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It was Europe's handling of the fiscal compact in 2012 that set the course for Brexit. The EU swatted away modest UK demands for City safeguard clauses. It then circumvented a British veto.
Europe's leaders rammed through the compact outside the EU treaties by "intergovernmental" means. They subjected the British Prime Minister to a torrent of invective for good measure. David Cameron's referendum pledge was the consequence.
Brussels claimed the compact was vitally needed to bolster monetary union. What it really meant was that Germany and the northern creditor bloc wanted intrusive budgetary surveillance powers to bring southern Europe to heel.
Events have since shown – as critics warned – that the compact is a deflationary doomsday mechanism. It has proved unworkable and has in effect been shelved. So the EU lost the UK for nothing in the end.
Hungary and Poland are now being threatened with a variant of the same treatment, though they have at least done something to deserve it. Fidesz and the Law and Justice Party are accused of high-stakes economic blackmail, having vetoed the EU budget and the Recovery Fund over "law and order" tutelage.
Brussels is sifting ways to circumvent that veto, and to throw these countries off the gravy train as added punishment. This too will have consequences.
When you look at this unfolding showdown, Brexit takes on a new complexion. The British people took the honourable decision – impetuous perhaps, but not cynical – to leave an EU project that was moving ever-further in an unwelcome direction.
Hungary, Poland, Slovenia and others want to go their own sovereign way but remain within the EU and continue to enjoy net financial transfers. This subversion of the EU from within – as Brussels sees it – is a reminder that the British are not Europe's real problem or indeed a problem at all.
It ought to be easy enough for the EU to rub along with a liberal, free-market, net-zero Britain, a country that also happens to be a close military and security ally, unless it choses to make this impossible by overdoing demands for a permanent droit de regard and by refusing to reciprocate basic neighbourly courtesies that should have followed de soi from the Withdrawal Agreement.
The Barnier team is sailing close to the wind by making so much hostage to an unrelated trade deal and by pushing large claims while offering so little beyond WTO terms . The British people are psychologically prepared for the worst on Jan 1, should it come to that. They have been carpet-bombed with scare stories for four years.
The European public is not prepared and this creates a negotiating asymmetry. Should Brexit trade talks fail , the EU will have to activate its no-deal contingency plans and that will come as a rude shock for those benefiting most from the EU's £95bn structural trade surplus with the UK, quite apart from the ensuing crisis in EU-Irish relations over what happens next.
It would be dangerous statecraft to let this happen in the middle of a double-dip recession and during a parallel political war with the Polish-Hungarian sphere.
I do not wish to dwell on allegations made against Hungary and Poland other than to note that several non-EU bodies – the OSCE, the Council of Europe, et al – have issued warnings over the authoritarian drift of these regimes .
But I am absolutely certain that this intra-EU dispute would be handled differently if the Hungarian and Polish leaders were not also eurosceptics. Who exactly is making the judgment on what constitutes an infringement of press freedom or judicial independence?
France's Emmanuel Macron has been trying to push through an astonishing law restricting media coverage of police action , though mass street protests and global criticism forced him to retreat this week. He does not tolerate criticism and has a habit of intervening to have commentary pulled, even in the Anglo-Saxon press.
A number of EU states are either riddled with corruption, or half-captured by organised crime, or fall short of authentic democracy. The Charter of Fundamental Rights is selectively enforced by the European Court.
Amnesty International says the nine-year sedition sentences for two Catalan activists engaged in peaceful disobedience is a first-order abuse of judicial power. It said the Spanish supreme court rubber stamped political repression and has "criminalized legitimate acts of protest." The EU has looked the other way – as has Scotland's Nicola Sturgeon – because Madrid makes the right noises on the European Project.
The gentlemen who turned Malta into their personal fiefdom have yet to do much about the murder of the journalist who exposed their abuses. Reporters Without Borders ranks several EU countries below Poland in its global survey of press freedom, including Greece (65), and Bulgaria (111).
In short, violations of the EU's Copenhagen Criteria of democratic governance and human rights are a stick to beat only those who resist the centralising ambitions of Brussels.
The EU is now split on two lines of deep cleavage: the East-West culture war; and the North-South debt war. The latter has gone into seeming remission. We no longer talk much about the conflict of interest between the creditor bloc and the debtor bloc. But nothing has been resolved.
The North-South gap is now worse than ever. Brussels says public debt in Germany has jumped 11 points to 71pc of GDP over the last year, but by twice as much or more in the South, reaching 116pc in France, 120pc in Spain, 135pc in Portugal, 160pc in Italy, and 201pc in Greece. These figures will almost certainly be worse after Covid's second wave.
The International Monetary Fund warned this week that the EU might have to step up "solvency support" to avert a cascade of defaults. It strongly implied that the Recovery Fund is too small and slow to shore up the system and that high-debt countries may face "adverse market reactions" unless there is a bigger fiscal bazooka.
Bond purchases by the European Central Bank explain the current illusory calm. Frankfurt is soaking up Covid deficits and keeping the bond vigilantes at bay. "Ultimately, the entire edifice hinges on the ECB itself, on its willingness to backstop the sovereign-debt market," says economic historian Adam Tooze.
At some point the ECB will have to stop buying Italian, Portuguese, and Spanish bonds because otherwise there will be further hostile rulings from the Verfassungsgericht , and German political consent for monetary union will ebb away. Any flicker of inflation will bring this to a head rapidly.
The point is that the eurozone is nothing like Japan, or the UK, or the US, where monetary rescues will always backstop the system. EMU states are legally and constitutionally on the hook for their own separate debt.
Once markets begin to anticipate an end to the ECB "put", Italy's implicit insolvency becomes explicit. Bondholders will discount future debt-restructuring, and we will be back to the contagion scenarios of 2012.
However you slice it, you cannot bridge the economic chasm between North and South, just as you cannot bridge the cultural chasm between a secular post-Christian West and a post-Communist East eagerly refinding its Christian identity. They cannot all coexist in a single Union unless it is a loose confederacy that leaves each country with its own sovereign economic and political machinery.
By vaulting ahead with headstrong ideology and a disregard for Europe's national polities, the EU has ended up with a twin-headed hydra that is part federal and part confederal, and inherently unstable. The showdown with Poland and Hungary is not a one-off event. It is the tremor of ever-grinding tectonic plates.
Historians will take a very different view of Brexit after Europe's cultural anthropology has imposed its irresistible force.
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