors as ‘Biffo’: Big Ignorant F***er From Offaly.

To be absolutely certain, Euro-enthusiasts also changed the law. Until 2001, Ireland had exemplary rules on the conduct of referendums, providing for every household to receive a mailshot setting out the case for either side. But, following the ‘No’ to Nice, this rule was repealed, allowing the ‘Yes’ side’s massive financial advantage to tell. A consequence of this alteration, of course, is that all Irish referendums — not just those to do with Europe — are now open to bias. Thus does the EU serve to vitiate democracy within its member states.

All in all, Irish ‘ayes’ should be smiling. But, from the moment the campaign began, things went wrong. First, a French minister announced that her government, which currently holds the EU presidency, planned to harmonise business taxes around the EU. ‘Yes’ campaigners were horrified: Ireland’s economic miracle owes a good deal to the fact that its corporation tax is 12.5 per cent, as against 27 per cent in the UK, and far higher in many Continental countries. Ireland’s Europe minister, Dick Roche, called his French colleague’s remarks ‘untimely, unhelpful and inappropriate’. Significantly, he didn’t call them ‘untrue’.

With spectacular clumsiness, the EU decided to shelve the plan until after Ireland had voted — a fact that was then leaked. This was to set the pattern for what followed. Again and again, Euro-integrationists postpone some contentious measure until after the referendum and then — where but in Brussels? — write a memo explaining the need for secrecy. I am looking at one now. It proposes the creation of common policies on justice and home affairs which, however, are not to go live until the ‘Yes’ vote is in the bag.

As the ‘Yes’ side is floundering, the ‘No’ coalition is, for the first time, getting its act together. In the past, it was made up of anti-abortion campaigners, peace activists and Republican hardliners. Now it is also full of articulate youngsters centred around a slick think-tank called Libertas. Meanwhile, Irish farmers, once a reliably pro-EU constituency, are getting tetchy. Last week, with lordly insensitivity, Peter Mandelson told agrarian leaders that they had got their facts wrong. You can imagine how that went down.

Three cheers for a British patriot

I don't suppose Labour's drubbing in the local elections was attributable to its refusal to hold a referendum on whether we should sign the Treaty of Lisbon, but that refusal - in contravention of a manifesto promise - is indicative of the arrogance and dishonesty with which the Brown terror conducts itself.

How appropriate that, as Labour digests its humble pie, it should hear that a very wise judge, Mr Justice Owen, has allowed a judicial review of its appalling decision to renege on the promise of a referendum.

While the judge deserves the congratulations of all right-thinking people, the real hero is the former spread-betting tycoon Stuart Wheeler, who has invested a huge amount of his money in the patriotic cause of stopping the European juggernaut from careering all over our constitution.
It might be too much to hope that the judicial review will have the guts to overturn the decision: but given the state Labour is in, the court should recall there's no better time to kick a man than when he's down.

Germans turn on euro

About 34pc of Germans want to ditch the euro and bring back the deutschmark, a poll showed yesterday - 10 years to the day since the decision to launch the single currency was taken.

According to the poll, by the BdB German banking federation and published in the Berliner Zeitung newspaper, more than half of those surveyed think the euro is to blame for an increase in prices in recent years. In Germany the euro has the nickname "teuro" - a play on words combining euro and "teuer", the German word for expensive.

The decision to launch the euro was taken by EU leaders on May 2, 1998. On January 1, 1999 the currency began trading on foreign currency markets and three years later euro coins and notes entered circulation.

EU Plans Embassies around the World

The European Union will open its own embassies under a plan critics fear represents a "power grab" by Brussels officials pushing for a federal superstate. The secret plan represents the first time that full EU embassies have been discussed seriously.

The "Embassies of the Union" would be controlled by a new EU diplomatic service created by the Lisbon Treaty.

The Daily Telegraph has seen a high-level Brussels document discussing plans for a "European External Action Service" (EEAS) which was proposed under the new EU Treaty, currently being ratified in Westminster.
Talks have so far remained behind closed doors. Officials fear political fallout over plans to implement the new Treaty before it has been fully ratified.

Working papers circulating in Brussels suggest that more than 160 EU offices around the world, including in member states, would become embassies. The new service would rival established diplomatic services. Britain, with one of the world's largest, maintains 139 embassies and high commissions in capital cities.

Equally controversial is a proposal for EU ambassadors who would be accountable to the European Parliament.

"Parliament should aim for proper hearings of special representatives and ambassadorial nominees in the tradition of the US Congress for nominations of a clearly political nature," says the document.
Plans for the new foreign service have raised highly sensitive political issues by giving trappings of statehood to the EU and by fusing, for the first time, national diplomats with existing "eurocrats".

A vicious battle over who should control the diplomatic corps has broken out between national governments and the European Commission.
Countries such as Britain are alarmed that the EEAS, which is expected to take on some consular activities, would be a stepping stone to a single "supranational" euro-diplomatic service.

Meanwhile, Brussels officials fear that, if controlled by national governments, the new EEAS would draw power from "Community" bodies, such as the Commission, to inter-governmental institutions such as the Council of the EU, which represents member states.
"Any inter-governmentalism of policy areas under Community competence has to be avoided," states the confidential document.
"The EEAS will have to be in a specific way administratively connected to the European Commission."

The EEAS will number between 2,500 to 3,000 officials at its inception in January next year. It is then expected to grow to 7,000, or even up to 20,000, according to different estimates.

Britain, which loses its veto over the EEAS after it is created by a European summit decision expected in October, is expected to contribute around 20 to 30 senior diplomats to the EU service.

William Hague, the shadow foreign secretary, said yesterday: "As predicted the renamed EU Constitution is forming the basis of a power grab by the EU. It exposes Labour's stupidity in giving up the veto on an area key to Britain's interests."

A Foreign Office spokesman said: "The UK opposes and will argue against naming EEAS offices embassies.

People 1, Eurocrats 0

No one predicted a result on this scale. When the figures came through, a number of Euro-enthusiast MPs were unable to adjust to the news, and carried on trotting out the line that they had taken during the referendums: that turnout would be derisory, that no one cared about Europe, that the whole operation was a front for the Tories.
Derisory, eh? The participation rate of 36.2 per cent was in line with turnout at parliamentary by-elections, higher than at local elections, and substantially higher than at European elections (I was elected on a turnout of 24 per cent). And the proportions were staggering: 89 per cent voted “No” to the constitution.

To put it another way, the number of people who voted “no” was roughly the same as the number who voted for the incumbent MPs in the ten seats that were chosen. No wonder two of these MPs – one Labour and one Lib Dem – swapped sides during the campaign, defying their parties to announce that they would, after all, vote as they had promised in their manifestoes. Other MPs in marginal seats will now be fingering their collars nervously.

Not for the first time, the political class has been caught completely off-guard. MPs and journalists had convinced each other that no one cared about the European Constitution. There was an almost total news blackout about the referendum campaign. Last week, five protesters who had climbed onto the roof of Parliament received acres of coverage, while thousands queuing patiently beneath them to ask their MPs to keep their words and vote for a referendum were wholly ignored.

Yet, under the radar, a revolution was taking place. The news was spreading by email and by word of mouth. Groups of concerned citizens were canvassing from door to door. Local meetings were being organised. Campaigning in Eastleigh, I began to get the feeling that something huge was happening, although I didn’t want to jinx things by saying so. In the event, the scale of the vote was beyond what I or anyone else expected.
This is not just a rejection of the European Constitution; it is a rejection of the cosy Euro-compliant culture that pervades Westminster. Voters feel taken for granted. They feel lied to. They feel angry. And they won’t be ignored any more.

MPs ignore voters’ calls for a referendum on revised EU Constitution – will the Lords listen?

Open Europe bulletin: 10 March 2008
In the House of Commons on Wednesday, MPs voted against a referendum on the Lisbon Treaty. Around 30 Labour MPs rebelled against the Government and voted for a referendum. About 50 Lib Dem MPs abstained, with 13 voting for a referendum against the orders of Lib Dem leader Nick Clegg.

Three senior Lib Dem rebels - Alistair Carmichael, Tim Farron and David Heath - resigned as party spokesmen after refusing to back Clegg’s position of abstention, and voting for a referendum. Alistair Carmichael said: "It is so similar [to the Constitution] that I could not in honesty remove myself from the commitment I gave to my constituents." David Heath said "I've been personally committed to a referendum for a very long time and it's not just what was in the last manifesto, it's what I personally feel. And I wanted to be honest to myself and my constituents."

The vote came in spite of the results of private referendums held by the I Want a Referendum Campaign in ten marginal constituencies around the UK throughout February, which found overwhelming public support for politicians to keep their promise of holding a referendum on the revised EU Constitution. 88% backed a referendum, and even though the poll was unofficial, the referendums saw an average turn out of 36% - higher than in many local elections. In eight of the ten seats a greater proportion of people voted for a referendum than voted for the sitting MP. This is the highest ever turnout in such an unofficial ballot. Polling expert Anthony Wells from UK Polling Report said: "A turnout in the mid thirties is stunning for a private referendum”.

The campaign for a referendum now moves to the Lords, where the odds are more favourable. If the Liberal Democrats stick with their policy of abstention on amendments for a referendum, and the Conservatives and Labour peers cancel each other out, a large vote for a referendum by crossbenchers could produce a majority and ensure that people are given a say.

Will debt crisis push Euro to breaking point?

Daily Telegrap 10 March, 2008 Ambrose Evans-Pritchard

Europe's monetary union may be tested to near breaking point as the economic downturn engulfs the bloc's southern tier, and German investors cut off a crucial source of foreign funding, according a hard-hitting report by the Swiss bank UBS.

"The coming two years are likely to prove the most testing time for the coherence of the single currency to date," said Meyrick Chapman, the bank's Europe strategist. "We expect that it will emerge unbroken. There is too much political and economic capital invested to break the project. However, adjustments are likely to be severe," he said.

UBS warned of a "funding freeze" for countries with very high current account deficits, such as Spain, Portugal, and Greece that have come to rely on in massive inflow of foreign money to plug the gap. Spain has built up the biggest cross-border liabilities with foreign debts of $362bn (£180bn), or 26pc of GDP. Italy has accumulated $275bn, Greece $129bn, Ireland $123bn, and Portugal $98bn.

Much of the funding has come from German banks and pension funds. They have shown a voracious appetite for cedillas (covered bonds) and other forms of Spanish debt at a voracious pace from 2005 to 2007. The yield was higher than stodgy offerings at home. The Germans have since brought down the guillotine.

"Following the market dislocation in July 2007, German buyers were almost entirely absent from the Spanish market," UBS said. The cut-off has left some Spanish borrowers starved of funds. Many have instead turned to the European Central Bank for temporary funding, using unsold mortgage as collateral for loans at the Frankfurt window. This is becoming a political issue. "It may raise awkward questions within the ECB Council," the bank added.

Under EU rules the funding is supposed to be "limited and temporary". Spain's banking association insists that the country's lenders are still in good health, with a solid capital base. The investor flight from the region has already become visible in the surging yield spread between German 10-year Bunds and equivalent Latin bloc bonds. After remaining steady in the mid-20s for several years, the spreads began edge up last summer and finally exploded this week. They reached 70 basis points for bonds from Italy and Greece, two countries with towering public debts over 100pc of GDP. "It is certainly a wake-up call to be cautious about fiscal policy," said ECB's president, Jean-Claude Trichet.

A number of hedge funds and banks are betting on a further divergence, taking out "short" positions on Club Med debt with an offsetting "long" contract on Bunds. Goldman Sachs, BNP Paribas, and Deutsche Bank have all advised clients over recent months to take out such positions. The "liability" countries deemed most vulnerable to such attacks vary among themselves. Spain has a current account deficit near 10pc of GDP and a collapsing housing bubble, but is in good fiscal shape. Italy's trade deficit is manageable but the country is falling into recession.

What all the southern countries have in common is a relentless loss of competitiveness against Germany, year after year for a decade.
UBS said it was unclear how Europe would deal with the likely crisis when it comes. EU rules forbid the ECB to provide liquidity to banks that are "potentially insolvent".

An IMF study said the "larger countries will end up footing a disproportionately large share of the overall burden". The Germans will not like that.

Irish banks may need life-support as property prices crash

The Dublin government appears to be almost powerless to prevent a severe downturn. Ambrose Evans-Pritchard reports

The Irish banking system faces acute strains and may require a phase of temporary nationalisation as the property slump leads to a wave of defaults, according to a leading Irish economist.

Morgan Kelly, of University College Dublin, said the government is almost powerless to stop the downturn becoming a severe slump. "We're in a classic post-bubble recession, yet we can't do anything that a country would normally do in this situation because we're inside the eurozone," Prof Kelly said. "We can't cut interest rates, we can't devalue, and there is a lot less room for fiscal stimulus than people think. We're stuck.

"We have a domestic recession now colliding with a global recession. It is the state of the banking system that will determine how terrible this will be, and frankly that is looking very shaky."

Irish house prices fell 7pc last year. The pace of decline has accelerated so far this year. The damage is spreading to the broader economy. Unemployment jumped to an eight-year high of 5.2pc in February, from 5pc in January.

"We are going to see banks on life-support with very big bail-outs. The precedent for this is what happened in the Nordic countries in the early 1990s when they had to take over the banks. We may have to do something similar," he said.

Two of Sweden's largest banks were nationalised before being nursed back to health and refloated. The Nordic rescue is seen as a model of how to tackle a banking crisis. However, Sweden succeeded only after it left the ERM's fixed exchange system and regained control of its monetary instruments.

The Bank for International Settlements said in its latest report that there had been a surge in euro bond and note issuance in Ireland in the third quarter to $35bn (£17.4bn), up from $10bn. This is a huge sum for a country of 4.2m people.

It appears to reflect a distress move by banks to raise money for use as collateral at the European Central Bank after the credit crunch hit. "The increase in net issuance came mostly from financial institutions, whose borrowing in securities markets had largely dried up," said the BIS. Irish borrowers built up $123bn in cross-border liabilities.

Ireland has been a star performer over the past 20 years, transforming itself from a high-tax backwater in the early 1980s to a free-market tiger. However, the country is the most exposed in the EU to both the dollar and sterling blocs, leaving it more vulnerable to trade and investment effects of the soaring euro.

Prof Kelly said Ireland had lost 20pc competitiveness against its trade partners since the launch of EMU.

Eurozone rates of 2pc in the early part of this decade fuelled a credit bubble that has gravely distorted the economy. Household debt has reached 190pc of disposable income, the highest in the developed world. Bank lending rose by 30pc annually. Construction reached 15pc of national income, with 280,000 employed there,

Matthew Taylor, a credit expert at Fitch Ratings, said 27pc of all outstanding loans by late last year were to property and construction, leaving banks heavily exposed. Irish Nationwide Building Society has been downgraded from A to A-.

"If the downturn proves more severe than expected, a wider range of rating actions on Irish banks may be required," he said. For now, the problem looks "manageable".

Over 55pc of all mortgage loans are at floating rates, with several banks offering 100pc mortgages at the top of boom. Interest-only loans made up 16pc of the total borrowing in the third quarter of 2007. Anglo-Irish Bank, Allied Irish Banks, Bank of Ireland and EBS, all have a big stake in the property sector.

The establishment has pretended it's business as usual. But the mood is now changing. The Irish Independent warned this week that the country is sliding into a serious slump.

"Look at all the signs: every single one is screaming that the economy is in big, big trouble. Housing market dead, new car sales dead, consumer confidence is dead, record job losses, exporters being killed off by a strong euro, fuel prices spike, housing repossessions increase," it said.
Ireland is the only country to hold a referendum on the EU's revamped constitution, now called the Lisbon Treaty. The darkening economic picture may greatly queer the pitch.

9Opc call for vote on EU treaty

MPs were under huge pressure last night to support a referendum on the new EU treaty after the biggest test of public opinion on the issue so far showed almost 90 per cent of voters want a ballot.

More than 133,000 of the 152,000 people who responded in a series of mini-referendums backed a national vote on the Lisbon Treaty, which would transfer more of Britain’s sovereignty to Brussels.

The results intensify the pressure on Labour and Liberal Democrat MPs — particularly those with slender majorities — to defy the leadership of their parties and back a Tory bid to secure a referendum in a Commons vote this week.

Gordon Brown has consistently refused to grant a national vote, insisting Britain’s interests are not threatened, but campaigners said yesterday’s poll results sent a “clear message” to MPs that the public want their say.
The mini-referendums, organised by the cross-party I Want a Referendum campaign group, were conducted in 10 marginal seats held by Labour and Liberal Democrat MPs.

These included those of Jacqui Smith, the Home Secretary, Ruth Kelly, the Transport Secretary, Jim Murphy, the minister for Europe, and Chris Huhne, the Lib Dem home affairs spokesman.

In total, 88 per cent of respondents backed a referendum on the EU Reform Treaty, which was signed in December in Portugal and became known as the Lisbon Treaty. Voters were also asked if the UK should approve the treaty. An overwhelming majority — 89 per cent — said no.
The turnout of 36·2 per cent was higher than in most local elections.
The vote echoes the overwhelming response to The Daily Telegraph’s Let the People Decide petition for a referendum, which has attracted support from more than 115,000 readers. At the last general election all three main parties’ manifestos promised a referendum on the Constitutional Treaty, which was abandoned after thumping “no” votes in France and Holland in 2005.

The Lisbon Treaty, which most EU leaders agree is substantially the same, was then created to replace it.

The Prime Minister argues that the document has been stripped of its “constitutional elements”, such as plans for a new EU anthem and flag, and therefore does not merit a referendum.

However, if it is approved in the EU’s 27 states, dozens of national vetoes will be abolished and powerful posts of EU president and EU foreign policy chief will be created.

On Wednesday, MPs will vote on a Tory amendment to the Bill to ratify the treaty, which is now passing through the Commons. If the amendment is passed, it would be British people who would have the ultimate say on whether it should be ratified.

Rebels estimate that 30 Labour MPs will definitely join the Tories in voting for a referendum and 25 to 30 more could join them if they feel the numbers are shifting.

Although the Government’s majority of 64 is unlikely to be threatened, Labour whips are nervous of a big rebellion. A key factor will be the number of Lib Dem MPs who rebel and back the Tories. At least a dozen are rumoured to be ready to defy the party line.

A “no” vote in a national ballot would mean the treaty could not come into force anywhere in the EU. The only member state planning a referendum is Ireland, which is obliged under its constitution to hold one.

Following yesterday’s poll results, William Hague, the shadow foreign secretary, said it was now time for Mr Brown’s Government to grant the British people a say.

He said: “Now it is not just opinion polls that show the vast majority of people want to be given a referendum and want to say no to the Lisbon Treaty: these actual votes show it as well.”

Kate Hoey, the Labour MP for Vauxhall, who was threatened with expulsion from the parliamentary party for supporting the campaign, said: “All MPs should now take note, listen to their constituents and vote for a referendum on Wednesday.”

Derek Scott, the referendum campaign chairman, said it was a “magnificent turnout” and a “great result”.

The DM says: And still the politicians take no notice. When will they see that we must leave the European Union. There is no benefit in it for us.

MEP who likened Euro Parliament to Nazis to speak at Claygate meeting

A CONSERVATIVE MEP who has been threatened with expulsion from the European People’s Party (EPP) for his controversial comments in the European Parliament, is due to speak at a grassroots campaign group in Claygate next week.
EPP leader Joseph Daul threatened to throw South East MEP Daniel Hannan out of the union after he compared the powers of the European Parliament to those of the Third Reich in Nazi Germany.
Mr Hannan argued that the European Parliament was in danger of straying into arbitrary government with its new powers.
On his Daily Telegraph blog he said: “The whole business is outrageous. I am almost tempted to compare it to the Nazi Ermachtigungsgesetz — the Enabling Act of 1933.”
However he later apologised, adding, “Whatever else MEPs are, they are not Nazis. Many of them have proud records of fighting totalitarianism throughout the world. That is why it was so disappointing to see them resorting to this appalling measure in order to silence dissent.”
Mr Hannan is due to be the guest speaker on Friday February 15 at Claygate Village Hall at 8pm as part of a campaign for a referendum on the Lisbon Treaty.
He has campaigned strongly against a federal Europe and was the first person in Britain to call for a referendum on the EU Constitution back in 2001.

New Global Vision Paper Finds That Millions Of Taxpayer Money is Being Wasted By EU: Feb 08

Matthew Elliott and Dr Lee Rotherham recently unearthed a staggering £101 billion of government misspending in the UK - all paid for the taxpayer – in The Bumper Book of Government Waste 2008. Building on their previous research, a new paper for Global Vision investigates one of the major culprits behind the growing mountain of waste – the European Union. In a highly bureaucratic culture open to abuse, fraud and corruption, Elliott and Rotherham found that:

“The shameful thing about EU waste is no longer the extent of it. It’s that we have become used to it. The shocking thing is that we are not longer shocked.

“Perhaps MPs currently debating on giving the EU new powers through the Lisbon Treaty should stop, and instead concentrate on fixing what’s already gone wrong. ”

The DM says: The costs of the European Union have always been inflated by a staggering amount of waste, fraud and corruption.

"Treaty is the Tipping Point" Reports Open Europe: 2 Feb 08

The revised EU Constitution is now being debated in the Houses of Parliament. During the debate Michael Connarty, the Labour Chairman of the Commons European Scrutiny Committee, said that compared to Maastricht, "the Lisbon Treaty represents a more significant point in our relationship with Europe", and that the "[Lisbon] Treaty is the tipping point". Mr Connarty, who supports the new Treaty, noted that it "will take the centre of power away from this Parliament to Brussels. There is no doubt about that." He also added that under the Treaty "the role of national Parliaments will be massively diminished."

The debate has been attacked as a “sham” over the past week. In the Independent Simon Carr wrote "There's no scrutiny of the Lisbon Treaty at all. It's just not happening. It's a sham".

Despite previously saying there would be sufficient time for line-by-line scrutiny of the Treaty, the Government cut the number of days of debate to only 12. The BBC noted that "MPs are absolutely furious about the way the government has divvied up the time for them to scrutinise the bill ratifying the Lisbon Treaty". (28 January) The Liberal Democrats voted with the Conservatives to oppose the reduction of debating days, but this was defeated by the Government.

A leaked EU Presidency document obtained by Open Europe last week showed that the full details of the powers being handed to Brussels under the EU Treaty are still to be finalised. It showed that a range of issues, such as the salary of the new EU President and the powers of the new Foreign Minister and his Diplomatic Service, have yet to be decided, meaning that MPs would effectively be signing a “blank cheque” if they ratify the Treaty without a referendum.

Denying us a vote on the EU treaty is arrogant cowardice

Without the debate a referendum would bring, Britons will rebel against unsanctioned meddling, to the union's detriment

Simon Jenkins; The Guardian, Jan 23, 2008

The House of Commons is about to do a proper job. For the next month it is not discussing the new European constitution or "Lisbon treaty". That is sealed and delivered, and was so back in 2005. The Commons is discussing whether Britain should agree to it, and how. The debate is already angry and bad-tempered, an excellent sign.

On this subject there are just two facts that matter. The first is that everyone but a fool (or a minister) knows that the new treaty is the rejected 2005 constitution in all but name. Its architect, the former French president Valéry Giscard d'Estaing, says so. The German chancellor, Angela Merkel, who negotiated its passage, says so explicitly. Even the pro-government Commons foreign affairs committee said so, at least in part, last week. As the pro-EU Tory Kenneth Clarke remarked in the Commons on Monday, the foreign secretary, David Miliband, would look less miserable if he abandoned his absurd denial, admitted reality and got on with the debate.

The second fact is that all three parties promised voters at the 2005 general election that their view on the restructuring of the EU would be sought in a referendum. Both Tony Blair and Gordon Brown pledged there would there be no question of "bringing it back with a few amendments" and pretending it was different. There were no ifs, buts or equivocations. There were no references back to previous referendums or debating points about the Single European Act. There was just an old-fashioned, cast-iron, read-my-lips, democracy-is-sacred, thundering great pledge.

Given the brutal mugging and facial disfigurement to which this pledge has been subjected by Brown's ministers, it is probably best remitted to the private confessional. A more vigorous debate is whether, irrespective of pledges, there should be a referendum anyway. Parliament cannot now alter the Lisbon treaty, but it can accept or reject it and determine the means of ratification.

Any argument about any referendum is dogged by the outcome usually being predictable from opinion polls. At the present moment 80% of the public wants one, though opinion is evenly divided on whether the treaty should be approved. Nonetheless, its advocates do not want to take the risk. Thus to want a referendum is seen as opposing the treaty, and to argue against one is seen as defending it. The democratic case for a referendum as such is corrupted.

Hence the agony of the Liberal Democrats who, on this matter, are neither liberal nor democratic. They too pledged a ratification referendum. But they have never been able to see, hear or speak evil of Euro-centralism, and therefore hold that a referendum on the treaty (which might be lost) should not be risked while one on withdrawal from Europe (which might be won) can be. The party's leader, Nick Clegg, wriggled and squirmed when asked yesterday if he would support the government and oppose a referendum. It was like asking a Catholic if he would support the Pope.
Referendums are customarily used to approve changes in a nation's constitutional structure. In this they have replaced the traditional British way of reform of bipartisan royal commissions. Given the pace of centralisation in many European states, referendums have increasingly been used to limit centralisation, to reallocate and fix power vertically between tiers in a democracy.

Thus a referendum was used by the British government to validate Scottish and Welsh devolution. Blair pleaded for one to both France's Jacques Chirac and the British electorate, to validate devolution upwards to a new and clearly more potent EU. The need for such validation had special force given the constitution's extraordinary "passerelle" clause, enabling Europe's new institutions to extend their powers without recourse to further treaty amendments. Blair rightly took the view that such a marked transfer of sovereignty should receive a specific democratic mandate.
Let us assume for the sake of argument that Blair was wrong and Brown and Miliband are right. Let us assume that the mechanisms by which Britons are governed can be determined not by British electors or partisan cabinets (or even royal commissioners) but by former French presidents at chateau seminars. This is what I call the "Holy Roman Empire" case for the treaty.

Let us further assume that subtleties of modern government are such that ordinary people cannot hope in future to understand them, and that they are best left to a sophisticated supranational oligarchy: the "Brussels Raj" case. Let us finally assume that the rights of Europe's minorities - even of entire states - are too trivial to be allowed to impede interests with most leverage on the Council of Ministers: the "majoritarian dictatorship". (I had better add the ontological, or Liberal Democrat, case: that because Europe exists anything tagged European is good.)

Assuming all this, what happens next? We all know the answer. People fed up with bureaucratic meddling in their lives will gradually withdraw consent from honest government. As under communism they will evade, fiddle and go apathetic. Faced with a torrent of Euro-directives - some possibly virtuous, on free trade, energy saving, public safety, terrorism, civil rights, building regulations and conservation - they will disregard them, as Mediterranean countries ignore or corrupt any public administration they do not like.

I do not want this sort of Britain. It will happen not because voters were cheated of a promised referendum. Most will just shrug and say: "Typical politicians." It will happen because no attempt was made to persuade them of the worth of a substantial transfer of their democracy off-shore, as would have happened in a referendum campaign. This neglect was not oversight. It was because the government thought its persuasion might not work (despite the polls suggesting it might). It was the arrogance of political cowardice.

Such an exercise would have benefited both sides of the argument. I still think Britain is better off as a member of the EU. Being dragged by trade necessity into accepting its regulatory regime, like Norway or Switzerland, is not sensible in an ever-more integrated continental economy. Britain is also one of the few EU countries that regularly resists the heap of corruption and self-aggrandisement that is the Brussels commission.

This stance is tenable only if Britons are willing participants in this "ever closer union", and many are unwilling. Not asking them will not increase their willingness. It will be worse than undemocratic, it will be foolish.

The DM says: A little optimistic - the British have not yet revolted and demanded that we leave the European Union. When will they?

NEW BRIEFING PAPER FROM GLOBAL VISION DEMANDS REFERENDUM: 22/1/08

Ahead of the start of the Second Reading in the Commons today on the European Union (Amendment) Bill, Global Vision publishes a new briefing paper investigating why the EU Reform Treaty really does matter. The briefing paper’s author and Chairman of Global Vision, Lord Blackwell, states:

“Whether one is for it or against this Lisbon Treaty, it is now clear that it will have a major impact on our relationship with Europe. It can no longer be dismissed as just a tidying up exercise.

Those who favour an activist EU welcome the increased powers and streamlined decision making this Treaty gives to EU institutions. They see it as enabling the EU to drive forward an expanded agenda against the reservations of member states.

Those who favour a more limited role for the EU see the same transfer of powers as leading to further centralisation, over-regulation and intrusion into both the domestic and international affairs of member states. They favour keeping democratic control in our national parliament and elected government.

It is time the government opened up an honest debate about the kind of relationship we want with Europe and allowed a referendum before committing us to further European integration.”

The dangerous uselessness of 'Euroscepticism'

Here we go again, another festival of pointless calls for a referendum on the EU constitution. The whole thing reminds me of dogs chasing cars. What would they do if they caught them? What would happen if they held a referendum, and everyone voted ‘No’? Well, we already know. Nothing good. Ask the people of France, Ireland and the Netherlands, all of whom at various times have said 'No' to EU plans. They've either been sent back to do it again and come up with the right answer, or they have been ignored. And then what do they do?

The EU isn't going to give up its plan to become a Superstate just because the people of Britain (or anywhere else) vote 'No' in a referendum. Why should it? Such a vote would be silly anyway. You can't be in Europe and not run by Europe any more than you can be in Wormwood Scrubs and not run by Wormwood Scrubs. When we were bamboozled into voting for Common Market entry in 1975 (I voted 'no', but only just) we accepted the Treaty of Rome, which means, and clearly states that its target is 'ever closer union.

This has become more and more unpopular since 1975, as those who are paying attention (or are personally affected) have come to realise that the supposed crackpots of 1975 -Tony Benn and Enoch Powell - were actually quite right. Just as they warned, we were being asked to give away our national independence and this was the most important issue. Those who are dismissed as 'bonkers' almost always do turn out to be right later on, and there is probably a historical study to be done about this.

The obvious conclusion from this is that we should now leave. We were sold a fraudulent prospectus nearly 33 years ago. We have since suffered quite badly as a country, economically and politically - the full cost has been detailed by Christopher Booker and Richard North in a series of books, the best of all being 'The Great Deception' - books largely ignored by many reviewers and journals. We have held back ( quite rightly) from plunging fully into the project, so that we still more or less retain our own currency and our own legal system , our own diplomatic service and our own armed forces, so there is not too much unscrambling to do. And there is a strong, reasoned case for negotiating an amicable departure. If Norway and Switzerland, both far smaller and less globally-connected than we, can negotiate individual terms with the EU, then why can't we?

Now, I am not saying these terms would be perfect. But thanks to the existence of the World Trade Organisation, the EU simply cannot erect huge trade barriers against us, as it could once have done, and would be crazy to do so anyway - as it sells far more to us than we do to it. Mexico, most certainly not an EU member, has excellent trade terms with the EU. If we want to keep the much-touted rights to live and work in the EU, we no doubt can. Norwegians and Swiss nationals have them. They even have - which we should never agree to - passport-free travel to and from EU countries.

To the extent that we wish to trade with the EU, we would be under pressure to agree to EU rules about what we sell. We would no doubt have to pay some sort of contribution to obtain the 'benefits' of EU membership. But we would be able to negotiate this from a position of strength much more advantageous than the one a British prime Minister now finds himself in at Euro-summits. They want our markets far more than we need theirs. We would have no need to need to accept the supremacy over our Parliament of the European Court of Justice at Luxembourg. We would not be obliged to enact EU commission directives as British Acts of Parliament. We could issue our own passports in whatever colour we preferred (I favour a stiff-backed blue booklet myself) and (as does the USA and...Thailand) we could give our own citizens (we might let them become subjects again) greater rights to enter the country than persons from Lithuania or Romania. We could halt the absorption of our independent diplomatic service into the EU's. We could make our own individual trade agreements with the USA, and wouldn't need to get caught in trade wars between Washington and Brussels, as we frequently have been in the past. We could withdraw from the European arrest warrant system, and ignore the new 'Human Rights' commission in Vienna which is shortly to be the fount of political correctness across the EU.
All this is practicable, possible and well within our abilities as a major nation, quite grown up enough to manage on its own. The only reason it doesn't happen is that the leaderships of the main political parties won't put such a case to the British people. That is because they are both firmly biased in favour of our absorption into the Superstate, for reasons they have never been required to explain because they have never faced coherent opposition.

The large but powerless minority who understand the issue and know we could go it alone remain just that - a large and powerless minority. They would only become a majority if major political figures openly stated that we could go it alone, something they currently refuse to do though many of them know in private that it is so. So if EU membership (rather than the constitution) were put to the British people they would very likely vote to stay in, for fear of finding something worse. And, if this government is forced to hold a referendum on the constitution, it will contrive to turn it into a vote on EU membership, raising the stakes so as to frighten an ill-informed electorate into supporting the status quo.

But the energy which ought to be going into this is wasted on a thing called 'Euroscepticism', a political position as futile as its name is unwieldy. MPs in both major parties fritter away their energies on micro-complaints about the detailed operation of the EU, or individual issues of EU membership, while veering away from the issue of membership itself which is in fact the only point at which these wrongs can be righted. Their behaviour allows the party leaderships to treat the matter as an argument between those who want Britain to me more European EU and those who want Britain to be less European.

Next time a Tory (or Labour) MP tells you he or she is a 'Eurosceptic. Ask them just how long it is they are going to continue sitting in the middle of the road. They have been doubting this project now for decades. Isn't it time they made up their minds whether they support or oppose it? Nothing will happen until they openly oppose it. Those of you who continue to have illusions about the Useless Tories should note that Tory MPs who sign up to the 'Better off Out’ organisation seem to come under mysterious pressure to withdraw. And can I make a plea for any UKIP supporters not to bother me with yet more queries about why I don't support their hopeless Dad's Army Party. It's precisely because it hasn't a hope. Nothing will happen until the two major parties begin to collapse, and that's most easily begun with the Tories. Other entries on this blog, notably my archived posting from 16th October 2007, still available, deal with this at length.

The DM says: Spot on as regards the need to leave the EU, but we don't agree it is useless to oppose the EU Treaty/Constitution. If a major country like Britain says No in a referendum, the EU will have to think again about whether its drive for a federal Europe is achievable. Our whole relationship with the EU could need rethinking. Worth a try, in our view.

America picks up the pieces as storm moves to Europe

If the economic storm is peaking in the US, it has hardly begun in Europe. Bernard Connolly, global strategist at Banque AIG, says euro-losses may surpass the US debacle. "The next really big shock to financial markets is likely to be the risk of collapse in the EMU credit bubble: the private sector credit consequences are likely to be catastrophic,'' he said.

Budget deficits must stay below 3pc of GDP, on pain of fines. Germany once breached this with impunity, but that was before Angela Merkel appeared. Virtuous again, Germany now demands rigour. Since France and Italy are already nearing the 3pc buffer, they may have to tighten into a downturn. Monetary bail-outs are not allowed either, at least not until the German bloc gives a green light to the European Central Bank.

We are a decade into EMU. The outcome is what Bundesbank sceptics feared. Interest rates have been far too low for Club Med and Ireland, fuelling property booms. These have burst, are bursting, or will burst. The victims are beached with current account deficits of 10pc of GDP in Spain, 13pc in Greece. The "Nordics'' have surpluses, at Club Med expense. Italy and Spain have lost 30pc in labour competitiveness against Germany under EMU. France has lost 20pc. An attempt to deflate these countries back to balance will run into revolt.

Hedge funds are already circling. One has set up a Euro Divergence Fund. BNP Paribas said spreads on Club Med debt will soar this year to levels never seen in the euro-zone. "The markets are going to punish wrongdoing,'' said Hans Redeker, the bank's currency chief. "The politicians in Italy and Spain do not seem to realise how deep-rooted their problems are. They may have to cut real wages,'' he said.

"While tensions can be camouflaged during economic upswings, they surface during downswings. All failed currency unions were abandoned during times of economic stress,'' said the bank.

We are nearing the moment when the ECB must decide whether it is a bank or the political guardian of the EU Project. It cannot be both. The monetary crunch needed to restrain German wage deals, after the rail workers won 11pc, will crucify Spain.

Over 40,000 estate agents closed doors in Spain last year. Property prices are dropping in Madrid, Barcelona, and Seville. Spanish banks are issuing mortgage bonds to use as collateral at the ECB's window, without even trying to sell them on the open market. La Gaceta said this "abuse'' has reached euro40bn.

The ECB has taken the political pulse of Latin Europe and concluded that rigour is now too dangerous. It will face a hostile troika of Paris, Madrid and Rome if it persists, risking EMU schism. Trumped by politics, the Germanic hawks have climbed down.

The euro fell hard last week. It is the start of a long slide to levels that reflect a sluggish, half-reformed bloc in demographic decline. The euro must be weak, or it will break. Whatever happens, it is already too late to avoid the Latin Crisis of 2008.

The DM says: The euro never was likely to survive an economic storm. If it breaks, the constitution will become irrelevant - the whole idea of a federal Europe will come under question.

Tell truth on EU treaty, say MPs

The battle over the EU Reform Treaty has been reignited after an influential committee of MPs said that the document is no different to the defunct EU Constitution.

As the Government prepares to debate the treaty in the House of Commons, a report by the foreign affairs select committee concludes that it cedes vital powers to Brussels and that ministers are misleading the public by saying that it does not.

The findings come as campaigners reveal plans to stage a series of "mini-referendums" in 10 areas across Britain. The vote, organised by the cross-party I Want A Referendum group, follows a Telegraph campaign backed by more than 100,000 people.

The treaty begins its second reading debate tomorrow with the Government aiming to push it through both Houses of Parliament before the summer. Gordon Brown plans a parliamentary marathon, dealing with the document section by section in a debate that will go on for 15 days.
In its report, the Labour-dominated foreign affairs committee hits out at ministers for deliberately playing down the consequences of the treaty and calls on them to publicly put this right by admitting how much power it really hands to Brussels.

Crucially, the report concludes that there is no difference between the foreign policy provisions in the rejected European Constitution and those in the new EU Reform Treaty, now known as the Lisbon Treaty.
The committee says: "We conclude that there is no material difference between the provisions on foreign policy in the Constitutional Treaty which the Government made subject to approval in a referendum and those in the Lisbon Treaty on which a referendum is being denied."
It adds: "The Government risks underestimating, and certainly is downplaying in public, the importance and potential of the new foreign policy institutions established by the Lisbon Treaty, namely the new High Representative and the European External Action Service. We recommend that the Government should publicly acknowledge the significance of the foreign policy aspects of the Lisbon Treaty."

The committee says that the signing of the treaty was the culmination of a process which had "little scope for UK public or parliamentary debate and engagement".

It concludes: "We recommend that all amendments to the treaty, including extensions of qualified majority voting, should be done by primary legislation and not simply by a vote of the House."
Last night, the Conservatives said the report proved once and for all that the Government was guilty of a "stitch-up to cut out public debate".
William Hague, the shadow foreign secretary, said: "Gordon Brown's pretence that this treaty is not in effect the EU Constitution reheated and renamed is now ridiculous. All of his arguments have been discredited. He made an election promise that there would be a referendum. He said that keeping manifesto promises was a matter of trust between him and voters.

"If Gordon Brown still insists on ramming this treaty through, all those fine words will be exposed as the most cynical spin."

Ministers continued to insist last night that the treaty was a "good deal" for Britain. David Miliband, the Foreign Secretary, said: "The Reform Treaty gives Britain a bigger voice in Europe and enshrines children's rights for the first time.

"By opposing this treaty, the Tories are yet again completely isolated in the EU. The only parties that share their extreme position in 27 member states are the Portuguese communists, Sinn Fein, the Dutch ultra-Right fringe and the Dutch animal rights party."

But the swell of demands for a referendum showed no signs of abating. Organisers of "I Want A Referendum" announced on Sunday that half a million people in marginal constituencies will get their chance to have a say on the Treaty in what will be the biggest vote on Europe since 1975, when Britain voted to stay in the Common Market.

The DM says: It seems unbelievable that the Government could simply ignore the above select committee verdict and go ahead with implementing the new constitution. Sadly, it is just par for the course.

Brown hopes we've forgiven broken promises

Gordon Brown doesn't want to give you a vote on the revived EU Constitution. But, funnily enough, you might be about to be get one anyway, particularly if you live in a marginal parliamentary seat.

As the Government tries to push the rejected constitution - now rebranded the "Lisbon Treaty" - through the Commons next month, the I Want a Referendum campaign group will be organising a series of constituency-based referendums to be held across the country.

In the first phase, roughly half a million people will be getting ballot papers through their doors.

That alone will be the biggest vote on Europe since the last national referendum in 1975. For the first time in a generation, people will be asked in large numbers which way they want the European Union to go.
But even if people say they don't want the constitutional treaty, will the Government listen to them?

When the broken promise of a referendum first became an issue last summer, Gordon Brown was 13 points ahead in the polls. Today he is 10 points behind.

Arguably, that broken promise has played a big role in that reversal by driving a wedge between the Prime Minister and previously supportive allies in the media.

But one way or another, the Prime Minister is certainly no longer in a position to ignore the wish of the overwhelming majority of Labour voters to have a referendum.

Continuing to defend the decision to break the referendum promise would play perfectly into the hands of the Tories as they attempt to portray him as untrustworthy and cowardly.

Second, attitudes to the European Union are changing on the centre-Left and Labour backbenchers are reassessing their views.

In recent months, the European Commission has proposed a health directive that looks a lot like the Conservatives' old plan for a "patient's passport".

The Court of Justice has shocked trade union members with two rulings allowing wages to be dramatically undercut and cost the Treasury billions by allowing multinational companies to avoid corporation tax.

Most importantly, the Government's fundamental case is terrible.
The bottom line is that no one believes the Government for a second when it says that this isn't just the rejected constitution under another name.
According to a poll by YouGov, 94 per cent do not believe the Government.
But Gordon Brown's calculation is that although people want a referendum, and although they are angry that the Government has not kept its promise, ultimately people don't care enough.

Is this cynical assumption right? Are politicians right to take the voters for fools? The results of the forthcoming referendums will tell us.

• Neil O'Brien is spokesman for the cross-party campaign group, I Want a Referendum

EU clash hard on Dave as well as Gordon

It was one of those moments when Gordon all but puts his hands over his ears and says "la, la, la, la, I am not listening." At Prime Minister's Questions on Wednesday, Labour's leading Eurosceptic, Ian Davidson, stood up and made a very naughty inquiry.

"Were the Prime Minister and his Government aware of his predecessor's plan," Mr Davidson said, " to attend the conference of the main party of the French right to announce his candidacy for the presidency of the European Union, as a prelude to his candidacy for the presidency of the world, the universe and everything? Did the Prime Minister know of that intended candidacy when his predecessor was negotiating the European constitution, and did that not represent a conflict of interests?"

For a moment, the chamber resembled a Bateman cartoon with Mr Davidson as "the Man Who Asked a Question About Tony Blair". The PM's colleagues flinched. His circuitry smoked as the red mist descended. But in the end Gordon decided to ignore the question altogether, and, leafing through the Physics revision notes in front of him, he read from the red-starred page marked "Emergency Answer To All Questions about Blair" - an answer that had absolutely nothing to do with Mr Davidson's point.
"My right hon. Friend the former Prime Minister," Mr Brown declared dutifully, "is doing a wonderful job because he is speaking up for peace in the Middle East; I approve of his taking up any opportunity he gets to put his advocacy of a peaceful settlement for the Middle East, and he was right to do so."

The PM will not be able to be so brazenly evasive when the Lisbon Treaty (formerly known as the EU Reform Treaty, formerly known as the EU Constitution) returns this week to the Commons for its Second Reading. Having welched on its manifesto promise to let the nation vote on the constitution, the Government has allocated more than a month of parliamentary time to the debate.

"It's all smoke and mirrors," admits one senior Labour figure. "We're claiming it's the greatest parliamentary event since the Corn Laws or the Impeachment of Warren Hastings, but everyone knows that a single amendment could ruin the entire ratification process and wreck the entire Treaty."

Privately, ministers also know that they cannot win the tactical battle over the plebiscite. The least worst option for the Government is to get the inevitable Commons amendment calling for a referendum out of the way, and hope that the Labour whips are right that Mr Davidson's mutiny amounts to a maximum of 30 MPs.

The Government's belief is that it will take a tactical hit over its broken manifesto promise, but that it can win strategically on the broader question of Britain's relationship with Europe. And, in this regard, it is form that will matter more than content: the tone and texture of politics will count for more than what is actually said on the floor of the House.
The plan is as follows: the Prime Minister, David Miliband and the calmly impressive Europe Minister, Jim Murphy, will do the heavy lifting but they will also bring in colleagues from other departments to make the case for specific aspects of the Treaty (children's rights, international development, the environment). The idea is to contrast the supposedly swivel-eyed constitutional obsessives on the Tory benches with the regular guys on the Government side.

The risk for Labour is that this squad of ministers will come across as unbearably sanctimonious, compounding the impression of a smug, EU-loving elite so confident that it knows what's best for us all that it now feels entitled to break its promise to consult us on the Treaty. If one pious minister is irritating, what will five be like?

David Cameron and William Hague hope to be seen as the spokesmen of British common sense against a bunch of Europhile limo-lovers on the Government side. The peril for the Tories is that the reasonable tone of their front benchers will be drowned out by the sound and fury behind them.

It is hard to exaggerate the passion that the question of Europe inspires in many honourable Conservatives, young and old. The substance of what they say is in line with what most Britons feel about the EU. But the strength of their opinion is atypical. This is why Mr Hague's "Twelve Days to Save the Pound" campaign did him no favours in the 2001 election, as he is the first to admit. It is also why Mr Cameron, in his first party conference speech, lamented the fact that "while parents worried about childcare, getting the kids to school, balancing work and family life - we were banging on about Europe."

Well, as Mr Brown has calculated, there will be plenty of Tories banging on about Europe in the weeks ahead. The question is how much, and how far, Mr Cameron can prevent his party looking like a mutinous bunch of single-issue campaigners.

The signs at the moment are that the Conservative backbench has little taste for a riot of indiscipline. The lessons of Maastricht have been learned. And those close to Mr Cameron say that the near-death experience of the grammar schools row last summer has focused minds.

To some extent, the maintenance of party discipline depends on what, precisely, he meant (or is perceived to have meant) by a single phrase he used on The Andrew Marr Show last weekend. If the Treaty had been fully ratified when the Conservatives came to power, Mr Cameron said, "we wouldn't be happy to let matters rest there". What did he mean by that, Mr Marr asked. The Tory leader wasn't to be drawn.

Is it that Dave already knows what he would do but is keeping his powder dry? Some detect what Mr Blair used to call "constructive ambiguity": that is, clever language to disguise vacuity. "My worry is that there isn't a secret agenda," one senior sceptic told me.

Well, I am assured that there is a cunning plan - in the sense that the key figures in the Tory leadership have indeed thought through what they might do in office to recalibrate the relationship between Britain and the EU. Since the next Conservative government will certainly be more Eurosceptic than the last, a new alignment with Europe is regarded as essential by the Cameroons. But the mantra is "deliverable Euroscepticism". When the plan is unveiled - and it does not yet exist in detailed form - it must be credible and achievable.

What is the direction of travel? My sources note pointedly that Mr Cameron is already unambiguously committed to withdrawal from the social chapter, which would necessarily mean treaty renegotiation. So the party is already on radical terrain, and will move further down that path in due course.
But, for now, the Cameroons do not want the focus to be upon their long-term plans - which is to say that they do not want to let Labour present the debate as an argument about staying in the EU or leaving it. The Conservatives want the focus to be upon Brown, and the debate to be about the broken referendum promise.

As tedious as much of the hair-splitting and amateur jurisprudence will be, this Commons battle could scarcely be more important. Will Mr Cameron be able to hold the line that all will be revealed about his EU strategy - just not yet? Will Mr Brown exit the ratification process looking more or less like John Major than he already does? We shall find out soon enough.

The DM says: The European Union has always been a lucrative home for rejected politicians. The Tories promise a Referendum on the Lisbon Treaty - will they keep their promise?

EU treaty won't work, says Labour MP

The new EU treaty "won't work", the government is warned today, as ministers prepare for a bitter Commons showdown over the controversial document.

Gisela Stuart, one of the "wise men" that drew up the original EU Constitution, said the Lisbon treaty lacked the necessary legitimacy to work across Europe.

The Labour MP has signed an amendment to the Bill, which returns to the floor of the Commons on Monday, calling for a referendum on the treaty.
Stuart believes the UK's Europe minister should be a cabinet-level post, akin to a deputy prime minister, and should be directly accountable to the Westminster parliament.

She also wants an assurance that any future changes to qualified majority voting (QMV) in the European parliament would be subject to primary legislation in the House of Commons.

In an interview with Guardian Unlimited, Stuart said: "I think this document pushes to the limits the areas I think I could just about agree with, but I would need further safeguards, so these are the limits and I think that's what this debate is going to be about."

Stuart said the revised document gave the European Union a "toolbox" of powers that would allow it to "interfere in virtually every aspect of our lives".

"There is no longer a question of saying, there are certain things that the union can't touch. Actually the union can touch everything."
Pressed on her objection to the treaty, Stuart said: "I don't think this is going to work."

Asked why, she added: "Because of a lack of legitimacy in the eyes of large swaths of people across Europe ... The crunch will be the environment. If you look at the acceleration of climate change, at the moment on the environment we are in a comfort zone of thinking all we need to do is take our bottles to the skip, recycle our newspapers; if you are really daring you say we should put tax on plastic carrier bags. And we think that's enough.
"Well the penny is going to drop that it's not going to be enough, and you will need to make a decision on whether you tax or ration carbon emissions. Of course no one country can sensibly do this on its own, so this will be a classic case of where you need the EU to do this. And the EU will start to ask its citizens to stop doing something they have always comfortably done before. There will be some fairly hard demands.

"People accept hard demands if that's a deal from their own government. But when politicians across Europe start saying, as they have always done, 'it is not us' - it's always been the politician's way of getting out of uncomfortable positions - at that point, it doesn't have that kind of legitimacy." Describing the Lisbon treaty as the same as the failed EU constitution "in substance", Stuart said: "I've been struggling to find analogies of how you compare this. It's like a cookery recipe: all the same ingredients, but you've just rearranged them differently. Or [former French president] Giscard d'Estaing came up with a wonderful phrase: he said, 'it's the same letter; just in a different envelope'.

Stepping up pressure on Gordon Brown to call a referendum, Stuart said: "My view is whether you call it a constitution or whether you call it a treaty, in essence it is something pretty significant, and it's a matter of trust now for the political parties to honour their promise.

"The British people should be given a say, as they were promised by all the major political parties in the 2005 election. "I certainly will find it difficult to vote for the treaty on Monday unless there is a commitment to have a referendum."

Warning of the potential for Europe creep, Stuart said: "I give you one example. Ten years ago everyone said health was [the competence of] national member states. Absolutely no doubt about it. You then started to get court cases where people from one European country were going to another European country for dental treatment. The question was, was that part of the internal market? One of the key things of the European Union.

"So we have the first court decision, the European Court of Justice, that says, 'yes, it is part of the internal market'. And then over a number of years you get more and more decisions because cases come up, until last year when someone in England goes over to France to jump waiting lists and the courts say 'well yes, you can do that, but you need prior permission and all kinds of caveats' - but the principle is established.
"You then at the same time over those 10 years have things like CJD [and] bird flu, so people say, 'well of course, bird flu and CJD don't recognise national boundaries, so public health must be an EU competence.' So we make public health an EU competence; we make health service delivery a court judgment ... so what's the next thing?

"A European commission draws up a proposals for an EU health directive, which it did before Christmas, then decides to withdraw it to consult more. It doesn't say we'll put it back on the table, and as we in the UK are the only ones to have a totally taxpayer-funded [health] system we will have particular problems. But this just illustrates that there is nothing where the EU doesn't have means - whether it's court judgments; whether it's internal market; free movement of labour - the way it makes laws. In every way it now has means, and once it has taken away a UK competence, there is no way you can ever go back."

"The prime minister committed himself to saying, 'no more extension of qualified majority voting or any further powers unless this house agrees to it.' Well, I would like that tightened up," Stuart said. "First of all, the only area where that could happen is in defence and foreign policy, because everything else already has gone to QMV.

"But I would want primary legislation, so it's not just one vote the government can whip through with their majority, but [instead] it would actually have to be a bill and go through the House, and go through [all] the stages.

"The second thing is the way the House itself operates has to change - very, very significantly.

Asked how she would vote in a referendum, Stuart said: "I don't know yet. There are a number of things I would want to hear from our ministers, and assurances in terms of their interpretation, and it will be extremely finely balanced which way I will go.

"My argument is that all the deals struck in Brussels need to be answered at the dispatch box. Create a proper Europe minister, take the Europe minister out of the Foreign Office, but make that person accountable for those negotiations. And that's almost a deputy prime minister post.
"I want them to come to the dispatch box every two weeks and say 'those are the deals we have struck'. I think you would find that that person would probably be responsible for negotiating something like 50% of our legislation, and that would merit a cabinet post."

The DM says: Even Labour MPs (those in the know)recognise the Lisbon Treaty as a con - it's the EU Constitution. To deny us a Referendum is outrageous.

Ministers mask effect of EU treaty

THE significance of the new EU treaty has been deliberately downplayed by the government, according to a damning report by MPs published today.
The Commons foreign affairs select committee has accused ministers of deliberately understating the impact of the reform treaty, as the amended EU constitution is now called, on British sovereignty, particularly in foreign affairs.

Their report raises serious concerns about plans for a new EU diplomatic service, the so-called External Action Service, headed by a foreign minister (the High Representative) assisted by European consuls around the world.
The Labour-led committee also accuses ministers of riding roughshod over the Commons during a key period in the rewriting of the treaty, denying MPs the time and opportunity to contribute to it. The report was timed to appear on the eve of a 12-day debate on the treaty at Westminster. But David Miliband, the foreign secretary, insisted the treaty was a “good deal” for Britain and gave it “a bigger voice in Europe”.

The government is heavily criticised over the way important decisions about the treaty were rushed through last spring. The report adds: “We are concerned that the government risks underestimating, and certainly is downplaying in public, the importance and potential of the new foreign policy institutions established by the Lisbon Treaty.”

The report will fuel calls for a referendum on the treaty, as pledged in the 2005 Labour manifesto, which the government is desperate to avoid - although it will give the Commons the chance to vote on whether there should be one.

William Hague, the shadow foreign secretary, said: “Although this report is from a Labour-dominated committee it makes such damaging criticisms of the government’s case against a referendum that their argument now has no credibility.”

The DM says: The Government just ignores protests that the Lisbon Treaty simply brings back the rejected EU Constitution.

Spain and Italy threaten EMU stability

By Ambrose Evans-Pritchard, International Business Editor, Daily telegraph 08/01/2008

A top French bank has warned that mounting strains within the eurozone will set off a sharp jump in spreads on Italian, Spanish, Greek, and Portuguese sovereign bonds this year, forcing major changes in government policy across the region.

BNP Paribas said a decade of lagging performance across southern Europe has left the region unable to compete with the eurozone's northern tier. A property boom fuelled by low real interest rates has disguised the slippage until now, but only at the cost of storing up greater trouble.

"Inflation, unit costs and current accounts are diverging. While tensions can be camouflaged during economic upswings, they will move to the surface during downswings. It is no coincidence that all failed currency unions were abandoned during times of economic stress," said the report, EMU Concerns.

"The markets are going to punish wrongdoing," said Hans Redeker, the bank's global head of currency strategy. "We think spreads over German Bunds could rise 50 to 60 basis points (bps) in Italy, and perhaps even higher in Spain because of the risks in the housing market."

A spread shock of this order would be greater than anything seen since the launch of the euro. It would amount to a stark reappraisal of the EMU project, raising the risk of a chain reaction as rising debt costs erode budget deficits even further.

Spreads were compressed to wafer-thin levels at the height of the credit bubble last year, falling to just 2bps in Spain and 18bps in Italy. They have since nudged up a further 8bps to 10bps in most of the Club Med bloc as investors turn more cautious.

"The politicians in Italy and Spain do not seem to realise how deep-rooted their problems are. We think the markets will force them to take action. They may have to cut real wages, and this could be unpleasant," said Mr Redeker. "These countries will want higher inflation in Germany to get them off the hook, but I doubt Germany is ready to do that. This is going to create friction within the eurozone. Euro weakness will be the inevitable result."

The southern states have lost about 30pc in labour competitiveness against Germany since 1998.

Analysts say each faces different problems. Italy has a bloated public debt of 108pc of GDP, now rising after a brief bout of belt-tightening to qualify for euro entry. Spending cuts have been half-hearted, leading to sovereign downgrades by Fitch and Standard & Poor's. A 60bp jump in spreads would cause Italy's debt service costs to shoot up, risking a debt spiral. Spain's debt is smaller, but the economy is swinging from boom to bust after an explosive rise in house prices. The country has a current account deficit near 10pc of GDP (Greece is at 13pc) - far above the danger threshold.
BNP Paribas said the eurozone's one-size-fits-all monetary system is fundamentally unstable, but stopped short of predicting a collapse of the EMU.

"Generally speaking, currency unions have been temporary if not followed by political integration such as the German customs union established in 1818 laying the foundation for the German Reich in 1871. The Latin and Scandinavian currency unions and the Gold Standard were blown to pieces by economic divergences during downturns," said the report. By contrast, the euro was launched in a rush ahead of political union, leaving it without a central treasury and social security system to cushion ups and downs across regions.

The bank said monetary policy could offer no relief at this point, and will now make matters worse. "The more economic divergences develop, the less optimal monetary policy will become. What might be too tight for some regions might be too loose for others within the EMU, increasing economic divergences even further," said the report.

Mr Redeker said there were echoes of Canada during the Quebec recession scare in the early 1990s, when spreads widened between different provinces. Canada held together, but investor angst led to a steep run on the Canadian dollar.

No major bank in the eurozone has ever published a report predicting the break-up of the EMU.

Morgan Stanley's former Europe economist set off a storm three years ago with a report suggesting that the system could split in two, while HSBC broke the taboo in 2005 by exploring whether or not Italy might benefit from ditching the euro. ("Maybe," it said). The study followed a call by two Italian ministers for a return to the lira.

The DM says: It defies belief that EU leaders and British politicians are now touting the Euro as a safe haven.

Pro-Europe MPs face sabotage campaign to force a referendum on EU constitution

By JAMES CHAPMAN, Daily Mail, 13 December 2007

Labour and Liberal Democrat MPs in marginal seats face
fierce attacks at the next election over their refusal to
back a referendum on the revised EU constitution.

Millions of leaflets will be sent to voters in the
constituencies of 101 Labour and 30 LibDem MPs with
majorities under 5,000. They will accuse the MPs of treating the public like
"fools".

Organisers of the ReferendumList.com campaign say even a
small backlash could unseat many of the anti-referendum MPs. All have been warned about the leaflet blitz and invited to
change their position.

Details of the campaign emerged as Gordon Brown prepared to
sign Britain up to the controversial EU Reform Treaty today,
despite Tory claims that he has no mandate. Shadow Foreign Secretary William Hague said if the Prime Minister reneged on his party's pledge to hold a referendum "no one will trust him on anything else".

The Prime Minister will miss the official signing ceremony
in Lisbon - pleading a "diary clash" with an appearance
before senior MPs in Westminster - but will add his name
later in the day. The fudge has prompted ridicule by both supporters and
critics of the EU.

Mr Brown insists the treaty is an "amending" document and
not a new constitution. But a string of other EU leaders have admitted it is almost identical to the proposed 2005 constitution, on which Labour
promised a referendum before it was rejected by voters in
France and Holland.

The new treaty will still create an EU president, give the
EU its own 'legal personality', like that of a country, end
Britain's right to veto policy in more than 40 areas and
strengthen EU courts.

The attack on the anti-referendum MPs is being funded by Tom
Kremer, an entrepreneur who popularised the Rubik's Cube,
among others. Stuart Coster, director of the Democracy Movement pressure group which is organising it, said: "This will make the
revised EU constitution treaty a very personal, matter for
those MPs who refuse to honour their manifesto promises. They face being named and shamed to thousands of voters."

Even without a referendum, ministers face a bitter battle in
Parliament to get the treaty approved. Foreign Secretary David Miliband has promised that the Bill bringing it into law will be carefully scrutinised - but sparked anger by indicating that MPs will not be able to
propose amendments.

A sign of the hostility he will face came from Labour's
Michael Connarty, chairman of the European Scrutiny
Committee, who accused ministers of being "frit" about a
full debate.

The DM says: Despite the overwhelming case for a Referendum on the Lisbon Treaty, our Government, along with all European Union leaders except Ireland, still denies us one.

The top six achievements of our new government

When our Foreign Secretary, David Miliband, flies to Lisbon this week to sign the treaty representing the EU's "constitution by any other name", something very eerie will be happening. He will sign away another huge chunk of Britain's power to run its own affairs to a system of government which, wherever we look at it, is breaking down. Yet there seems a general wish among our politicians to ignore the failure of all the EU sets its hand to.
Here are brief updates on some of the EU's major policy areas.

1. Common Defence Policy
The most ambitious expression to date of the EU's desire to project its military power in the outside world was its decision to send a force of 4,000 men to co-operate with the "African Union" in bringing order to Darfur, Chad and surrounding areas. Although the force, drawn from half a dozen EU countries, was meant to be operational by mid-November, the only nation with any troops so far in place is France. The French commander has long made it clear that he cannot operate across an area half the size of western Europe without at least a dozen helicopters. None has been forthcoming.
Last week, the rebel forces in Chad announced that they would deal with any EU troops that appeared as "enemies". The rebels thus set a historical precedent, as the first people ever formally to declare war on the EU - if they can find an enemy to fire at.

2. Common Foreign Policy
The EU's ambition to act on the world diplomatic stage, under its Common Foreign Policy, has inspired negotiations with the murderous regime in Teheran, through a troika of the UK, French and German governments. In four years these efforts at projecting what the EU likes to call "soft power" conspicuously got nowhere. But they provide a twist to the shocking story of the People's Mujahideen of Iran (PMOI) that I reported last week.
The High Court ruled that our Government acted illegally when, at the behest of Teheran, it outlawed the PMOI, Iran's chief opposition movement, as a terrorist organisation. It was puzzling, I said, that our Government not only acted illegally in this way, but also incited the EU to follow suit and proscribe the PMOI. When this was ruled illegal by the European Court of Justice, the EU twice agreed to ignore its own court.
The mystery has now been solved. It emerges that the "EU-3" signed a "Paris Agreement" with the mullahs on November 14, 2004. In return for an Iranian promise not to develop nuclear weapons, the EU pledged to keep Iran's main pro-democratic opposition on its list of terrorist organisations. For this, the EU was prepared to break its own law - to appease a regime which now insists that it never had any intention of making nuclear weapons anyway. Whether or not this is true, the fact remains that the EU's most grandiose foreign policy initiative has ended in disgrace.

3. Common Agricultural Policy
A frequent misconception about the CAP is that it was set up to encourage farmers to grow more food. In fact its purpose was to manage food surpluses created by the post-war subsidy system. These were either stored or dumped on the outside world at knockdown prices, inflicting untold damage on many Third World countries. But in the past two years those beef, grain and butter mountains have all but vanished, as the world faces a meat, wheat and dairy shortage.
The EU is left with its cupboard bare, and a system designed to cope with surpluses, but not shortages. It is now making the problem much worse with a policy whereby 10 per cent of transport fuel is to come from biofuels by 2020. To meet this target would require almost all the EU's farmland, just when world food prices are soaring (not least because so much land is already being given over to biofuels).
Britain is no longer in a position to prepare for food shortages: all power to do so has been surrendered to Brussels, which has no policy on the matter.

4. Common Fisheries Policy
Last week the EU's Court of Auditors (which, for 13 years running, has refused to sign off the EU's accounts) produced yet another devastating report on the system whereby Brussels manages the EU's "common fisheries resource". On all four counts it examined, from the reliability of data to the effectiveness of enforcement, it found the system had comprehensively failed.
Only once, it reported, has a country been prosecuted for failing to obey the rules, when France was fined €2.37 billion (£1.65 billion) for systematic lawbreaking over many years. Only 3.3 per cent of this was paid. Yet the report's sole recommendation was to more powers should be given to those same Brussels officials who have already made the CFP synonymous with one of the world's worst ecological disasters.

5. Common Immigration Policy
When Italy's prime minister, Romano Prodi, recently decided to deport some of the estimated 500,000 Romanians who have poured into his country, he breached a directive that allows free cross-border migration throughout the EU which he issued himself in 2004, as President of the EU Commission. "Nobody could have expected such an influx," he said.
This recalled the forecast of British ministers in 2004 that only 13,000 immigrants could be expected from Poland and other eastern European countries following the EU's enlargement in 2005. The true figure emerged as nearer 600,000. It was recently reported that 13,000 Polish babies alone will have been born in NHS hospitals this year, while teachers have had to cope with 240,000 eastern European immigrant children joining our schools.

6. Common Policy on Global Warming
As Commission President, José Manuel Barroso likes to boast that Europe "leads the world on climate change", the cornerstone of its policy being the world's largest "emissions trading scheme", based on buying and selling "carbon credits". In its first year, Britain paid out £470 million while Germany made £300 million profit (despite ordering 26 new coal-fired power stations).
NHS hospitals had to spend £1.7 million on credits, while BP and Shell made £40 million. The EU's electricity supply industry enjoyed a windfall profit of £13.6 billion, with the biggest losers UK electricity consumers, whose bills rose by as much as 12 per cent. The net result was that EU carbon emissions rose by 1.5 per cent.
There are many other glaring examples of how the EU regime is "not fit for purpose" - such as Galileo space policy (due to cost UK taxpayers £1.7 billion); or the waste policy which has reduced our rubbish collection system to chaos (and threatens us with fines of billions of euros). Yet Gordon Brown is so keen to hand even more power to this system that he is prepared to lie about the new treaty, to avoid giving us the right he himself promised us - a vote on whether we want it or not.

The DM says: A timely reminder of just how far the European Union has already gone in taking over our Government. The Lisbon Treaty will be another nail in our coffin. Give us a Referendum!

Commons European Scrutiny Committee warns “Red Lines” will not provide adequate protection

The Commons European Scrutiny Committee has warned in a new report on 14 November that the UK would face “new and unquantifiable risks” as a result of the revised EU Constitution, arguing that the UK’s ‘red lines’ would not provide adequate protection.

The report notes that "There will be a steady transfer of jurisdiction to the Commission and the European Court of Justice in the areas of civil and criminal justice. These matters should be debated on the floor of the House before the treaty is signed." Committee Chairman Michael Connarty added that Britain's "opt-ins" on justice and home affairs matters would surrender jurisdiction from the UK courts: "Although the Government has secured the right to opt-in in respect of justice and home affairs matters, it is clear that if the Government opts in on any measure, ultimate jurisdiction will transfer from the UK courts." He said that choosing not to opt-in would present "new and unquantifiable risks".

The report called into question the Government’s claim that the controversial EU Charter of Fundamental Rights would not affect UK law: "We express doubts on the effectiveness of the protocol on the Charter of Fundamental Rights and do not consider that it guarantees that the Charter can have no effect on the law of the United Kingdom when it is combined with consideration of the implementation of Union law."

The Committee also criticised the lack of opportunity for proper parliamentary scrutiny and debate before the treaty was signed: "The process could not have been better designed to marginalise the role of national parliaments and to curtail public debate, until it has become too late for such debate to have any effect on the agreements which have been reached."

The DM says: The "red lines" always were a con - a pretence that the Lisbon Treaty will not give the European Union even more control over us. We will leave the European Union - when we see it for what it is.

Jose Barrero EU Commission President: Radio 4 Today Programme: 20 October

Mr Barroso claimed that Gordon Brown had secured all he wanted when signing the Lisbon Treaty. When it was suggested that the European Court could change what was agreed, he said “The red lines are secure for the time being”

The DM says: This is exactly how the EU has always worked. They see a delay as a concession, but they never give up in their drive for a federal Europe.

How Brussels governs Kingston-upon-Thames

I never cease to be amazed at how far the tentacles of our new government in Brussels stretch into the nooks and crannies of our national life.

For some years the burghers of Kingston-on-Thames, in Surrey, have been planning the redevelopment of the Eden Quarter of their town with a big property company, Hammerson. Their very own "Eden project" was well advanced when, earlier this year, the European Court of Justice came out with a ruling on the arrangements made by Roanne, a small town in south-eastern France, for a new leisure complex.

According to the ECJ, the French scheme had to be halted because the contract with the consultants who organised it came under an EU procurement directive. This meant that it should have been put out to tender across Europe via the EU's Official Journal. Lawyers have now advised Kingston council that the same ruling would apply to its arrangement with Hammerson, which has already bought part of the Eden site.

The scheme has therefore been sent back to the drawing board, leaving the ratepayers to recompense Hammerson to the tune of £450,000, and with the prospect that, once it has been advertised in the Official Journal, giving developers in Cyprus and Latvia and Finland a chance to bid for it, the project may be delayed for several more years.

The DM says: The EU's procurement rules, which our Government must obey, are bureaucratic beyond belief. They add billions of pounds to Government purchasing costs, without adding a penny of value. Indeed their narrow view destroys value in most projects.

EU polls would be lost, says Nicolas Sarkozy

Referendums on the new European Union Treaty were "dangerous" and would be lost in France, Britain and other countries, Nicolas Sarkozy has admitted.

The French president's confession that governments could not win popular votes on a "simplified treaty" - drawn up to replace the EU constitution rejected by his countrymen two years ago - was made in a closed meeting of senior Euro-MPs.

"France was just ahead of all the other countries in voting no. It would happen in all member states if they have a referendum. There is a cleavage between people and governments," he said.
"A referendum now would bring Europe into danger. There will be no Treaty if we had a referendum in France, which would again be followed by a referendum in the UK."

The comments confirm suspicions that the real reason why Britain, and all other EU countries, apart from Ireland, were refusing to hold popular votes was because governments were afraid they would lose them.

Nigel Farage, the leader of the UK Independence Party, accused Mr Sarkozy and Gordon Brown of following "an utterly cynical political plan". "Not only does he stop his own people from having a say but he is trying to block Britain from having the referendum which our government promised," he said.

Mark Francois, the Conservative Europe spokesman, said: "President Sarkozy is right to say that there's a cleavage between people and governments in the EU. In Britain that will only get worse if Gordon Brown persists in breaking his solemn manifesto promise on a referendum. That is why the British people should have their say."

Speaking earlier in front of the European Parliament, in Strasbourg, Mr Sarkozy made public comments that would further alarm Downing Street. Mr Brown, when signing the new EU Treaty last month, promised that he would oppose any further European integration for at least a decade.

But the French president told MEPs: "It would be a mistake to think that with the simplified treaty we have sorted everything, we can sleep easy and that no other issues are pending."
He is planning to use his turn at the EU's rotating presidency, in the second half of next year, to call for new European powers in highly sensitive areas such as defence, which will dismay Mr Brown.

The president said: "Now we have got to resolve the political issues and to broach them without fear. We have got to debate them without taboos. Budgetary policy, trade policy, monetary policy, industrial policy, taxation, all policies, any policies."

The DM says: So much for Gordon Brown's insistence that he will stop any more major loss of sovereignty to the European Union after the EU Lisbon treaty has implemented the new EU constitution. He can't stop it and he knows it, but it sounded good at the time.

Why aren't we shocked by a corrupt EU?

By Daniel Hannan, Daily Telegraph 14/11/2007

The shocking thing is that we're no longer shocked. Yesterday, for the thirteenth consecutive year, the European Court of Auditors refused to approve the EU budget.
If this happened to a government department, it would be front page news. If it happened to a private corporation, directors would be facing prison terms. But, because it's Brussels, we flex our shoulders in a shrug so disdainful as to be almost Gallic. Yup, the EU is corrupt. Et alors?
It's true that the story has become familiar: the Court of Auditors has never once signed off on the accounts.
It's true, too, that the auditors' report is long and detailed, and no longer gives an aggregated figure for the spending for which it cannot account - although, on my maths, around 60 per cent of the budget fails to meet approval. It may even be true that things are slightly improving, at least in agriculture. But, even so, we ought to be outraged.
The amount being lost in outright graft is higher than Britain's net contribution. A still larger sum is being "irregularly" allocated - to take one example, millions of euros intended to support farmers are being claimed by golf clubs. And even the bits that are being properly spent often go on boondoggles: a Labour council in my constituency recently advertised a six-month EU-funded sabbatical "to study the impact of gender mainstreaming in the field of waste management".
Why, then, are we so fatalistic about the whole business? After all, it's hardly as if the sums involved are small. Britain's gross contribution to the EU budget is more than £12 billion a year - enough to scrap inheritance tax, stamp duty and capital gains tax. Why aren't we angrier?
Partly because we have come to understand that corruption, in so large a bureaucracy, is institutional: a product of how the EU is structured.
"To tax and to please, no more than to love and to be wise, is not given to men," wrote Edmund Burke. Accordingly, the European Commission worked out a system where it would get the credit for spending money, but the member states would have to raise the necessary taxes. In consequence, Eurocrats tend to spray their grants around indiscriminately, hoping to buy popularity with every cheque.
The national authorities, for their part, have little incentive to police the system. Because the grants come from Brussels, it is not "their" money that is being wasted. And so a whole class of people is brought into existence whose livelihoods depend on the existing European budgetary arrangements: civil servants, big landowners, council leaders, Jean Monnet professors, lobbyists, contractors, aid agencies and pressure groups.
This class is larger than is generally supposed. A couple of weeks ago, I hosted a meeting at the European Parliament for a network of towns from around the EU. There were perhaps a hundred people present, of whom only four were elected representatives. All the others were functionaries. And not just any old functionaries: they were, by and large, the "European Officers" of their respective municipalities - people, in other words, whose mortgages were being informally underwritten by the EU.
Whenever I asked them to give me examples of what they did, they would reply that they liaised with the Commission, drove innovation and spread best practice. Fair enough, I'd say, but what do you actually, you know, do? "Didn't you hear what I just said? We liaise with the Commission, drive innovation and spread best practice!"
This is what we're up against. The EU is no longer an ideological project, but a racket - a mechanism for redistributing wealth to people who, directly or indirectly, are on its payroll.
And these people, of course, include MEPs, who are notionally in charge of scrutinising the budget. Some do so with exemplary assiduity.
My colleague James Elles, for example, is constantly looking for ways to reduce expenditure. But most Euro-MPs balk at the idea of withholding money from the project. They know that their own expenses regime is far from exemplary and so, their own house being made with panes of the flimsiest crystal, they are reluctant to start lobbing rocks.
As for the taxpayers, they seem to have subsided into a resigned funk. For a long time, voters' apathy depressed me. Then I had a conversation with someone who used to be a marriage guidance counsellor. A marriage, she said, can sustain any number of rows: as long as you're arguing, it means your partner's opinion matters. It is when the rows give way to scorn, she said, that the marriage is over.
What a perfect description of Britain's attitude to the EU. When I was first elected eight years ago, I used to get furious letters about Euro-fraud. Who the hell were these shameless Euro-creeps? Could no one control them?
But those letters have gradually dropped off. Anger has turned to contempt. People have given up on any hope of reform: they know that Brussels will never change and, in truth, they no longer much care. Sooner or later, almost matter-of-factly, they will initiate divorce proceedings.
• Daniel Hannan is a Conservative MEP for South East England

All animals are equal in the one-size-fits-all monetary system of the euro, but some are more equal than others. Germany is supremely equal. It is now up on hind legs.

Or in the words of Italy's financial daily Il Sole, Berlin has "declared war" on southern Europe by refusing to back desperate pleas for a weaker euro – by which is meant a tilt towards looser monetary policy. Indeed, it is strangling such efforts.

Germany's post-1990s mini-slump delayed this showdown but delay has merely made matters worse. Loose money for German needs caused Latin booms to get out of hand. Now those booms are over and Germany is resurgent.

The clash is a foreseeable result of strapping together Europe's two ancient cultures – each with different wage systems, trade patterns, economic cycles and sensitivities to interest rates – in a premature currency union without a central treasury. And doing so in an entirely political bid to force the pace of EU federalism, against the warnings of the European Commission's economists.
Germany has clawed back 40pc in labour-cost competitiveness against Italy, 30pc viz Spain and 20pc viz France since the currencies were fixed (Eurostat data). This was done by hard work or – depending on your view – by squeezing wages in a beggar-thy-neighbour strategy to snatch market share from the rest of euroland. The truth lies between the two.

Italy has held up better than feared. Or at least, the Ostrogoth "Republic of Padania" above the Po is holding up. Fiat has silenced critics. But there are limits as the euro stalks $1.44 against the dollar and screams to mad highs against the Asian mercantilists. "What really worries us is new orders," said Francesco Peghin, head of Padova's business league.

"The euro has risen 60pc against the dollar since 2001. Until now companies have held share by squeezing margins but it's no longer possible at this level. A strong currency is one thing. It is quite another when the exchange rate completely decouples from the real economy," he said.

France is slowly bleeding. House prices are falling. In the Jura – Europe's toy-making capital – Smoby-Majorette has just gone bust, undercut by Chinese imports. Nearby, car-parts group Manzoni-Bouchot has suffered the same fate. The big names are shielded by currency hedges but these become ever more costly to roll over. "The euro has become a terrible handicap," said Peugeot-Citroën's Christian Streiff.

As President Nicolas Sarkozy knows, it takes a year or two for currency effects to feed through and the victims draw political sympathy. Hence his daily broadsides against the European Central Bank: liquidity spigot for "speculators" but foe of working people.

Germany is in another world. Its August trade surplus was $19.8bn and, a paragon of fiscal virtue once again, it is becoming bossy. Finance minister Peer Steinbrück unwisely makes cisalpine enemies as if it were sport.

Whatever the theory of EMU, everybody knows that the German people gave up the Deutsche Mark and the revered Bundesbank under an implicit contract that their country would never face inflation. That German voters were never asked whether they wished to fold their prize into a peseta-lira porridge makes the issue even more neuralgic. Yet inflation is what Germany now faces. It reached 2.7pc in September, hitting milk, butter, bread and fuel.

Bundesbank chief Axel Weber is breathing fire. "By the end of the year, inflation in Germany could increase to 3pc. As a central bank we are really concerned," he said.

"Monetary policy can't lose sight of its primary mandate – even if that means no longer supporting a robust economy."

The teutonic bloc of Austria, the Netherlands and Finland is behind him, alarmed by M3 money supply growth racing ahead at 11.3pc.

But while the North is inflating, the South is wilting and Ireland faces crucifixion. The celtic boom is over. The Irish economy contracted by 1.4pc in the second quarter. House prices have fallen for six months in a row. A satellite of the dollar zone, it is painfully leveraged to the US property slump.

For now, Spain's inflation is the same as Germany at 2.7pc, but that is an illusory convergence. Property prices fell 4.1pc in Seville in the third quarter, 0.9pc in Madrid and 0.5pc in Barcelona on official data. The Iberian bubble is bursting, whatever sunshine vendors in Britain continue to claim.

Over 98pc of Spanish mortgages are priced off Euribor, up 60 basis points since the credit crunch. "All is beginning to go catastrophically wrong for the Spanish economy," said Bernard Connolly, global strategist for Banque AIG. Spain is left floundering with a current account deficit of $125bn (9pc of GDP). Greece is worse (10.5pc).

But this is not a national morality tale. The Spanish and the Greek peoples are victims – even if they don't yet know it. Never forget that Frankfurt kept rates at 2pc until December 2005, turning a blind eye to frothy M3 when it suited Germany. By doing so, it consigned the South to even bigger boom-busts.

Once the EMU's enthusiasts are thrown out of power in Spain and Italy this winter, Mr Sarkozy will have enough allies to force a change in ECB policy – as he is entitled to do by invoking Maastricht article 104. The bank's sacred independence is a Wagnerian myth.

As for Germany's Mr Weber: does he really mean to destroy the post-war European order nurtured by Adenauer, Schmidt and Kohl with high-minded idealism for half a century?

The DM says: Far from helping unity in the European Union, the Euro is a source of strain. We must keep the Pound.

EU treaty threatens economic freedom

By Roger Bootle, Daily Telegraph 22/10/2007

So he did what we all suspected he would. Gordon Brown agreed to the EU "reform treaty" without granting a referendum. This is, of course, a political matter, par excellence, on which a humble economist can have little to say. But there are economic aspects to our European future to which this matter most definitely relates.
Anyone who has observed the EU process over the years is bound to recognise that things to do with the EU are not quite what they seem. Constitutional and legal niceties are observed at first but can then be over-ridden in pursuit of the ultimate goal, which is the creation of a European state, whether super or otherwise. The Danes said no in their referendum on Maastricht but were then asked the question again. Where was it written that they should be compelled to go on voting until they said "yes"? Why was Italy admitted to the euro even though its debt and deficits were well above the Maastricht reference criteria?
So forget the idea that this treaty is minor and forget the protection afforded by the so-called "red lines". That protection may well not survive the first onslaught in the European courts. What matters is the political will across Europe to forge a European state. As many a European politician has been honest enough to admit, this treaty bears a striking resemblance to the recently abandoned Constitution and as such represents another major step along the road to surrendering national sovereignty altogether. If that result were to emerge, quite apart from the political implications, it would have major economic consequences.
In particular, the danger is that, bit by bit, the considerable economic freedoms we in the UK still enjoy – to regulate the labour market, set taxes and set interest rates – would be eroded and we, along with the rest of the EU, would be governed by a single economic policy.

Mind you, it isn't always the case that throwing in your lot with a larger grouping has adverse economic consequences. It all depends upon who you are – and who is in the larger group with which you are merging. This is why the Italians, for instance, have by and large been enthusiastic Europeans. Their state hasn't worked and its effective replacement by a more powerful EU offers hope of improvement.

But this is not our position. Why has the UK been a comparative success story over the last 20 years? It is difficult to escape the conclusion that this is because the state relinquished many of the levers of control over economic life, thus allowing a greater role for the market. In short, because we have experienced pretty good economic government, not least because we have had less of it.

Some of the economic dangers facing Europe arise from the sheer size of the EU. The world is full of large countries, in terms of both area and population, whose GDP per head, and growth rate, are low. By contrast, there are umpteen examples of small and even micro states which succeed economically. Why is this? The prime reason is that small states tend to enjoy good government. Because the countries are small and vulnerable the politicians are forced to recognise the limits to what they can do. With large states the elites can tilt at whatever windmills they like and the coffers will still overflow and they will still survive. One major exception to this is the US – enormous yet also enormously successful economically. Yet it proves the rule. For its history and ideology have resulted in definite limitations on the powers of the state. To its very core it has been a market economy.

A second cause for worry is the recent history of the state's role in the European economy and the prevailing ideology about the role of the market among the EU's elites. The key issue is appreciating that governments do not create economic growth – but they can stop it. It is difficult indeed to imagine a government founding Microsoft, for instance. But, as the German president once said, if it had been founded in Germany, in a garage as it was in America, it would have been promptly closed down by the health and safety inspectors.

Yet it must be easy to believe, as you swan from one gilded cocktail party to the next, that you, the barons of the eurocracy, are creating the prosperity Europe enjoys. After all, didn't you just sign a treaty concerning the promotion of workers' interests, the extension of pension rights, increased maternity pay, etc etc. Without these goodies bestowed by the Euro great and the good where would the poor European citizen be?

The one really big thing to get right is the labour market. People will naturally want to work to improve their lot. You actually have to try hard to stop them, but this is what some governments manage to achieve – especially in Europe. In the economic sphere most European member states (as opposed to countries) are a massive failure: they have stopped their labour markets from functioning effectively, presided over huge public debts which threaten to become unsustainable under the weight of unfunded pension policies, and are in thrall to aggressive, depredatory trade unions, as evidenced in France last week.

Out of this mishmash of incompetence can we envisage that what will emerge is an enlightened economic government of all Europe? All the signs are that the EU elite has not the slightest conception of how wealth is generated, as opposed to taxed and redistributed. Essentially the EU is living off capital – the history, the culture and the national institutions which history has bequeathed it. But it is laying down nothing new of value. The EU is likely to continue to be an economic failure for years to come.
This is the institutional structure to which the European elites are so keen to grant increased power and to which we have chosen to become more closely attached politically – defended, of course, by our (thin) red lines. Why? It's not easy to give a single, clear, logical answer. Rather, several candidates suggest themselves: because the euro-glitterati don't understand economics, but do understand their own self-interest; because they are slaves to some defunct economist or other; because they don't think the economics matter compared with the politics; because they think big is better. I have come to believe it is best to think of the elites dragging us into ever closer union as like the soldiers in Tolstoy's War and Peace, drawn to march across Europe by some inexorable force, beyond thought or logic.

For our future we must hope, against all the evidence, they will learn their lesson – or that we will learn ours, before it is too late.

Roger Bootle is managing director of Capital Economics and economic adviser to Deloitte. You can contact him at roger.bootle@capitaleconomics.com

The DM says: The more you learn about the European Union, the more you wonder why we don't leave it.

Beware, constitutions can change your life

The controversy over whether the EU treaty is really a constitution by another name misses the point. This is not an argument about Europe's constitution; it is about ours.

The transfer of power and sovereignty over the past 40 years has transformed what Walter Bagehot called the "great entity" of the British constitution, characterised over hundreds of years by its continuity and simplicity. It is often said that we have no written constitution. We do. It is contained in dozens of statutes but has never been codified into a single document.

This is a subject whose importance is too easily ignored. It seems as dry as dust, arcana of interest only to political anoraks or academics. Yet it goes to the heart of who we are as a nation. It defines our liberties and the relationship between people and the state, the governed and the government.

These may not be matters that much exercise us today; yet down the centuries they have been the causes of rebellions and wars.
Exactly 360 years ago this week in a parish church by the Thames, one of the great unsung events of English history took place. For almost a fortnight, participants in the Putney debates of October and November 1647, among them Oliver Cromwell, argued over the boundaries of state power and the extension of the franchise.

Radicals, known as Levellers, considered that since the Civil War had been a fight for freedom it should result in a right to vote for all Englishmen (even the most revolutionary speakers did not advocate the vote for women).

The radical case was famously supported by Thomas Rainsborough MP: "I think that the poorest he that is in England hath a life to live, as the greatest he… I think it's clear, that every man that is to live under a government ought first by his own consent to put himself under that government; and I do think that the poorest man in England is not bound in a strict sense to that government that he hath not had a voice to put himself under…"

Today we consider Rainsborough's words not merely unexceptionable but the essence of our democracy. At the time, Cromwell regarded them as extremist and anarchic. It would take until 1929 for the franchise to become universal. But the argument in the Church of St Mary the Virgin is one that we are still having today.

It is what the row about the European constitution is all about: what control do we have over our own destiny; and how do we call those who govern us to account?

Nobody denies that membership of the European Union has transferred sovereignty from Westminster and Whitehall to Brussels. But it is easy to lose sight of how substantial that transfer has been and the effect it has had on our constitutional arrangements.

This upheaval is at the core of a compelling new book by Professor Anthony King of Essex University, The British Constitution, which tells the central historical story of the British – how a somewhat ad hoc constitutional settlement underpinned three centuries of political stability.

Until Edward Heath signed the Treaty of Rome in 1972, it had changed little. What Prof King calls the "old constitution" was self-contained and largely immune to outside influences (indeed, its precepts were widely exported to the Empire), though there were arguments over the relative importance of Parliament, the executive and the judiciary.

But all this changed when we joined the Common Market. "Not only did Parliament cease to be sovereign, Britain itself ceased to be an old-fashioned sovereign state," observes King. "The fact of being a member of the EU permeates almost the whole of the British government – to a far greater extent than most Britons seem to realise."

The new settlement has significantly augmented the role of the judiciary – especially in interpreting EU law and the UK's human rights obligations; it has considerably reduced the role of Parliament; and it has restricted the executive's power. Each treaty signed by a prime minister since 1972, including that in Lisbon by Gordon Brown, has enhanced one or all of these changes.

It is ironic that the Government wants to embark on a programme of "radical" constitutional reform, as though it has any real control over matters any more. Indeed, before he became Prime Minister, Mr Brown gave his more excitable cheerleaders the impression that he was planning the biggest constitutional earthquake since the Glorious Revolution.

Yet the reality is far less dramatic. Some ideas will be set out this week when consultation papers will be published about the right to demonstrate outside Parliament (the draconian restrictions introduced a few years ago will be eased) and the prerogative powers of the prime minister to order troops into battle and sign treaties without parliamentary approval.

Future papers will propose that MPs should have a vote on whether to dissolve Parliament – a largely pointless gesture since no opposition would divide against it and risk being branded craven.

There are also ideas for the greater involvement of "citizens" in decision-making. But when many of these decisions are being taken outside the country with little say-so for Parliament, let alone a community action group, what would be the point of this?
The strength of the old British constitution was that, by and large, the governed believed (whether correctly or not) that they had some control over the government through the ballot box. Now they feel powerless. Why else has election participation fallen so dramatically?

This week, Jack Straw, the Justice Minister, will deliver a major speech about whether the UK should have a new Bill of Rights and, possibly, a written constitution. However, since successive governments have surrendered so many of the sovereign powers which they – and, by extension, we – once possessed, this is an increasingly futile exercise.

Our most fundamental right is to hold those who govern us to account, something understood, if not achieved, by the Putney radicals. But when so much of our law is decided by people beyond any influence that we can exert, then the old constitutional order really has broken down.

'The British Constitution' by Anthony King (Oxford University Press, £25) is published on Nov 1.

The DM says: All the evidence on the European Union shows up how much we have given away our sovereignty and got nothing in return. There are no benefts for Britain in the European Union.

Battle of the EU treaty to last for months

Gordon Brown has set aside up to three months to ratify the new EU reform treaty after it was agreed by European leaders last night, raising the spectre of the tumultuous parliamentary battles over Maastricht 15 years ago.

The Prime Minister briefed his Cabinet colleagues on Tuesday to expect another protracted tussle on the latest treaty, starting in the new year and continuing well into the spring, The Times has learnt. He told them that months of detailed examination will dampen Eurosceptics’ opposition while demonstrating that the document is too complex to be decided by referendum. Ministers also hope to revive voters’ memories of a divided and weak Conservative Party under John Major, obsessed with every detail of the European Union. The 14-month debate over the Treaty of Maastricht, which transferred some powers from Westminster to Brussels, split the Tories.

The reform treaty was agreed by leaders of the 27 EU nations after talks that stretched through their summit dinner. Mr Brown confounded those expecting a reprise of his previous role as a reluctant European when he arrived in Lisbon yesterday for his first EU summit as Prime Minister. Instead he urged recalcitrant leaders to accept the final version of the EU reform treaty.
Mr Brown scheduled face-to-face meetings in the margins of the summit with both Romano Prodi, his Italian counterpart, and Lech Kaczynski, the Polish President. They were seen as the two biggest stumbling blocks to agreement, with the Italians demanding extra MEPs and the Poles’ insisting on greater voting powers for medium-sized countries. Officials last night confirmed a deal to resolve their concerns.

In his first meeting with Mr Prodi since entering No 10, Mr Brown urged the Italian leader to agree the treaty so that the process of ratification could begin. The Prime Minister also joined in the armtwisting of the Polish President, who threatened as he arrived in the Portuguese capital to delay the treaty if he did not get what he wanted.

Last night, after agreement was reached, Mr Brown insisted the British national interest had been protected. “It is now time for Europe to move on and devote all our attentions to the issues that matter to the people of Europe — economic growth, jobs, climate change and security,” he said. Speaking before the start of formal talks on the document, Mr Brown effectively destroyed any remaining hopes that it could be put to a referendum, insisting that it did not represent “fundamental change”.
“Let’s now have the debate in the country,” he said. “That will be reflected in a very substantial number of days in the Houses of Parliament and people can judge for themselves whether the British national interest has been protected.”

Although Geoff Hoon, the Chief Whip, has yet to finalise the number of days allocated in the House of Commons, Labour MPs were told this week to expect significantly more than 20. It is understood that legislation will be introduced after Christmas and a target of late March has been set for completing the passage of the Bill ratifying the treaty.

Mr Hoon, who helped to marshal Labour’s attacks on Mr Major over Maastricht, will be well aware that that Bill took 14 months with a total of 29 days in the Commons and 12 in the Lords. William Hague, the Shadow Foreign Secretary, conceded this week that the Tories have little chance of defeating the Government in the Commons but are pinning their hopes on winning enough backing in the Lords to secure an amendment to put the EU treaty to a referendum.

Mark Francois, the Shadow Europe Minister, said that the Tories were relishing the prospect of a lengthy battle. “Detailed scrutiny will give us the opportunity to expose Gordon Brown’s so-called red lines for what they are.” He said that parliamentary ratification was no substitute for a referendum.

The EU treaty includes new voting weights for countries, provision for an EU Foreign Minister and a permanent President of the European Council, a slimmed-down European Commission and a Charter of Fundamental Rights. The Government claims that it has ensured British opt-outs on justice and home affairs, but this is an area of concern for sceptics.

In arguing that Parliament should be the judge, however, Mr Brown is likely to invoke Baroness Thatcher. Referendums, she said in 1975, sacrificed parliamentary sovereignty to political expediency. She added: “Perhaps the late Lord Attlee was right when he said that the referendum was a device of dictators and demagogues.”

Mr Brown yesterday rebuffed suggestions that he was losing political capital by refusing to hold a referendum in the face of polls showing that a large majority wanted one.
He argued that he was one of the first to suggest a referendum should the Government want to join the euro but that the reform treaty was not sufficiently fundamental to merit a popular vote. As evidence he said that nine EU countries had planned a vote on the EU constitution but only one — Ireland — was certain to hold one on the new treaty.

The treaty must be ratified by every member state and EU leaders want to complete this process by January 1, 2009, when the High Representative — the new EU foreign minister — is expected to be appointed.

The Yorkshire village of Crigglestone has become the latest rebel against EU legislation by securing the right to vote for a national referendum on the EU treaty.

In a five-day series of articles for The Daily Telegraph, Global Vision sets out a realistic, global alternative to the current relationship between Britain and Europe. The articles shows how Britain can negotiate a better, more modern relationship in order to get the best out of Europe.

In the third article in the series on the Telegraph’s website today, Sir Rocco Forte seeks to answer a critical question in the EU debate: Would Britain have to eschew the benefits of the ‘borderless Europe’ lifestyle under a new, more modern relationship with the European Union?

Forte states, “Switzerland is an interesting ‘model’ which we can learn from.” Through bilateral agreements, Swiss and EU citizens enjoy ‘lifestyle benefits’ such as the right to travel and work in each other’s territory, the mutual recognition of qualifications, and reciprocal retirement arrangements. Switzerland is also due to join the Schengen Area in 2008, which will allow for the free movement of people across national borders without the need for passport checks.

He goes on to argue that, “Switzerland seems to be in a win-win situation with the EU. It has the benefits of trade and it has the ‘lifestyle benefits’ it judges to be beneficial. But it does not have the increasing restrictions, costs and burdens that Britain is currently experiencing as a full member of the EU. As it is not in the Single Market, it does not have to worry about the EU’s business regulations, though it can, of course, comply with them if it wishes to for business reasons.”

If Britain were to adopt a policy to negotiate a looser relationship with Europe, then we, too, could be in a win-win situation.

The DM says: If only. Our politicians will never admit they have been wrong about the European Union for decades.

For many years we have been told that British jobs and prosperity depend on our economic integration with the EU and the development of the EU's single market.
We have also been told by Government ministers, in somewhat lurid tones, that if we opt out of the EU's political union we will lose the three million jobs that depend on our trade with the other EU countries. Put simply, the EU will not trade with us and we will be isolated. Frankly, this is no better than cheap scaremongering.

I am quite prepared to accept, for the sake of argument, that three million jobs in the UK could be associated with our trade in goods and services with the EU. The EU is an important trading partner, taking roughly 55 per cent of our total exports of goods and services.

But we should note that the other EU countries between them have a very sizeable trading surplus with us - a whacking £38bn in 2006. So surely more German or Swedish or French jobs taken together are dependent on their exports to us than are British jobs dependent on our exports to them.

Under these circumstances it is quite inconceivable, even if world trade rules permitted it, that the EU would build protectionist barriers between the UK and the EU if we opted out of political union. It would be a superb example of cutting off one's nose to spite one's face. I could not, for one moment, believe that French wine producers or German luxury car manufacturers would relish the prospect of a trade war with Britain, or cheer the EU for instigating one.

Consider Switzerland, which has had a free trade agreement for industrial goods with the EU since 1972, though it remains outside the EU. A recent exhaustive study on Switzerland and the EU concluded that "...not being a member of the EU does not seem to have led to a significantly smaller degree of economic integration of Switzerland relative to that of EU members".
Switzerland has not been cold-shouldered by the EU as a trading partner. It has not been isolated. Indeed, it is more integrated with the EU economy than any of the major EU economies and, perhaps more surprisingly, Denmark.

Britain was a major mover in developing the single market in the 1980s, hoping that it would stimulate trade and growth in the EU. To be fair, it has partly succeeded. But even on the European Commission's own figures the benefits, estimated at less than €200bn (£139bn) a year, have been very disappointing.
In the meantime, the regulatory costs associated with the single market have multiplied and now amount to a staggering €600bn (£418bn) a year - the costs outweighing the benefits by three to one.

But more worrying are the implications for the City of London of the Financial Services Action Plan, which is intended to complete the single market in financial services. It is a regulatory monster with 42 detailed measures.

According to Open Europe, the plan could cost the British economy at least £14bn to implement by 2010. But, shockingly, there has been no comprehensive cost-benefit analysis to enlighten us about its potential benefits.

In terms of international competitiveness, the plan looks increasingly like an own goal for the EU - with the ball landing firmly in London's net. If London's regulatory regime becomes internationally unattractive, jobs will simply migrate out of London.

It is hardly surprising that many British businesses increasingly see the single market as a regulatory drag rather than a trading opportunity. They see a looser relationship with the EU, based on trade and cooperation, while opting out of political union and top-down, bureaucrat-driven economic integration, as the best of all worlds.

This is the vision promoted by Global Vision - a vision I fully endorse. The economic centre of gravity is shifting eastwards. With the spectacular growth of India and especially China, the world economy is changing fast. Europe's share of global GDP is sliding inexorably, and canny businesspeople look to the expanding markets outside the EU for growth opportunities.
In 1980 the EU25 accounted for over a quarter of world output, while China and India together accounted for just 6 per cent. By 2015, the EU's share will have dropped to 17 per cent, while 'Chindia's' share will have soared to over a quarter.

Britain is a major trading nation - the third largest in current account terms - and our prosperity depends on trade. Yet the EU's heavy-handed regulations hit all businesses based in the UK, damaging their ability to respond flexibly and swiftly to changing world conditions. The EU's centralised, inflexible regulatory model is quite simply out of tune with the times.
There are, in addition, other aspects of full EU membership that are economically damaging.

Ever since we joined the EEC's Customs Union in 1973, we have been unable to negotiate our own trade deals, depending instead on the Commission. We cannot, for example, negotiate our own free trade deals with the US, Australia or Canada, even though they are all important trading partners.

There is also the problem that the EU is not consistently on the side of free trade. Its protectionism damages the economic prospects of developing countries and disadvantages Europe's less well-off consumers. This is notoriously the case with agricultural produce where the EU’s defence of the egregious and notoriously resilient Common Agricultural Policy (CAP) has been one of the major sticking points in the beleaguered Doha Development Round. But as "bra wars" and "shoe wars" demonstrated, the EU is prepared to intervene to defend non-agricultural producer interests when their voices are loud enough.

Mention of CAP reminds us that, even now, it is still the major item of expenditure in the EU's budget - over 40 per cent. This, allied with endemic fraud, represents a grotesque misappropriation of European taxpayer's money. Britain's contributions, moreover, are rising. Gross contributions (net of the rebate) are currently around £10bn - money which could be spent on schools and hospitals or, dare I say it, tax cuts.

There is no doubt in my mind that we have nothing to fear from opting out of political union and much of the bureaucratic economic harmonisation, and having a looser trading relationship for Britain with the EU. On the contrary, we have a great deal to gain.

A few customs formalities that Switzerland and Norway seem to cope with rather well.

Over 50 BRITISH BUSINESS LEADERS CALL FOR CHANGE to Britain’s relationship with Europe

In a letter in today’s Financial Times, over 50 eminent British business leaders back Global Vision’s call for a new relationship between Britain and the European Union which would allow Britain to prosper fully in the 21st Century. This new relationship should be built upon free trade and mutually beneficial cooperation whilst opting out of political and economic union. This would thus allow British business to escape from high cost EU regulation and enable the UK to realise its future as a successful global trading nation – looking outwards to the new opportunities in the fast growing emerging economies.

The letter – which includes Lord Young of Graffham, Sir Rocco Forte and Julian Blackwell as signatories – declares,

“As business leaders we believe the time has now come when we need not only to reject the impetus to further intervention that would flow from this [Reform] Treaty, but finally face up to the need to negotiate a new relationship within Europe that better serves our national interests.”

“Britain is a great trading nation and it is vitally important that we continue to trade with Europe for our prosperity. There is, however, absolutely no reason to believe such mutually beneficial trade would be damaged if we changed our relationship with the EU to one based on free trade and cooperation, whilst opting out of political and economic union.”

“Our polling tells us that such a relationship is the option of choice for the people of this country. It is increasingly clear that it is also the option of choice for Britain’s business leaders.”

“This letter marks the opening of a new chapter in the debate about Europe.”

“Up until now the prevailing wisdom has been that the UK’s economic interests were best served by playing along with the EU project, seeking to influence its direction as a core player. That presumption is now under serious challenge. For too long the arguments have been represented as a polarised choice between going along with the full European project or pulling out and breaking all our ties. But at last the realisation is growing that there is a middle way that does not imply turning our backs on Europe and walking away. Instead we can and should negotiate a constructive new relationship where we maintain the benefits to both the UK and our European neighbours of free trade – and free movement of capital – across our large common market.”

The DM says: If Britain opted for a looser relationship with the European Union, it would open the floodgates, as more and more countries chose to leave.

Insulting our intelligence on an EU referendum

Daily Telegraph editorial 16/10/2007

Yesterday, Labour MP Gisela Stuart, who was herself a government representative on the EU convention negotiations, condemned his stance in the most devastating terms.

The essence of her argument was that the Prime Minister could not even be commended for consistency, because he was "sticking to (his) guns in defence of a patently dishonest position". Not only was he engaged in a cop-out from an explicit promise that his party had made to the electorate, but his defence of that position was illogical.

First, because the opt-outs (which Labour prefers to call "red lines") that Mr Brown now believes to have virtually magical significance are, in effect, no different from those that were negotiated earlier when a referendum was promised.
Second, it is absurd for the Government to reiterate the logically pointless mantra: "We will hold a referendum only if our red-line demands are not met." Since it has also repeatedly said that, if those red lines fail to be met, it will not sign the treaty, what would then be the point of holding a referendum?

Mr Brown's position is so lacking in logic and basic honesty that it constitutes an insult to the intelligence of the electorate.
Having rejected the idea of an imminent general election, Mr Brown has even prevented voters from treating the question as an electoral mandate issue.

He should therefore, by rights, see himself as bound by the last Labour manifesto, in which a referendum was promised. But even if he went to such convoluted lengths to avoid a referendum, he still must contend with the Commons European Scrutiny Committee, which has profound concerns about the arcane semantic significance of the famous "red lines".

How Britain can get the best out of Europe

This week, the details of the draft reform treaty will be discussed at the Lisbon summit, where it is expected to be agreed by representatives of the EU's 27 member states in readiness for ratification and enforcement.

Quite rightly, the current debate continues to focus on the need for a referendum on this treaty, which is, with the exception of the Government, almost universally acknowledged as the rejected constitution. But this focus should not totally distract us from another, more fundamental, debate: what sort of relationship is right for Britain and the EU?

Much has changed since Britain joined the EEC in 1973. Britain was the "sick man of Europe"; had lost an Empire and not yet found a role. The 1970s really were as alien to today's realities as the recent television drama Life on Mars depicted. The solution seemed to lie across the Channel, where the major economies were consistently out-performing Britain's.

But the global economy has changed beyond recognition since then. The British economy was transformed by the reforms of the 1980s and the 1990s. Both India and China are growing rapidly and their shares of world GDP will continue to expand. Conversely, slow-growing Europe's share of global GDP can only shrink.

Moreover, the EEC has been transformed from a customs union "with ambitions" into a would-be "country called Europe". If the reform treaty is ratified and enforced, the EU's institutions will have all the powers they need to create a United States of Europe.

The 1957 Rome treaty spoke about "an ever-closer union among the peoples of Europe", which was understandable in the atmosphere of post-war reconciliation.
This founding treaty has dictated the EU's direction of travel ever since. For all the oft-expressed hopes that the EU can be reformed into a looser association of nation states, the brutal truth is that the EU has only one direction – towards greater integration and centralisation.

But is ever-closer integration with the EU now in this country's economic interests?

Britain, as one of the world's great trading nations (third-biggest in current account terms), should ensure that its economy is as flexible and free as possible to rise to any challenge.

Unfortunately for Britain, the EU promotes economic policies that tend to be inward-looking and protectionist.

Moreover, the costs of the single market's centrally driven regulations far outweigh the benefits. Such policies act as a dead weight on British business. EEC membership may have given Britain a lift in the 1970s; EU membership is now acting, and will continue to act, as a drag.

We could accept the situation and deal with the consequences, however unpalatable. Or we could encourage a serious debate about Britain's relationship with the EU in a constructive light. Global Vision, a new campaign group, has been set up with the objective of galvanising debate on the second option; the first is for defeatists.

For far too long, the debate on Britain's relationship with the EU has been polarised between those arguing for staying as a full member, come what may, and those who would pull up stumps and walk away. But there are, of course, perfectly attractive alternatives to these extremes.

The "third way" is one based on trade and mutually beneficial co-operative agreements, while opting out of political and economic union. We are pro-European, but appreciate that Britain must be free of the EU's bureaucracy if it is to thrive.

We believe that a future British government should seek to negotiate this new, looser, more modern relationship.

Earlier this year, Giscard d'Estaing, grand architect of the constitution, openly discussed the notion of a "special status" for Britain; our Continental neighbours are more likely to be relieved, rather than terminally peeved, if we were to take a constructive approach to solving the tensions between ourselves and Brussels. They would probably welcome an end to haggling about posturing "red lines".

There are, of course, precedents. Switzerland's relationship with the EU is based on free trade and bilateral agreements, covering issues such as freedom of movement, civil aviation, and cooperation in justice, police, asylum and immigration. Despite not being an EU member, the Swiss economy is highly integrated with the EU.

Norway is another successful European country with a special relationship from outside the EU. The experience of these two countries easily scotches the notion that a looser relationship with the EU would "lose three million jobs" because the British economy would be "isolated, bobbing in the middle of the ocean". Instead, a freer, more competitive economy would generate more jobs and prosperity.

I know, from our Global Vision polling, that this sort of relationship is the option of choice of the British people. The majority like Europe, but wish to be free of the bureaucracy. The people are ahead of the politicians. It is time the politicians caught up.
Over the next four days, a series of articles on Telegraph.co.uk will explore aspects of this proposed relationship: starting tomorrow with Norman Lamont on what it would mean for business and the economy. Sir Rocco Forte will consider whether we would have to eschew the benefits of the "borderless Europe" lifestyle; Martin Howe QC will examine the legal and negotiating implications; and David Trimble will weigh up the political considerations. I hope you will join the debate.
Ruth Lea is director of campaigning group Global Vision

The DM says: A different relationship with the European Union would be a good start. The only way to get it, however, would be to leave, and negotiate from outside.

Gord lying over EU, says MP

GORDON Brown was accused last night by a senior Labour MP of lying to the nation over the EU Lisbon treaty. Gisela Stuart attacked the Premier for refusing to give the nation a say over the treaty. She blasted Mr Brown for his “cop-out” on the referendum – which he promised as part of Labour’s 2005 election manifesto.

Miss Stuart played a key role in drawing up the EU constitution – the forerunner to the new treaty. But last night she tore into the PM for pretending the treaty is different to the constitution. She told the London Evening Standard: “Sticking to your guns in defence of a patently dishonest position is not leadership but the soft option and a cop-out from a specific promise made to voters.
“The path adopted by the Government is neither honest nor coherent. We have reached the absurd position where the Government says there will be a referendum only if its red lines are not met, so presumably it will ask people to vote ‘no’ on a treaty it has not signed.

“The red lines are red herrings. It’s a matter of trust and integrity. A referendum was promised. It should be delivered. If Labour can’t trust the people, why should the people trust Labour?”
The broadside from Miss Stuart – MP for Birmingham Edgbaston – increases the pressure on Mr Brown to offer a referendum. Surveys have shown an overwhelming majority of eight out of ten voters want a vote.

An astonishing 100,000 Sun readers have demanded a referendum on the rejigged EU Constitution.

Mr Brown will fly to Portugal on Thursday to rubber-stamp the treaty. The Premier will agree to surrender Britain’s power in 61 key areas. Our national veto on EU laws will go for good on everything from energy policy to sports policy. Unelected European judges will get powers to set British employment law.

The EU will get a permanent President and a foreign minister will take Britain’s place in some key international summits instead of our elected Foreign Secretary.

MPs have warned Mr Brown that his “red lines” protecting Britain’s sovereignty in the treaty are worthless. They will not guarantee our right to make our own laws when the EU wishes to act, the European Scrutiny Committee has said.

Fresh blow to Gordon Brown as Labour MP condemns ‘lack of veracity’

Gordon Brown’s attempts to restore his authority were dealt a blow yesterday when a senior Labour MP accused him of “lacking veracity” ahead of his first EU summit as Prime Minister.

Gisela Stuart, a former minister and ally of Tony Blair, said that Mr Brown’s refusal to hold a referendum on the EU reform treaty was “patently dishonest”. She said that he must reverse the policy if he was to win back the trust of the British people, lost after his decision to call off an autumn election. Her intervention came as Mr Brown pledged to defend the national interest two days before an EU summit that could finalise the text of the reform treaty.

“I will continue to be resolute and determined in making all the decisions necessary for the future of the country,” he said. He brushed aside criticisms over his performance last week – judged to be the worst of his leadership – but acknowledged that he faced a potentially difficult period ahead. “Every week is a challenge. This week is a challenge as well.”

The two-day summit in Lisbon, Portugal, aims to agree the replacement for the EU constitution that was voted down in Dutch and French referendums more than two years ago.

David Miliband insisted yesterday that the EU treaty was a “square deal” for Britain because, contrary to claims by some Labour and Tory MPs, there was no threat to the Government’s “red lines” defending British sovereignty. The Foreign Secretary will confront the Commons EU Scrutiny Committee today and reject its claim that Britain was being bullied to drop its opt-outs from EU justice policies.

“There is no question of the UK being bullied in any aspect,” said Mr Miliband after a meeting of EU foreign ministers. “We have been clear and consistent at every stage about the importance of the red lines and that has been respected in the legal text that has been produced.

“What we have got is a square deal for the UK, which respects at every point our determination to exercise a right to choose on justice and home affairs, and the right to protect our social and labour legislation from the European Court of Justice.”
Most of the last remaining obstacles to agreement on the EU Reform Treaty were settled by EU foreign ministers yesterday. Poland’s demand for greater voting weight in decisions by the European Council must still be thrashed out by EU leaders when they meet later this week.

Mr Miliband secured agreement that an obligation in the treaty that national parliaments “shall” contribute to the good functioning of the EU would be reworded after claims that the phrase would put Parliament under extra legal obligation to Brussels. He added: “We are pleased that the draft treaty text respects the ‘red lines’ but we are going to remain focused on this right up to the signing [of the treaty] in December.”
But Ms Stuart, MP for Birmingham Edgbaston, dismissed the “red lines” as “red herrings”. In an article in the London Evening Standard she wrote: “The path adopted by the Government is neither honest not coherent. We have reached the absurd position where the Government says there will be a referendum only if its ‘red lines’ are not met, so presumably it will ask people to vote ‘no’ on a treaty it has not signed.

“The ‘red lines’ are red herrings. It’s a matter of trust and integrity. A referendum was promised. It should be delivered. If Labour can’t trust the people, why should the people trust Labour?” She added: “Recent events have shown some rather old-style politics, with the Prime Minister looking indecisive and lacking veracity.

“To pretend that Labour was not gearing up for an election or that opinion polls played no part in the decision to postpone it was silly and gave David Cameron some of his most damaging ammunition.” She said that the new EU treaty contained “90-95 per cent” of the old document.

The Bruges Group has uncovered that the revived and renamed EU Constitution will blow a hole wide open in Britain’s borders allowing the EU to take full control over Britain’s asylum and immigration policies.

The Treaty that Gordon Brown is expected to sign Britain up to next week includes new provisions; these will impose upon the UK the duty to be: “fair towards third-country nationals”. 'Fairness' is subjective. This will allow the European Court of Justice to rule that an Australian style quota policy cannot be used to restrict immigration.

There will also be more costs placed on the taxpayer. The asylum provisions contain a solidarity clause. Under Article 69 c there will be increased demands on the taxpayer as Britain will be expected to share the financial burden of immigration. This will lead to Britain supporting asylum seekers in EU states that have a lower GDP than the UK.

EU expert Dr Lee Rotherham says,
“Once again, the renamed EU Constitution proves to be a Trojan Horse. Now we find that our ability to get a grip on asylum and immigration issues is under threat - our opt out is dangerously undermined.

“When we pick at the details the Government’s case for downplaying the text endlessly unravels. We must have a referendum.”

EU Treaty: Sun poll sensation

By GEORGE PASCOE-WATSON, Political Editor, The Sun
September 24, 2007

GORDON Brown would pulverise the Tories in a General Election with a staggering 17 per cent lead — IF he gives the people a vote on the EU Treaty, a Sun poll reveals today. But Labour and the Tories will be virtually neck and neck if he refuses to grant a referendum, it shows.

Labour is already enjoying an eight-point lead over the Conservatives, our exclusive Ipsos-Mori study says.   It shows Labour on 42 per cent — its highest ever level.   David Cameron’s Tories are on just 34 per cent with the Lib Dems on 14 per cent.
The gap between Labour and the Conservatives would more than double if the Premier agrees to a referendum on the EU Constitution.    But the difference would be only one point if he goes to the country having ruled out a say on the treaty.
A massive 81 per cent want a referendum, our survey reveals. And two thirds — 64 per cent — believe Mr Brown is going back on promises by refusing to grant them a say.   Only one voter in five believes the Prime Minister’s claim that the Treaty is so different from a constitution that there is no need for a referendum.

Today’s poll shows the issue of an EU treaty referendum is hugely important to voters. Ministers repeatedly insist it’s not a major issue for the nation. The survey for The Sun also suggests that Mr Brown would be hugely rewarded for giving the people a say.

Give voters a say on the EU treaty, unions tell Brown

The Unions last night delivered an embarrassing blow to Gordon Brown by demanding that he hold a referendum on the EU treaty.
Delegates at the TUC's conference overwhelmingly voted to call on the Prime Minister to give the British people a say in a national vote. A string of union leaders - who fund Labour to the tune of £17million a year - launched scathing attacks on Mr Brown for refusing to cave in to public pressure for poll. Gordon Brown's speeches to the TUC's conference have failed to persuade many members, particularly on the EU treaty

The result means that the TUC will now form an unlikely alliance with the Tories to campaign for a referendum. The unions warned the treaty is almost identical to the old EU constitution, which was rejected by French and Dutch voters in 2005. At the last general election, Tony Blair promised the British public a referendum on the old constitution. However, ministers have resisted a ballot on the treaty because they say it is merely a "tidying-up exercise". Union leaders, who represent more than one million workers, yesterday rejected this claim.

Colin Moses, from the Prison Officers Association, said: "We have had a bellyful of broken promises and what we have here is another broken promise. Promises should not be made in the heat of an election, they should be kept and they should be brave enough to go to the people of this country and ask them. And if they say, 'No', that should be the answer."

Bob Crow, general secretary of the RMT, said: "If it is good enough for the Irish to have a vote in a referendum, then it should be good enough for British workers. We should have the arguments and a full debate. People should be able to decide their own destiny."

The vote came as it emerged that Britain has been embroiled in emergency talks in Brussels to ensure European judges would not be able to challenge our foreign policy. Ministers are said to be concerned that EU officials have watered down a key "red-line" - which demands that Britain retains full control of its foreign policy. However, suspicions were last night mounting that the row may have been deliberately manufactured in a bid to show Mr Brown standing up for the country's interests.

In a further blow to Mr Brown, EU officials last night confirmed that Britain's multi-billion pound farm rebate - won by Margaret Thatcher in 1984 - was back on the agenda. European Commission chief Jose Manuel Barroso, who is overhauling the EU's annual budget, told reporters there would be "no taboos". His comments will raise fears that Brussels is once again attempting to launch an assault on the rebate. Mr Blair was widely criticised for giving away £1 billion from the hand-out in 2005.

Meanwhile, David Cameron continued to pile pressure on Mr Brown over the referendum by pledging to force a vote in the House of Commons when MPs return from their summer break. The Tory leader called on opposition MPs to back the motion, calling the treaty "the wrong constitution for Europe".
William Hague, the Shadow Foreign Secretary, said: "This deeply embarrassing defeat at the TUC is a result of the Government's arrogance and its intention to disregard both its own promises and the views of the British public."

Derek Scott, chairman of the campaign group I Want a Referendum, said: "Trade unions are in tune with their members and the overwhelming majority of voters. The Government should listen to them."

Labour MP Ian Davidson said: "We have won the arguments at the TUC over the last few days. Trade unions have listened to their members, and the Government should listen to its voters."
However, John Hutton ruled out a referendum yesterday. The Enterprise Secretary told BBC Radio 4's World at One the treaty "doesn't fundamentally affect our constitutional relationship with the EU".

The Prime Minister has ruled it out in the face of growing opposition. The president of the European Union has dismissed it entirely. And countless politicians have tied themselves in knots Explaining why it is not necessary.

But today a small village in Dorset will hold a vote that has thus far been denied to the British public — a vote on the the EU reform treaty. The farming community of East Stoke may have just 369 residents but it now stands at the vanguard of the fight against the European juggernaut. It is, as one resident put it, "the mouse that roared".

By exploiting a little-known loophole in the law, the village will hold a vote on whether there should be a referendum on the EU treaty. And, like rural uprisings of the past, it hopes that its stand will lead to rebellion across the countryside and force Gordon Brown to put the issue to the nation.
Darren Patterson, one of the organisers, said yesterday: "We hope that from small acorns, huge oaks will grow. I have been inundated with people from surrounding villages wanting to know how we have done it. The village may be tiny but the support is massive."

East Stoke, which lies in the shadow of the Purbeck hills and is surrounded by unspoilt countryside, is hardly a hotbed of political strife. The main issues in the past few years have been the positioning of a speed camera and the lack of buses to the nearby market town of Wareham. But the Europe vote appears to have awoken a hidden rebellious streak among residents.

Part 3, Schedule 12, paragraph 18, sub-paragraphs 4 and 5 of the 1972 Local Government Act stipulate that if 10 or more local people vote for a poll on any subject of their choosing, their district council is obliged to organise one. This is how it works:

1 Six residents must sign a letter announcing that a parish meeting will take place, at which a motion will be proposed calling for a referendum on the EU treaty.
2 The meeting must be advertised at least seven days in advance and must take place after 6pm.
3 Tell local leaders and the press about the meeting.
4 Ensure at least 10 people on the electoral roll turn up.
5 Propose a motion that a parish poll should be held on whether there should be a referendum on the EU treaty.
6 Make sure the motion is carried by at least 10 electors, or one third of those present.
7 Tell the local authority. Under the Act, the parish poll must be held within 14 to 25 days on a date set by the authority.
8 Canvass the parish.
9 Counting will be carried out by the authority's returning officer.
10 The result has no legal power but will help demonstrate public opinion.

Changes to EU treaty sought by Labour MPs

Labour MPs want 12 changes to the EU reform treaty as the price for dropping their campaign for a referendum:

'Labour promised vote on EU'

By DAVID CAMERON , The Sun , August 28, 2007

I'VE got a couple of simple questions for Gordon Brown.

"What makes you think you can break your promises to the British people? And what makes you think you can change the way our country is governed without asking the British people first?"

And when it comes to Europe, arrogance is what we've seen from Labour time and time again. It's the arrogance that says: "We, the powerful elites, know best." It's the arrogance that puts more and more decisions in the hands of bureaucrats that no one's ever heard of and no one can ever get rid of if they do a bad job. And it's the arrogance that Gordon Brown displays when he says we don't need a referendum on the European constitution.

Labour's last Election manifesto could not have been clearer on the EU constitution. It said: "We will put it to the British people in a referendum, and campaign wholeheartedly for a Yes vote."

And just two months ago, Gordon Brown said: "The manifesto is what we put to the public. We've got to honour that manifesto. "That is an issue of trust with me and the electorate."

I think this kind of shameless arrogance is the big cancer eating away at trust in politics. Who can be surprised that people have less faith in politicians if they break their promises so casually? Why should anyone bother to vote if the real decisions that affect our lives are made somewhere else?

This is the 21st Century. People are demanding - and getting - more and more control over their lives. Many decisions that once used to be made by the "powers that be" are now in your hands - and that's a great thing. These days, no one should have to take what they're given any more.

Because it would transfer power from our elected Parliament to the EU's unelected bureaucrats, I would campaign for a resounding No vote. And because it includes the power to transfer even more power from Westminster to Brussels, without even the need for a new treaty, this could be our last chance to stop the EU juggernaut.

Gordon Brown should be in no doubt: If he's got the courage to hold an early election, as he should, our referendum pledge will be right there in our manifesto, giving the British people a clear choice. But we shouldn't have to wait for a General Election to get the referendum we need.

Today we are launching a new campaign, "Don't Let Brown Let EU Down" to keep the pressure up.

Labour MPs in Parliament today were elected on a manifesto promise that their Government would hold a referendum on the European constitution. So let's hold them to it. By going to our website - conservatives.com - Sun readers can see if their local MP is Labour, then send them a letter asking them to tell Gordon Brown to keep Labour's manifesto promise.

When Parliament returns in the autumn, we will hold a vote demanding the Government gives Britain a referendum on the European constitution. Sun readers will then be able to judge whether Labour MPs and Gordon Brown can be trusted.

When he took over as Prime Minister, Gordon Brown told us he would be "humble" and that he would listen to the people. Well, if he breaks his referendum promise now, everyone will know that was just the same old spin from a Labour Party that hasn't changed.

Eight out of 10 'want a vote on EU treaty'

As many as one in four Labour supporters could refuse to vote for Gordon Brown if he denied them a referendum on the EU constitution, a poll showed last night.

The survey also said that more than eight out of 10 of the public as a whole want a national vote on the so-called reforming treaty.

However, the Prime Minister will be particularly worried that 24 per cent of Labour supporters may desert him at the next General Election if the Government persists in refusing a referendum.

The poll also shows that 13 per cent of Labour voters are even threatening to cross over to David Cameron's Conservatives if the Tory leader were to pledge to hold a referendum as one of his first acts as Prime Minister.

The Government went into the last General Election in 2005 promising a vote on the original EU constitution, which was defeated in referendums in France and the Netherlands later that year.

Ministers now argue that the revised treaty is not as far-reaching and no longer requires such a vote.

But the growing campaign appears to be having an effect. An ICM poll, for the Daily Mail, showed that 82 per cent of all voters, and 80 per cent of Labour supporters, want a referendum. Some 24 per cent of Labour supporters said they would be less likely to back the party in an election if they were refused a national vote.

However, if Mr Cameron promised a referendum, 23 per cent of the public would be more likely to switch to the Tories on polling day.

The survey also showed that almost six out of 10 voters believe that the EU already has too much power over Britain.

A Daily Telegraph petition calling for a referendum has attracted tens of thousands of signatures.

But yesterday, a German politician fired a warning shot at moves to hold a vote. Elmar Brok, a centre-Right MEP and close ally of Angela Merkel, the German chancellor, effectively told Britain to sign up to the treaty or consider pulling out of the EU. He insisted that the new draft was substantially different from the "old" constitution and that Britain had "got what it wanted" with a series of opt-outs and "red lines".

"Gordon Brown's government has said there is no justification for a referendum and the UK should stick to this commitment," said Mr Brok, the European parliament's representative on inter-governmental negotiations on the treaty. "It would be very unfair of the UK if, having more or less got what it wanted in the new treaty, it would then turn round and put this to a popular vote."

Brok, a member of the European convention that drafted the old constitution, asked: "The UK got its various opt-outs so what's the problem? "How would it seem to other EU member states if Britain were now to hold a referendum? For me, that would undermine the negotiations on the treaty and even go as far as to question Britain's credibility as an EU member. Britain is a valued member of the EU but we should perhaps remember that the treaty contains an article which gives any member state the right to leave the EU if it so wishes." Those campaigning for a British referendum were motivated "solely" by their opposition to the EU, he claimed.

Brok, who was chairman of parliament's foreign affairs committee, said there was "no reason to renegotiate something you agreed on".

Martin Callanan, a senior Conservative MEP, said Mr Brok should "mind his own business" and allow Britain to decide how it wishes to determine the treaty's ratification

We say: Does Mr Brok think he is threatening us? There's nothing most of us would like better than to leave the EU.

Business comment: Sub-prime crisis is the edge of a financial hurricane

It is hard to overstate the seriousness of the global financial crisis. Yet the world's central monetary authorities - the central banks - have been culpably slow to recognise how dangerous things have become.

The Fed is going to have to make very substantial cuts in the general level of interest rates if it is going to have any chance of preserving financial stability and avoiding an extremely serious recession. It will do that, even if it does not yet realise just how much it is going to have to do, because its mandate will make it do it. The Fed was created, in response to the 1907 financial crisis in the US, precisely to try to avoid further crises. And, whatever mistakes Greenspan may have made, he just got it wrong: he didn't deliberately set up this Greek Tragedy.

In contrast, the EU quite deliberately created the most dangerous credit bubble of all: EMU. And, whereas the mission of the Fed is to avoid a financial crisis, the mission of the ECB is to provoke one. The purpose of the crisis will be, as Prodi, then Commission president, said in 2002, to allow the EU to take more power for itself. The sacrificial victims will be, in the first instance, families and firms (and banks and investors) in countries such as Ireland and Club Med. Subsequently, German savers (or British taxpayers) will bear the burden of bailouts that a newly-empowered "EU economic government" will ordain.

The mechanism is plain to see. Germany entered the euro with an overvalued exchange rate. It then faced a long period of high unemployment that drove wages down and restored its competitive position. But Germany was also helped at the beginning of this process by the newly-established ECB, then dominated by the Bundesbank president, Tietmeyer, and his acolyte, Trichet, then governor of the Banque de France. The ECB initially set interest rates where Germany needed them - far too low for most other EMU countries - and allowed extreme euro weakness.

That combination, and Germany's initial uncompetitiveness, created booms in many other EMU countries. But, as in the US in the 1920 and again in the 1990s, inappropriate interest rates and temporarily booming growth totally distorted perceptions of today versus tomorrow. The result has been that firms and families in these countries have massively over-borrowed and banks and investors have massively over-lent, often on the illusory security of inflated house prices.

Several of these countries have built up enormous current account deficits. They are now the ones that over the next decade will have to restore competitiveness. But, trapped in EMU, they can do that only through unemployment and wage reductions. Very high unemployment and deflation will make debts simply unpayable. But, trapped in EMU, these countries cannot do for themselves what Greenspan did and Bernanke will have to do - slash interest rates. And Tietmeyer's successor, Weber, will be striving to ensure the ECB does not do it for them. The resulting carnage in the financial system of the whole euro area will make the present global financial crisis, serious though it is, seem almost insignificant.

Eventually, when things have got bad enough, the German public will be forced to acquiesce in lowered interest rates and high German inflation. But by then the EU will have taken the opportunity to seize control of the financial system (cheerfully punishing the London financial "casino" in the process), dictate budgetary policies, extort bail-out transfers from countries such as Britain and impose exchange controls with the rest of the world (and even, as reportedly threatened in a 1998 meeting of the EU Employment Committee, impose exit taxes - expropriation of life savings - on people seeking to flee the EU). And it will seek to "democratise" this power grab by instituting an emergency "European government".

Would Britain resist? The revived "constitution" now being rammed through allows future constitutional changes to be made just on the say-so of a cabal of heads of government, with no need for ratification. Would any British prime minister be prepared - or be allowed - to do his duty and say no in such a carefully-manufactured emergency?

For information : Bernard Connolly is global strategist for Banque AIG and the former head of economic research for the European Commission Watch.

The DM says: He's also author of "The Rotten Heart of Europe" - an excellent expose of the deception used by European Union leaders to bring in the Euro.

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