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POLITICAL ECONOMY
Eurozone crisis revives old rivalries
by Staff Writers
Brussels (UPI) Dec 16, 2011

disclaimer: image is for illustration purposes only

Before another EU member lines up for a bailout and cries for help, the political organization behind the European Union and its eurozone is betraying signs of stress that recall the historical baggage of rivalries that kept the union's constituents apart for many years.

EU's current bete noir Britain is the prime target of europhiles for failing to stand up for the eurozone at last week's summit, a conference that produced a two-tier Europe with Britain flung to the bottom rung.

As the eurozone shows little sign of stabilizing and multiple downgrades of banks and then possibly states loom large, Europe is back in form as a group of nations harking back to historical enmities for instant comfort.

European Parliament members last week mocked Britain and briefly boycotted English as a language of communication and the French this week sharpened their words critical of old foe Britain.

Several major banks faced the first of crushing downgrades Friday and markets feared sovereign downgrades by credit rating agencies could follow soon. France said it wanted Britain downgraded first, before it could face its own sovereign downgrade -- as if either nation had a choice at the hands of ratings trio Fitch, Moody's and Standard and Poor's.

The entire EU is on Standard and Poor's list of entities on watch for possible downgrade.

French Finance Minister Francois Baroin attacked Britain's economy, arguing it was weaker than France's. French Central Bank head Christian Noyer said any sovereign downgrade should begin with Britain "which has more deficits, as much debt, more inflation, less growth than us."

Analysts said a sovereign downgrade of either Britain or France from their triple-A ratings could start a series of downgrades across the board in Europe. Several major banks were downgraded this week.

Although British officials said they had a "credible plan" to keep Britain afloat, they faced further recrimination from European counterparts as London prepares to join more EU consultations on saving the eurozone.

Last week, the European Parliament heard calls for Britain to be punished for its perceived betrayal and disloyalty to a common cause.

The other 26 members of the union remain divided over terms of keeping the eurozone alive, amid fears the collective rescue effort could be unpopular at home and cost them their governments.

Hard-pressed Hungary and cash-shy Czech Republic have already changed their minds about last week's much trumpeted fiscal union plan.

Hungarian Prime Minister Viktor Orban said he won't join any deal that moved toward tax harmonization. Czech Prime Minister Petr Necas said a common tax policy wouldn't be "good for us."

Both raised concerns about EU plans for a closer fiscal union, saying that should apply only to eurozone states.

The eurozone consists of 17 of the 27 EU countries -- Austria, Belgium, Cyprus, Estonia, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovakia, Slovenia and Spain.

France and Germany want a deal that requires eurozone countries to have common corporation and financial transaction taxes. At last week's talks, they could secure agreement only on a coordinated economic policy.

British Prime Minister David Cameron made himself unpopular in Brussels last week when he vetoed an attempt by French President Nicolas Sarkozy and German Chancellor Angela Merkel to turn tighter fiscal controls into a new EU treaty.

Sweden said it will leave its Parliament to decide on the deal. Other northern European states are also not too keen on a deal that may demand major fiscal and political sacrifices.

European Council President Herman Van Rompuy announced another EU leaders' summit would be called by late January or early February to secure agreement on the text of a new accord.

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