Devolved Government: Copying the Eurozone Crisis Model

This is a piece from “St Etienne” who is normally to be found blogging here.

The first drips of social unrest are permeating through Italy and Greece. Merkel is fighting the crosscurrents of Eurozone leadership and Germany domestic leadership. The French are being well, French. And everyone it seems is wanting a different version of the 9th December ‘agreement’ in Brussels.

This treaty, yet to be ratified by state parliaments anyway, is political gloss applied over the cracks of the EZ experiment. And we’ve seen it all before. This is the fifth agreement to end all agreements. A few days after the summit with bond markets resuming their declines, Merkel said ‘there were no easy solutions’. She said that back in October after the fourth agreement – remember the one that promised a €1bn leveraged EFSF to bailout insolvent governments? We didn’t get anywhere near that leverage – a meeting of EU finance ministers at the end of November agreed to a fraction of that if at all. Another €200bn was pledged by EU central banks this time round.

Each time those whose primary task is to stay in domestic power create a frenzy hailing a measure here and resolution there, how wonderful it is that all of the Eurozone has at last come together, that this time will be different. Then they head home and the disagreements & recriminations begin. Watered down, delayed and ultimately out of date proposals eventually get implemented months later, and by that time the market has hammered out new losses for the politicians to deal with. They blamed speculators to begin with, then discovered the holders of the derivatives were their own banks protecting their money with hedges. Then they blamed the ratings agencies, for doing nothing other than what is in their job description.

This is political dysfunction.

Devolved administrations would be best remaining contrite, rather than blame Westminster for all their ills. All 3 UK regional structures are illiquid. If ourselves and Wales had exited the UK say at the dawn of the EU we would likely be as insolvent as the Southern European states today. That is a big wake up call. Or rather it should be. But Edinburgh especially is busying itself with talk of further isolation from the UK – turning 3rd level education policy on it’s head (& shamefully discriminating against others into the bargain), the first minister talking up joining the Euro (think Last King of Scotland type madness but actually in Scotland). While at Stormont too we have failed to grasp the fallacy of breaking away from the unified fiscal authority and are pushing for tax changing powers. This is bad policy in action – divergent, competing interests is precisely the opposite of what the Eurozone needs to fix their predicament. Why would we want it here?

Don’t get me wrong I’m all for lowering corporation tax – throughout the UK. Tax is simply not an NI-specific issue. Productivity is. But that means horrible non-populist measures such as pension reform in an aging population, cracking down on sick leave abusers, management reform in several large state organisations and so forth. Changing attitudes is the real nub of the problem in NI but our political structures encourage politicians to ignore it rather than to face up to difficult realities.

And so in our festering regional mess we apply a peculiarly backwards logic – more devolution! more power to the people! – when it has been shown that the drug of populism has only condemned the Eurozone to a fate that will take many years to unwind itself fully. The UK is a single market with fiscal union free of charge – why destroy what everyone else is attempting to achieve?