Martyn in Europe

Khaled Diab, writing in The Guardian (Trouble in the Baltic , 25 February 2009) stated the following;

"We want to send a clear message that we support the European Union's position in favour of defending the common market and that we are against protectionism," said Poland's Europe minister, Mikolaj Dowgielewicz, in response to aid packages unveiled in France, Spain and Italy to help their domestic car makers.

What comes as no surprise is that some politicians in the EU continue with the divisive strategies that found so much favour with the former Bush Administration. Robert Zoellick, the Bush choice to run the World Bank has been quoted in connection with an interview for Suddeutsche Zeitung as saying: "I think it would be an immense tragedy if Europe were once again divided in two", in direct reference to potential outcomes of the crisis. It is time for some European governments to wise up. This is no time to play the East versus West, USA and EU versus Russia game. The game was of no benefit to the EU or the eastern European countries who are not members of the EU.

I think it's important to pay especial attention to the following.

Tom Barry, the policy director of the International Relations Center, has written that Robert Zoellick "regards free trade philosophy and free trade agreements as instruments of U.S. national interests. When the principles of free trade affect U.S. short-term interests or even the interests of political constituencies, Zoellick is more a mercantilist and unilateralist than free trader or multilateralist".

So, if we go back to the comments of Dowgielewicz, we can see that, external interference aside, that what some people don't seem to realise is that the assistance for manufacturing (France, Spain and Italy) is explicitly linked through to the stability of the Euro. EU based manufacturing must be protected from real existential dangers; these industries are part of the wealth creating fabric that allows EU member countries to provide funds to prevent an economic tsunami from starting in the East in the first place. If Dowgielewicz is okay with French, Spanish and Italian industry going to the wall, then this already tells us more than we need to know.

The Telegraph has reported that western EU banks have lent in the order of 1.13 trillion (converted to GBP) in east Europe, with the resulting high risk exposure to Austrian, Swedish, Italian, Greek, Belgian, and Swiss banks.

Meanwhile, the EU is doing what it can to prevent a complete financial melt down in the East, because it is common knowledge that if we don't help then the resulting crash will reek havoc in other joined-up economies, the economies of the EU and also, to some extent, the USA economy. If Mr Mikolaj Dowgielewicz doesn't understand this simple fact then he is, at best, seriously misinformed. 

Even though Poland and Latvia are in the EU, neither country is in the Eurosystem, and as far as the ECB is concerned, and as important as they are to the EU, the health of their economies is not the first priority.

The most prominent guiding principle of the ECB is to maintain price stability, by minimising inflation. The fact that the EU has provided funds to rescue the Latvian banking system speaks volumes for the benefit of EU membership; it also serves to underline the financial irresponsibility of some governments, banks and financial centres, for as small as they may be.

The fact of the matter is that the EU is not contemplating excessive protectionism; neither is it going to sacrifice the use of stabilising economic measures on the altar of destructive free-market dogma. This is a given, and no amount of frothy freefall free-market "café lattevianism", "journobism" or reverse polish notation will change that position.