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Hunting season distracts from Euro-calamity

31 May 2012

9:04 AM

31 May 2012

9:04 AM

As James observed yesterday evening, the Westminster media has its eyes on one story today: Jeremy Hunt’s career-defining appearance at the Leveson inquiry. A deafening cacophony has broken out from a host of tweeters, talking heads and irate scribblers. It will be a diverting piece of political theatre at the very least.

There is drama of a different kind in the Eurozone. Irish voters will go to the polls today to approve an EU budgetary restraint treaty, which they are expected to approve. Meanwhile, Spain’s borrowing costs have reached ‘perilous levels’ (6.65 per cent) according to the Times’ commentary (£). The European Commission has indicated that the European Rescue Fund is very likely to be deployed in order to recapitalise Spanish banks, a move that the Spanish government has been opposed to.

Italian bonds are also lurking around the 6 per cent mark. The word ‘contagion’ is back on peoples’ lips. City AM leads with the headline: ‘Disintegration’. Stock markets continue to slide as investors rush to the comparative safety of US, British and German government bonds.    

Much of the coverage exudes a sense of bewilderment. This is best expressed by Sir Christopher Meyer, who has just tweeted:

‘Treasuries at their lowest since 1703, US bonds at theirs since 1946. Will nothing galvanise Berlin and the eurozone into radical action?’

Former chancellor Norman Lamont had a crack at answering that question on the Today programme and concluded, simply, that the whole project was a mess, politically and fiscally. the Telegraph’s Jeremy Warner has arrived at a similar conclusion. He argues that the European Central Bank must defy the Germans and wade into sovereign debt to ensure that PIGS might actually be able to fly. But, even then, he holds little hope for the single currency. Popular support for the euro is ebbing away (a plurality of French, Italian and Spanish voters now believe that the single currency was a mistake), while German and Greek intransigence makes a political solution all but impossible.   

Obviously, these events will profoundly affect our politics. Philip Hammond has informed cabinet colleagues that the crisis in the Eurozone will increase demand for a referendum on our membership of the EU. The question is whether that moment comes before or after the next election.

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