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Monday, October 24, 2011

Sarkozy to Cameron: “Shut up”

"You have lost a good opportunity to shut up," Sarkozy said to Cameron during a bitter two-hour exchange which held up a meeting of all 27 European Union states on 23 October 2011, according to the  Guardian. Translating the relatively polite European English into American slang, Sarkozy’s statement becomes, Shut the fuck up.

"We are sick of you criticizing us and telling us what to do," Sarkozy added. "You say you hate the euro, and now you want to interfere in our meetings." Cameron had insisted on participating in the euro zone meetings because he anticipated that, perhaps along the lines of taxation without representation, unfavorable regulations would be imposed on Britain without its consent, according to The Telegraph. Cameron also claimed that the euro zone crisis was having a "chilling effect" on all European states, including Britain. He insisted that all 27 E.U. state governments, rather than just the 17 using the euro, should be able to have the final say over Europe's rescue package, according to The Guardian.

Was Cameron trying to have it both ways by having refused to transfer the governmental sovereignty necessary for monetary union yet going on to demand being entitled to a vote on monetary policy regarding the euro? Might it be that the prime minister presumed himself to be in a superior position from having evaded the common-currency trap, and thus he felt entitled to tell the E.U. “euro” states, which had found themselves in a pickle, what to do? Alternatively, if British banks are called on to take sizable losses on their Greek debt holdings and/or to increase capital reserves, the state government would indeed be entitled to participate in the decision-making process at the E.U. level on those proposals.

Cameron would doubtless go further, insisting that just the fact that Britain would be adversely affected economically by a Greek default justifies the British prime minister in having a seat at the table. At the time of the E.U. conference, the Huffington Post observed: “Europe already is entering a continent-wide economic slowdown, as manufacturing output recently reached an 18-month low, according to the Wall Street Journal, and European economic growth fell to its lowest rate in two years,  according to The New York Times.” Any mishandling of the Greek situation could easily rock the European economic boat, which Britain is in. In other words, if the debt crisis had gone well beyond the matter of the euro, then Cameron had a legitimate point that the entire E.U. should decide on a solution. This could mean that all 27 states contribute to the European Financial Stability Facility, for otherwise it would be difficult to bracket the involvement of the non-euro states in the decision-making process. In other words, if the most serious of the financial problems involve European banks and wayward E.U. states rather than centering on the euro itself, then all of the states should be involved in the decision-making at the E.U. level.
Sarkozy and Cameron eventually reached an arrangement on October 23rd that the 27 E.U. state governments “would initially debate the measures to write down Greek debt, increase the size of the bailout fund, and recapitalize European banks, but ultimately the euro zone would have final say over the rescue package  [on October 26th] , according to The Guardian.” Presumably British banks would not be called on to write down their Greek debt, and this might cause banks in the “euro zone” states to demur. The same goes for any recapitalization requirements. As for the bailout fund, that would rightly be governed by the states that had contributed to it.

Perhaps the squabble between the two state leaders can be seen by the rest of us as a harbinger of the difficulty involved not just in achieving fiscal integration within the “euro zone” requisite for stable monetary union, but also in there potentially being two levels of fiscal integration in the E.U. itself. The E.U. would have a major structural/procedural/political problem if the “euro zone” states were to cede additional governmental sovereignty regarding their fiscal or budgetary/tax policy and Britain were to insist nonetheless on having a vote on particular “euro zone” fiscal policy proposals that might affect it even though it had not agreed to cede the sovereignty to being subject to “euro zone” decisions, including those on which Britain participates. That is to say, extending the “two tracks” tradition of the European Union to fiscal policy (including state budgeting and taxation) could mean that an “outer” state such as Britain is negatively impacted by a decision made by the players in the “inside track” and yet not be able to have any formal involvement in the decision-making. Rectifying this would mean that the “outer” state government could participate in “inside” policy while not be subject to it. Is the prospect of being negatively impacted by others’ policy sufficient in the E.U. to justify the right to vote on the policy even without being subject to it? It would seem that exasperating its “two track” tradition might put the Europeans in a double-bind. If so, it may be that E.U. state governments may all have to bite the bullet and cede more governmental sovereignty, whether or not they adopt the euro.


Bonnie Kavoussi, “Nicolas Sarkozy To David Cameron: ‘You Have Lost a Good Opportunity To Shut Up’,” The Huffington Post, October 24, 2011.