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  1. Wealth
May 3, 2012

Summer of Discontent

By Spear's

Until now the crisis pre-baked into EMU has been economic, but last week it became political

Last week the intractable eurozone crisis moved into a different sphere, as the first round of France’s elections went to the socialists, the right-wing Dutch government resigned over fiscal constraints and the technocratic government of Spain openly admitted that its economy was in crisis.

Until now the crisis pre-baked into EMU has been economic, but last week it became political. The danger is moving up from Amber towards Red Alert, and quicker than Europe’s leaders’ faltering footsteps can keep pace with it, let alone get ahead of the curve. Resistance to German-style economic austerity and EU fiscal deficit limits are now under political attack on all sides.

Last week, a potential horizontal split across the eurozone was becoming clearer by the day, but it is now discernible to spot a looming vertical split as well: France and the Benelux countries and the Iberian Peninsula going one way, while the German-Finnish-Italian axis – with an unwilling Italy being dragged along as long as the unelected technocrat Monti is in charge – goes the other way, but not including any part of Eastern Europe.

It’s Fireman Merkel, come to save the euro!

Quite what Monsieur Hollande will actually do in office remains to be seen, but he may well prove to be the second coming of Mr. Leon Blum, who got it all wrong in the 1930s: as Europe turns to right-wing nationalism, France turns left into an introverted socialist cul-de-sac.

So, for the first time, the prospect of the eurozone splintering in every direction, amid a strange mixture of bad debts, uncontrolled immigration, record unemployment and political acrimony, is becoming more likely by the day: the only possible solution is for a total transfer union with full political and fiscal integration, as dreamed up by Merkel, but increasingly by no-one else, especially her fellow-Germans.

Less than three months ago, Sarkozy told Cameron at the Fiscal Pact Summit in Cannes he didn’t know when to keep his mouth shut, but on Sunday Hollande is on course to kick the mouthy one out of the Elysée Palace, along with that Fiscal Pact. Meanwhile, rich French people decamp to Switzerland and London, a haunting 1789 vision of enforced emigration.

Those who told us that the Maastricht Treaty of 1993 was the only way forward for Europe and for Britain – Heseltine, Hurd, Howe, Blair and many chairmen of FTSE-100 companies along with the FT – have been comprehensively proven to be wrong. This treaty, written by flat-earthers for dreaming rationalists, traded in many forms of foolishness: it was meant to harmonise everything from the common currency to condoms and bananas in the name of a gossamer-like ‘ever-closer union’.

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Instead, it has brought economic dislocation to the whole continent, suspended democracy, fanned unemployment, spawned bankrupt banking systems and unsustainable national debts. It is a treaty that was always set to destroy the wealth of nations, as many of us predicted at the time, only to be ridiculed by those who are now shown to be, politically and economically, pitifully inept.

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