Monday, March 02, 2009

The cracks are starting to show

The Telegraph reports the deepening tensions in the EU as the recessions starts to bite deeper.

Europe is in danger of being split by a new 'Iron Curtain' as the deepening economic crisis separates east from west, the EU has been told.

Hungary warned the growing split threatened to provoke outbreaks of social unrest and a flood of unemployed immigrants travelling to Western Europe in search of jobs.

Ferenc Gyurcsany, the Hungarian prime minister, called for a £169 billion bail-out of Eastern Europe to prevent a major crisis that would reverberate across the continent.

Anyone want to guess where he thinks that £169 billion is going to come from?

But Angela Merkel, the German chancellor, dismissed the call for an Eastern Europe aid fund, saying: "I see a very different situation among eastern countries, I do not advise going into the debate with massive figures."

No - Germany is much too busy trying to save its own economy from collapsing - as is France.

When announcing a £2.7 billion (EUR3bn) aid package to French car makers Renault and Peugeot Citroen last month, President Nicolas Sarkozy implied that the cash was in exchange for a promise not to shut French plants or move to cheaper sites "in the Czech Republic or elsewhere".

In a move to ease the tension, the European Commission declared itself satisfied with guarantees from Paris that the French plan to bail out its auto sector was not protectionist.

Yeah, right! This is what I mean when I say that other EU countries - particularly France and Germany - are already protectionist, but in the worst possible way. Of course handing out subsidies in return for an industrial giant agreeing to keep their factories open in your country is protectionist and, to be fair, all EU states do it to one degree or another - but it is the worst, most inefficient form of protectionism.

However, as it is the sort that the EU Commission is happy to turn a blind eye to then it is the only sort of protectionism we're likely to see, but where Britain also usually ignores such blatant protectionism by the big players of France, Germany, Spain and Italy I don't see the eastern European states showing quite the same willingness to let them get away with it.

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