Editor : Martin Simamora, S.IP |Martin Simamora Press

Selasa, 27 September 2011

David Cameron joins forces with Mexico and Indonesia to advise on euro

Prime minister spurns US and EU to try to influence G20 in letter with Indonesia, Mexico, Australia, Canada and South Korea

David Cameron believes that Nicolas Sarkozy and Angela Merkel will be interested to hear the views of Mexico and Indonesia on how to run the single currency. Photograph: Philippe Wojazer/Reuters
British diplomacy has been anchored in two alliances for the past 40 years: Europe and the United States. Does David Cameron now believe that British interests lie elsewhere? The prime minister has decided to join forces with leaders from outside the US and EU to try and influence the next meeting of the G20, to be chaired by Nicolas Sarkozy, in Cannes in November. Cameron has written a joint letter to Sarkozy with the leaders of Australia, Canada, Indonesia, South Korea and Mexico which issues this warning:
We have not yet mastered the challenges of the crisis.

In the old days Britain would try to sign such a letter with the likes of the US, Japan, Germany and José Manuel Barroso, the president of the European Commission, who has a seat on the G20 on behalf of all 27 members of the EU. The raw statistics explain the pull of this group:
  • The US, with a population of 313m, is the world's largest economy with a GDP of $14.66 trillion.* 
  • Japan, with a population of 126m, is the world's third largest economy (behind China), with a GDP of $4.31 trillion.
  • Germany, with a population of 81m, is the fourth largest economy with a GDP of $2.94 trillion.
  • The EU, with a population of 501m, is the world's largest trading bloc with a GDP of $16.242 trillion.

So the size of a traditional British alliance, including the UK population and GDP, would be:
Population: 940m
GDP: $35.212 trillion

Cameron's new alliance looks like this:
  • United Kingdom, with a population of 62m, is the world's sixth largest economy (now behind France) with a GDP of $2.173 trillion. 
  • Canada, with a population of 34m, is the world's tenth largest economy with a GDP of $1.33 trillion.
  • Australia, with a population of 21m, is the world's 13th largest economy with a GDP of $882.4bn
  • Mexico, with a population of 113m, is the world's 14th largest economy with a GDP of $1.567 trillion.
  • South Korea, with a population of 48m is the world's 15th largest economy with a GDP of $1.459 trillion.
  • Indonesia, with a population 245m, is the world's 18th largest economy with a GDP of $1.03 trillion.

The size of Britain's new alliance, including the UK population and GDP, is:
Population: 523m
GDP: $8.441 trillion

So Cameron's new alliance is, in economic terms, around a fourth of the size of a traditional Transatlantic British alliance. So what is Cameron thinking? By joining forces with Canada and Australia is he harking back to the days when Britain thought its economic future lay in the Commonwealth?

The prime minister is a Tory romantic who probably believes that Britain treated the Commonwealth in a rather insensitive manner when it decided in the 1960s that its future lay in Europe. But he knows that his new friends will never pack a punch to rival the US and EU.

Cameron has signed up with countries further down the economic table for a very simple reason. The letter delivers a stern lecture to the 17 members of the eurozone to do more to stabilise the single currency which, in Cameron's eyes, currently poses a grave threat to world financial stability. The letter says:

Eurozone governments and institutions must act swiftly to resolve the Euro crisis and all European economies must confront the debt overhang to prevent contagion to the wider global economy. The July agreement to strengthen the Eurozone Financing Facility was an important first step. Euro countries now need to ratify this agreement as soon as possible, alongside implementing reforms to deal with excessive deficits, improving economic competitiveness, and acting now to strengthen banking systems. The Eurozone must look at all possible options to ensure long-term stability in the world's second largest international currency.

The prime minister went even further in an interview with Channel 4 News tonight when he said that eurozone leaders must offer stronger political backing for the €440bn bailout mechanism, known as the European Financial Stability Facility:

We cannot go on kicking the can down the road. We need decisive action, swift action to deal with this issue.

So the prime minister is adopting a fresh approach to British diplomacy in two ways:
  • Forging an alliance with countries which would traditionally be viewed in the foreign office as largely irrelevant. 
  • Lecturing the EU's paymaster – Germany – on how to run its economy. Any advice to the eurozone is effectively aimed at Germany which, as the EU's largest economy, will decide the future of the euro.

Margaret Thatcher used to lecture Helmut Kohl, the former German chancellor. But this was because Kohl had a radically different vision of the EU. The Cameron lecture is different because he is not taking issue with Germany's vision for the euro – the single currency will have to be underpinned by greater fiscal co-ordination. His criticism is that the running of the eurozone, led by a country whose economic performance for the past 60 years has towered over Britain's, is lamentable.
Maybe Germany will be keen to hear Mexico and Indonesia's views on how to run the single currency. But perhaps Germany will take a different view and suggest that Britain should contribute more to the eurozone bailout fund, particularly if Spain runs into trouble. Santander is, after all, now a major UK bank.


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