In These New Times

Cailean Bochanan

18th November, 2010

When Obama announced his latest quantitative easing scheme I assumed Britain would follow suit. Surprisingly they didn’t. Usually we move in tandem with our American partners but here there was a divergence. I had argued in the past that the pound functioned in much the same way as the dollar as a global reserve currency though very much under its wing. What was going on?

QE2, the latest quantitative easing programme was an attempt to run another free ride at the expense of the rest of the world: in fact, the culmination of thirty years of doing exactly that. Wasn’t Britain interested in the same racket: we could do with it since we have nothing else to fall back on. Unless, that is, we have our sights on a free ride off the European Union.

Tonight’s Channel 4 interview of the Irish Minister for Europe, Dick Roche, gave a strange impression. Presenter Jon Snow seemed absolutely desperate to get Roche to admit that the bailout was on the way whilst the latter remained fairly laid back about it all. It all aroused my suspicion: are the Brits are using all their influence to bounce Dublin into this? Why?

The rationale behind the bailout is that it is necessary to prevent contagion specifically of the European periphery, notably Spain and Portugal. It is here , it transpires that UK bank’s exposure is massive: so there is more at stake than just £143 bullion invested in Ireland. Surely, this explains why the British response to this bailout is so different from their response to the Greek bailout. That was poo-pooed as, on the one hand, a sign of the imminent demise of the eurozone and on the other an attempt to shore up French and German banks exposed to Greek debt.   But this time the mood music is much more positive. We are even happy to contribute to it ourselves- a nice touch when you consider the likely beneficiaries- whilst allowing our eurosceptics to run a simultaneous moaning campaign. Incidently, David McWilliam, an Irish eurosceptic, anglophile economist and also a sudden enthusiast for EU bailouts has pointed the finger again at French and German banks notably neglecting to admit to the British interest. Is this the elephant in the room?

Let’s wait to see how this unfolds but I have a sense the Brits have pulled off a coup here. The implications are rather disturbing- already the EU seems to have shown weakness in dealing with the City of London’s hedgefunds.  Now Merkel has backed down precipitately over the issue of a haircut for Ireland’s creditors.The EU’s exposure on their western flank to City wrecking operations hasn’t been dealt with. Can the City really rerun a neo-colonial racket in Ireland courtesy of the EU?