Does it really matter now whether the eurozone breaks up or not? The damage may already have been done, in terms of business confidence. A £10 billion bailout for Cyprus has been agreed, but nobody will forget that its people woke up one morning to find their bank accounts raided — something you don’t hear of happening even in developing countries. At the height of the confusion, Britain had to send out cash on a plane to its troops in Cyprus so they wouldn’t be deprived, a bit like a UN mission plopping food packets over stricken areas.
The buzz is that Russian billionaires may now stage some sort of reprisal, but the real harm is that corporations, both large and small, will now be extremely wary of doing business in the eurozone.
Is it now safer to do business in the eurozone than, say, China? A decade ago, such a question would not even have been asked, but ten years is a long time in economics. The most curious event of our time may be that, even as eurocrats apply larger and larger statist and interventionist plasters over the eurozone’s increasingly gaping cracks, communist China can’t wait to show how capitalism-friendly it’s becoming. Its banks (state-owned, to be sure) are buying up financial institutions around the world, it’s promoting its own credit-ratings agency, and its new President Xi Jinping says he wants to push ahead with economic reforms. Nobody’s saying Beijing is as cast-iron as Berlin, but certainly most investors would now prefer to park their money in the Chinese outpost of Hong Kong than, say, Cyprus or Greece.
One need look no further than the currencies of the two entities. The EU seems hell-bent on using any measure, free-market or not, to keep the euro as the single monetary unit in a region that may be more comfortable with several. China, on the other hand, is trying to free up its renmimbi (under its own terms, clearly), and the City of London will count it as a coup if it becomes the first Western offshore centre for the currency.
Of course, China has a thousand miles to go. Aside from its draconian political culture, it’s dirty, polluted, over-crowded, avaricious, craven and noisy. Its people are apt to spit and they don’t have proper receptacles for their poo. You need not put a gun to most people’s heads to persuade them they want to live in Paris over Shanghai. But history notes not only the absolute nature of things, but their trajectory. Right now, China is opening up to business, while Europe is shutting down. That is where the euro crisis is headed, and eurocrats might as well be honest about it.