TWO-SPEED

EUROPE,
OR TWO
EUROPES

EUROPEAN UNION
TheEuropean

Union(EU)is
aneconomicand political entity
andconfederationof 27member stateswhich
are located primarily inEurope. The EU traces
its origins from theEuropean Coal and Steel
Community(ECSC) and theEuropean
Economic Community(EEC), formed bysix
countriesin 1958. In the intervening years the
EU has grown in size bythe accession of new
member states and in power by the addition
of policy areas to its remit

EURO ZONE
Theeurozone, officially called theeuro area,
is an economic and monetary union(EMU) of
17European Union(EU)member statesthat
have adopted theeuro() as their common
currency and solelegal tender.
Monetary policyof the zone is the
responsibility of theEuropean Central
Bank(ECB) which is governed by a president
and a board of the heads of nationalcentral
banks. The principal task of the ECB is to keep
inflation under control.

BEFORE

TWO SPEED EUROPE, OR TWO

EUROPES
The eurozone is in existential crisis. The crisis
effects the entire EU and beyond. The crisis is
being controlled by Germany. Last week,
Germany effectively put in place two puppet
governments in the eurozone, one in Greece,
the other in Italy.
These are seismic events; yet they pass here
almost in the blink of an eye. If Germany had
put in place two puppet governments by dint of
tank and gun, the continent would be at war.

NOTICE
These

days it does not need to resort to such crude

methods. Instead, it can use the markets to do what
the Haps-burgs, Napoleon and Hitler could not do.
The puppet government in Greece is to be headed
by a German-speaking former vice-president of the
European Central Bank; the puppet government in
Italy is to be headed by another insider technocrat,
who has had two stints as an EU commissioner.
Democracy has been usurped; temporarily and for
our own good, we are told, that is, for 18 months or
so, until the German plan for total domination is put
in place.

DETERMINIST
A

stability commissioner will be given power to

withhold funds from the structural and cohesion
funds if a country violates its obligations, which will
limit access to coveted EU subsidies.
The European Stability Mechanism will be
transformed into a monetary fund, which could
smooth the way for a national bankruptcy.
The clearest path to this new Europe is that of
amending the treaties of old Europe. If this is not
politically feasible, the Foreign Ministry argues, a
treaty among eurozone countries ought to be
considered.

NOW

TWO SPEED EUROPE, OR TWO

EUROPES
For

France and Germany, this is the "ever closer

union" of Europe's founding dreams. For them, the
creation of the single currency was one large step
towards that goal; now, paradoxically, a crisis in
the currency has forced the next giant leap. But
the direction could not be clearer. Call it what you
like integration or harmonisation, compact or
union the idea is the same: a Europe in which
national sovereignty gradually fades away. As Der
Spiegel magazine put it, "Europe is on the path
toward becoming a federal country"

EVOLUTION
The

result is that Europe is advancing towards its

integrated destiny, with Britain in its rear-view
mirror. The two-speed Europe has arrived, with
Britain in a slow lane of one. Whatever the letter
of the rules, the reality is that big decisions
affecting Britain's economy will now be taken in
rooms in which Britain is not present and has no
say. Soon, foreign-owned banks may wonder
what sense it makes to be based in London, out
on the margins. Cameron and his party are
toasting what feels like a victory. In time, it may
come to taste like defeat

FUTURE

CONSECUENSES
That's the way some Conservative MPs see Britain
as they envisage life outside theEuropean Union.
This makes sense, since there are obvious cultural
affinities. The Swiss have William Tell; we have
Robin Hood. Both countries have such thriving
communities of hedge fund dealers that there are
said to be plans to twin Mayfair and Zug.
Neither of us is ever going to win the World Cup,
although judging by Man Utd's performance in
Basel this week, Switzerland have the better
chance

PROYECT

If the eurozone survives this existential crisis,

it will require deep reform of the EU's treaties.
Done properly, the creation of a more flexible
EU could ease many of the existing tensions;
but done wrongly, it will be a recipe for breakup. The issue, therefore, is not a two-speed
Europe but, rather, two separate Europes.
Last week, Merkel and Sarkozy denied what
this was their plan, but they denied only what
is mostly already in place.