Greece Pulls Out of the Euro?

This mistake by the Reuters Exchange Rate made me smile earlier today, mostly because I suspect someone in their office actually played a bit of a joke rather than there being a "programming error" as claimed.

Greece hasn't used the Drachma since 2002 but the error in the programming didn't surface till now did it?

Pressure mounts on Cameron over Lisbon

It's finally happened then. President Klaus of the Czech Republic has signed the Lisbon Reform Treaty bringing it into law. Once the Czech Supreme Court looked like it was going to declare this effectively constitutional treaty, well....constitutional there was always going to be a huge amount of pressure on Klaus from the other 26 countries to sign and this has happened in the last hour or so.

This brings bad news for two sorts of people euro-sceptics and EU Law students and unfortunately I fall into both categories. However, as David Cameron will now be realising at Conservative HQ there is little me or him can do about it and we've just got to deal with the Treaty as it comes.

Cameron is probably under a lot more pressure than my good self though. I have to learn a few new names and Article numbers but Cameron faces something of a no-win situation. On the one hand he has promised the British public a referendum on the Treaty but now Lisbon is in force, to reject the Treaty now would lose Britian a lot of face on the world stage. The flipside of this is to accept the Treaty though this would undoubtedly upset the strongly Euro-sceptic wing of his party; especially considering their new Euro grouping.

A policy announcement is due tomorrow and many will wonder which way Cameron will go with the definite possibility that either way will cost votes at next years general election.

Both Labour and the Lib Dems are enjoying this Tory discomfort but there may still be a way out. In my opinion Cameron is in a strong position in relation to Europe with the threat of a referendum. This can be used to ensure various opt-outs and concessions for Britain and it is at this stage that Cameron can either choose to campaign for a 'Yes' vote in a referendum (as happened in Ireland) or to promise the British public that no referendum is now needed that important opt-oputs have been negotiated whilst getting even the likes of Bill Cash MP to support this position.

In any circumstance, Cameron will be under great pressure over the forthcoming weeks and months. The best thing Conservatives can truly hope for is damage limitation.

Preparing for the Future

The Mansion House speeches are normally more of a back patting exercise rather than the substantial debate of economic policy seen on the 17th June. The reason for this is the collapse of the financial system and in particular the near-death of the banks last October. All of this has resulted in the biggest rift between the government and the Bank of England since Gordon Brown (as chancellor) freed them 12 years ago.

In many respects Alistair Darling is lucky to be making a speech at all after the recent cabinet reshuffle. Nevertheless the speech is representative of new Labour policy and make interesting reading. Firstly, Mervyn King stated that the central bank should not only take charge of macroprudential regulation but should also be given new powers in order to do so effectively. This echoes the position of the Conservative party but in stark contrast, Darling suggested that "to concentrate on institutions seems to me to miss the point". In effect Darling said that no one system of regulation has protected a country though this view in itself seems to be missing the point and also appears naive of the situation.

The most interesting exchange though took place on the European level. This comes after a meeting of European leaders on the 18th and 19th June where it was recommended that more regulatory power be shifted to Europe. The proposals would include a 'European Systemic Risk Board' (ESRB) that would look out for dangers to financial stability then suggest how to avoid them flaring up any further. On top of this a 'European System of Financial Supervisors' would aim for more convergence in financial regulation.

In general I am an anti-European man myself but if you had asked me in 1957 whether I supported the newly formed European Economic Community (EEC) I would have said yes. Any institution which facilitates free trade is good in my eyes. This is why I support these reforms even where pro-European new Labour have some concerns. Darling agrees that there should be more co-operation on both a European and global level but dislikes the proposed commanding role of the head of the European Central Bank as well as believing bank supervision should remain a national responsibility. To a large extent I agree with this position. If, as happened with the EEC, Europe begins sticking it's oar in where it is not wanted then we may not only lose our own sovereignty but, particularly here, land ourselves in serious economic trouble. However, it should be noted that when European Finance Ministers met on the 9th June it was recognised that European supervisory ruling should not impinge on national fiscal sovereignty.