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England is not going to participate in bailing out Eurozone countries. An all night Thursday into Friday meeting of the principals in the Eurozone crisis have come to agreement on a bailout plan and a new long-range deficit and debt reduction plan, in treaty form that is expected to be approved by March by the EU. Meanwhile, the UK seems to be distancing itself from the EU, much to the ire of France and Germany. The main feature of the treaty reads as follows: "General government budgets shall be balanced or in surplus; this principal shall be deemed to be respected if, as a rule, the annual structural deficit does not exceed 0.5 per cent of nominal GDP. Such a rule will also be introduced in member states’ national legal systems at constitutional or equivalent level. The rule will contain an automatic correction mechanism that shall be triggered in the event of deviation."
Not determined is what this means to Ireland, whose stellar economic rise is now rocketing down. Will the UK have to undertake the solving of Ireland's problems without the help of the EU? Meantime, at Thursday's meeting, the EU pledged 200 billion to the IMF. Of that 150 billion will come from Eurozone countries and the balance from EU members not in the Eurozone. In any event, the treaty that Britain is not signing onto will be designed to force austerity measures on EU countries. It will be harsh medicine for these countries, especially since pensions and healthcare benefits are likely to be affected. It is expected that companies will be forced to participate to a greater degree in paying for these benefits. Economists however are fairly united in the assumption that this plan will push a recession. Accordingly, as most companies see their payroll numbers fall, funding coverage for the unemployed becomes a uncertainty. Many economists within Britain think that their failure to sign on will pay off for them in the long run. According to Robin Niblett, director of Chatham House, the London foreign policy think-tank: "Fiscal discipline and political cohesion among 23 or more EU member states with such different levels of economic competitiveness and contrasting approaches to European integration will be very difficult to deliver. Staying on the sidelines of this process might not be such a bad option for the UK for now."
However, the reason for the UK's reluctance to sign on was that it wanted safeguards for London's financial institution, which member of the EU were unwilling to give. On a brighter note, at least to some, Croatia officially signed its accession treaty and will become a full member of the EU on July 1. 2013. However, in all of Eastern Europe Croatia has the worst economy, and been slowest in recovering from the recession. Its credit rating is just above that of junk bonds, has 17.2 percent unemployment rate among it 4.2 million citizens and third quarter GDP growth was a very unimpressive 0.06 percent. To many it would seem that by granting admission to Croatia, the EU is only increasing the likelihood of another unruly economy joining the already volatile mixture. Meanwhile, EU members have lauded Croatia's intentions as further proof that the idea of pan-europeanism makes sense and is worthwhile. Germany's Angela Merkle expressed how attractive the EU is to emerging countries and EU commission president Jose Manuel Barroso indicated that Croatia and the EU will continue to be a "transformative power." Based on the week's activities one wonders which direction the transformation is headed.
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