Europe: what's going on

We know a little bit more about the 'Plan' referred to previously, following Mr. Cameron's visit to Germany.

The Eurozone hates the British when we sound off on Europe, and indeed rather hates us for not having made the monumental errors they have. But the whole world is affected by what is going on in Europe and we are entitled to voice our opinion, as is Obama, who does so regularly, and the Far East (China has just said it will not buy any more European debt).

What the rest of the world wants is a quick solution to all this, before the contagion spreads. And for most people that means Eurobonds (ie Germany guaranteeing the debts of all the others). For myself I am dubious abut eurobonds economically, legally (are they permitted under the German post-war constitution?) and politically (is it in Britain's interest to have a united Europe kow-towing to an over-powerful Germany?).

Merkel recognises the potential constitutional difficulty and recognises the even stronger political dangers: she comes up for re-election next year, and a commitment to use unlimited wodges of German taxpayers' cash to bail out countries Germans don't approve of would be an albatross round her neck.

What Merkel wants now is a banking union, where 'Europe' bails out banks in difficulty and guarantees the depositors, as happens in Britain and the United States. This would, she knows, involve a number of new Euro-institutions, monitoring the banks, controlling individual states' involvement with their banks and so on. And she knows that some countries are not fit enough to go along with it and some countries will not tolerate the loss of sovereignty it implies. Merkel doesn't expect this banking union to include everyone. When she says the solution is 'more Europe' she means 'more Europe for the few'.

It's funny, when I used to campaign against the Maastricht Treaty the first thing the Europhiles used to say was 'of course nobody wants a two-speed Europe'. And now, that two speed version is exactly what the europhiles are campaigning for.

The banking union will take time: 2018 has been mentioned. And the short-term? Merkel wants to continue with the austerity.

I think Cameron is making a mistake pushing for eurobonds. Apart from the reasons above why I don't like the idea I think there is a political mistake here, too. They will come up with some new Euro-Treaty, which Britain won't like because it will effectively pawn the City of London (Michel Barnier the economics commissioner has already spoken about a 27-nation Financial Transaction Tax). Cameron will have to veto the Treaty and it will be clear he is vetoing the very thing he had been campaigning for.

Not clever economics, not clever politics. Meanwhile the German economy is tailing off, the French are forecasting a downturn, German and Austrian banks have been downgraded, Spain is insolvent and can't even prop up its own banks, and the Greeks are reduced to soup kitchens. And no one has apologised.