In prospectby David Goodhart / May 26, 2010 / Leave a comment
Published in June 2010 issue of Prospect Magazine
What a month. In the newsagents you will find Prospect classified as a current affairs monthly. This month we are more current than usual—indeed, three of our main features (on the euro crisis, Britain’s new coalition and the Labour MP Jon Cruddas) were being rewritten to stay abreast of events as the deadline guillotine fell. The first two stories—the euro and British power sharing—are both about attempts to suspend, through acts of will, the normal rules of economics and politics respectively. Just because the eurozone has fallen back to earth does not mean the Lib-Con coalition will follow it: political rules may be easier to bend than economic ones. Bronwen Maddox’s tour d’horizon of the trials of the euro (and the EU itself) concludes that Greece, and some other weaker eurozone economies, are likely to be ejected from a currency system that they should never have been part of. It is most unlikely that the current “adjustment” being required of Greece will stick, and a further rescheduling of its debt is what people in the markets now expect. But it is possible that this could still happen with Greece inside the euro. Dominique Strauss Kahn, head of the IMF and likely candidate for the French presidency in 2012, will not want to be the man who broke up the euro. And a semi-default inside the euro may also be easier to handle for Europe’s big banks—which are heavily exposed to the crisis. So Greece may end up as the Argentina of the eurozone. Meanwhile EU coherence will suffer further injury. Germany is more disillusioned than ever. The EU will become even more introverted as the next decade is punctuated by emergency summits and last minute bailouts. And there will be a brake on future expansion as the crisis exposes the reluctance of richer countries to pay for poorer ones. The suspension of the normal laws of political gravity in Britain is a happier story. It is true, as Andrew Adonis says, that the Lib Dems will not have their heart in deficit reduction and that the Tories are unexcited about political reform. But there is still enough self-interest to keep them together for a while before gravity reasserpts itself. Coalition government is unlikely to become the British norm, so we should enjoy its anomalies while we can—in particular the enthusiasm for non-statist social reform and more checks and balances at Westminster—and fret less about the representativeness of the cabinet (see Julian Baggini). Curiously, the gloomy news from Europe is a blessing for the coalition: as even Germany becomes more British in attitude and further integration is ruled out, one potential conflict point between Tories and Lib Dems is neutralised.