Betting on Berlin

David Cameron is off to Brussels and Berlin, with his forked tongue especially honed for the trip. At the Lord Mayor's Banquet earlier in the week he declared himself to be Eurosceptic: but he resolutely opposes the Europhobes in his party. In Brussels he will demand that Britain remains at the top table in all discussions on the future direction of the European Union and of the Euro, while opposing the demand of the EU Parliament and the Commission for a 5% increase in the EU central budget [which would enable them to extend the area over which the Commission controls both capital spending and restrictive regulation within the member countries].

Then in Berlin he will ask Germany to open its reserves [and indeed it national revenue] to bail out the profligate mendacious members of the eurozone. Deploying carefully controlled phrases that may loose a little in translation he will also decline to support the idea of a Tobin tax [see blogs passim] and try to insist that Britain must have a veto on any institutional changes in the European Union. Having had experience of Hitler ruling by decree, the founders of the German Federal Republic built into the Constitution provisions that any constitutional change must be approved by due process. The Constitutional Court has taken the view that EU constitutional  changes that apply to Germany must be carried by due process throughout Europe; and it is generally agreed in Germany that any moves to further integration of the eurozone must be treated as fundamental constitutional matters. That is likely to mean that the changes would be subject to referendum in those countries that have such a provision.

 Cameron is saying that Britain should be a party to any rule changes, even in the eurozone of which it is not a member. His party have promised their electorate that there would be a referendum on any significant change in the rules of the EU. Everybody in the UK knows that the result of any referendum on 'Europe' - whatever the actual question - would be a massive majority against. Since the Liberal Democrats are europhiles - led by an extremist of the kind - the coalition government could collapse  if the Tory partners insist that there must be a referendum. So Cameron is hooked on the dilemma of his own wishing: he must either make himself a liar by refusing a referendum while signing up to constitutional changes or endanger his government. If the government falls there is a good possibility that the dysfunctional Labour Party would emerge from an election as the biggest single party, without a majority over a Parliament in which minor parties were all stronger that they are just now. The spectre would arise that there may not be a majority government for decades: with even less chance of there being a Conservative majority government.

As if that spectre is not enough to make Cameron a very frightened negotiator in Berlin, he also faces German pressure for the Tobin tax to be imposed on all financial transactions. France and Germany see that tax as a way of reducing the predominance of the City of London in European and world financial markets. The more Cameron and Osborne say they will not countenance the tax, the more observers fear that it will be imposed anyway.  If it happens, the turnover - and taxability - of the City will be hit, possibly devastated.

If the government were to see sense, and reclassify all of casino banking as betting [which it is], the Tobin tax would then fall most heavily on retail banking, and thus  have a negative impact on the standard of living of  the already hard-pressed taxpayers. By reclassifying derivatives and other classes of instruments as bets - and subjecting them to UK betting tax - a precedent would be set for other countries to follow, to their own advantage. The present EU proposals would bring the take from the Tobin tax into their coffers at Brussels; which would further fuel euroscepticism in Britain, especially if it was the direct cause of mayhem and mass unemployment in the City.

Germany and the UK are on a collision course: nobody with worldly wisdom would expect Cameron to win. Cameron has some appreciation of the risks, and he will bet on Germany politely seeking a verbal compromise whilst not changing its stance by one iota. In short, he is betting on flying back to London with fine words wrapped around a failure to affect the situation; while hoping that he can buy time to avoid any of the crunch decisions that will crowd in on him within a few months.

A former Prime Minister flew back from Germany brandishing a meaningless set of words and a signature on a piece of paper. Cameron must hope that not many people see the parallels.