Friday, 27 May 2016

Former US treasury secretary on Brussels revenge: EU demands 'Old Testament justice'

The Financial Times has it right this morning: if Britain votes for Brexit, what the British can expect is the most vindictive treatment possible by the EU under the treaties.

So any Leave campaigner who persists in the idea that trade-as-usual would be quickly re-established outside the Single Market because ‘the Germans want to sell us their cars’ (or ‘the French will want to sell us their wine’ or whatever variation of that they repeat yet again) is a Leave campaigner with no knowledge of how Brussels operates.

The EU operates above the concerns of the prosperity of any single member state or its citizens. It operates in its own interests. If that means ‘Old Testament justice’ – see the former US treasury secretary, below, including the determination of EU finance ministers to force the collapse of the Italian government – for any member state which threatens The Project, so be it.

First, here is what the FT says today:

‘French officials are wary of Brexit contagion spreading to other member states and the lift it would provide to anti-EU insurgents like the National Front’s Marine Le Pen. They are determined to send a tough and punitive message to show divorce will be costly for Britain. “Playing down or minimising the consequences would put Europe at risk,” said one senior French official. “The principle of consequences is very important — to protect Europe.”’

‘Another leading European politician central to the Plan B process said: “Making Brexit a success will be the end of the EU. It cannot happen.”’


And if you doubt that the EU would be vicious in its dealings, remember Brussels has form.

I call your attention to what are known in Brussels as the Geithner Tapes. These are raw transcripts of the conversations which Tim Geithner, US treasury secretary during the financial crisis, had with his assistants while preparing his book, 'Stress Test: Reflections on Financial Crises.'

The transcripts were reported by Peter Spiegel, until recently the Brussels correspondent of the FT, in November 2014.

In the 100 pages of transcripts, Spiegel calls particular attention to Geithner’s recollections of a Group of Seven finance ministers’ meeting in Canada in February 2010, ‘just as panic over Greece’s restating of its accounts was beginning to grip the bond market. In his book, Geithner recalls there were calls for “Old Testament justice” at the meeting. But in the transcripts, he’s a bit more explicit.’

Here is the transcript, as reported by Spiegel (the emphasis is my own):

‘Geithner: I remember coming to the dinner and I’m looking at my Blackberry. It was a fucking disaster in Europe. French bank stocks were down 7 or 8 per cent. That was a big deal. For me it was like, you know, you were having a classic complete carnage because of people [who] were saying: crisis in Greece, who’s exposed to Greece?….’

‘I said at that dinner, that meeting, you know, because the Europeans came into that meeting basically saying: “We’re going to teach the Greeks a lesson. They are really terrible. They lied to us. They suck and they were profligate and took advantage of the whole basic thing and we’re going to crush them,” was their basic attitude, all of them….’

‘But the main thing is I remember saying to these guys: “You can put your foot on the neck of those guys if that’s what you want to do. But you’ve got to make sure that you send a countervailing signal of reassurance to Europe and the world that you’re going to hold the thing together and not let it go. [You’re] going to protect the rest of the place.” I just made very clear to them right then. You hear this blood-curdling moral hazard-y stuff from them, and I said: “Well, that’s fine. If you want to be tough on them, that’s fine, but you have to make sure you counteract that with a bit more credible reassurance that you’re going to not allow the crisis to spread beyond Greece and that’s going to require, you’ve got to make sure you’re putting enough care and effort into building that capacity to make that commitment credible as you are to teaching the Greeks a lesson….”’

 ‘Interviewer: I mean was that, did you have this kind of foreboding like: oh my god, these guys are just going to…?'

‘Geithner: Yeah. I had like a definite, and of course I, as I think I’ve said separately, I completely underweighted the possibility they would flail around for three years. I thought it was just inconceivable to me they would let it get as bad as they ultimately did. But the early premonitions of that were in that initial debate. They were lied to by the Greeks. It was embarrassing to them because the Greeks had ended up like borrowing all this money and they were mad and angry and they were like: “Definitely get out the bats.” They just wanted to take a bat to them. But in taking a bat to them, they were feeding a fare that was in its early stages. There were a lot of dry tinders.’

Spiegel adds:

‘Intriguingly, the transcript includes more than a full page of redacted comments on what emerged as the most explosive eurozone revelation in Geithner’s book: that EU leaders approached President Barack Obama ahead of the November 2011 Group of 20 summit in Cannes, France, with a plan to deny financial aid to Italy unless Silvio Berlusconi, then Italian prime minister, resigned.’

If Britain should vote for Brexit -- alas as unlikely as that now appears, given the ignorant arguments being made by most of the Leave campaign to leave the Single Market, too -- one needs to expect Brussels to 'get out the bats' to punish the UK in any way allowed by the treaties. And no German car manufacturers or French wine producers will stop them.


  1. Ooh! Maybe I should change my mind and vote remain . . not.

  2. What are your thoughts re. punishment, if we were to leave via the Norway Option?

    How would they punish us then?

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