1. The Eurozone did have a clear ‘no bailout’ promise. Taxpayers of the Eurozone were given an explicit no-bailout policy when they signed up (in the instances, of course, where they were given a say). Art. 103 of the Maastricht Treaty (now Lisbon Treaty) says "any ... type of credit facility ... in favour of Community institutions or bodies.. shall be prohibited". And quite right too, for reasons that we in Britain used to call “moral hazard”. Why encourage recklessness by providing a safety net?
2. But political vanity and commitment to ‘the project’ comes first. Many EU leaders would rather shaft their taxpayers than risk losing a Eurozone member – or, of course, the Eurozone losing its status as a ‘reserve currency’ to rival the dollar. The project really is that important to them. Angela Merkel started making noises: "If something happens in one country, then all other countries are affected as well... As we have a common currency we also have a common responsibility". Peer Steinbrueck, her finance minister, has been saying that the EU may have to contemplate the bailout of nation states. The European Commission has been boasting that it “stands ready” to help Greece – with other people’s hard-earned, of course. And this with the ink of the ratification document barely dry!
3. A de facto EU “too big to fail” policy is with us. Just as that which emerged with the banks in the aftermath of the crash. Jacques Cailloux, an RBS analyst, says: “It looks pretty clear that the reality is somewhat different from what the Treaty is saying. In fact, we believe there is actually a pretty sound implicit safety net within EMU which is made up of the ECB and the core countries”. He adds that Greece and Portugal are, de facto, too big to fail “not because of their size but because a default from these countries would question the long term sustainability of the monetary union, something that cannot be allowed by the founding fathers of the Union”
4. All this goes to show just how the EU bend its own rules when it suits them. And if the EU as an institution doesn’t obey the Lisbon Treaty, why should we? I’d like to see Britain taking a more Chiracian go-to-hell style approach with a Treaty imposed on us in defiance of a manifesto pledge and public opinion.
5. It pays us Brits to study how nations are going pop nowadays As Irwin Stelzer said in the magazine recently, the mechanics of national bankrupcy are starting to become a lot less theoretic. A few years ago, I’d be writing with a little contempt about these Greeks and Italians. But now, I’m mindful that Britain – if it were in the Eurozone – would more likely be patient than doctor. But if we go pop, I’m not sure even the IMF will have a safety net big enough.