Clegg warns of xenophobia over euro
Nick Clegg today urged critics not to exploit the eurozone crisis to foster “xenophobia, chauvinism and polarisation” as doubts were cast on political efforts to save the single currency.
Credit rating agency Fitch said it believed that a comprehensive solution was now “technically and politically beyond reach” despite last week’s agreement on a rescue package.
And Tory former chancellor Lord Lamont warned that time was running out to develop sufficiently strong measures to prevent the euro from an fatal “explosion”.
In moves that will be closely watched by markets, Fitch put the ratings of six countries – Belgium, Spain, Slovenia, Italy, Ireland and Cyprus – under review.
And it dropped France’s economic outlook from stable to negative – meaning it believes the country is more likely than not to lose its cherished AAA credit rating within two years.
Paris was delivered a diplomatic slap by the Deputy Prime Minister yesterday for “simply unacceptable” attacks on the UK economy by a series of senior politicians and officials.
Prime minister Francois Fillon and its central bank chief had questioned why the UK was not facing a downgrade despite being “even more indebted than us and carrying a bigger deficit”.
As cross-Channel relations spiralled downwards, fuelled by Prime Minister David Cameron’s EU treaty veto at last week’s summit, Mr Clegg told the French PM to “calm the rhetoric”.
He was said to have secured such a promise and an agreement to discuss economic co-operation.
Fitch said it believed France was the “most exposed to a further intensification of the crisis” among AAA countries, partly because of its place in the euro bailout fund.
Its rating is also under review by another leading ratings agency – Standard and Poor’s.
In an interview with The Guardian, Mr Clegg put the spat down to European politicians being “a bit tired” and needing a Christmas break as well as the impending French presidential election.
“We all need to go away, have a bit of hiatus, a bit of time to have Christmas, to eat some mince pies or whatever the French equivalent is,” he said. “Everyone is a bit tired.”
With the presidential poll around the corner, he noted that there was “nothing more popular in French politics...than giving ’perfidious Albion’ a good kicking from time to time.
“At the end of the day, France and Britain have always worked out it is better to work together rather than shout at each other across the Channel.”
But as he led efforts to calm the situation, he warned: “The danger at the moment is because society is under economic stress, xenophobia, chauvinism and polarisation increase.”
“The people who are trying to exploit the politics of grievance and blame, they believe they have got the wind in their sails,” he said – naming UK Independence Party leader Nigel Farage and Scottish First Minister Alex Salmond.
Mr Farage said the comments “smack of desperation” after his party finished only narrowly ahead of Ukip in the parliamentary by-election in Heston and Feltham.
“Criticising the EU and its failure to resolve the eurozone crisis has nothing to do with ’blame’ or ’grievance’ or ’xenophobia’, but everything to do with challenging and questioning the politics that created this mess in the first place,” he said.
The Deputy Prime Minister, whose MPs abstained en masse on Tuesday rather back a Commons motion praising Mr Cameron’s use of the veto, welcomed “big steps to re-engage” with EU partners, such as taking part in the talks and softening opposition to the use of EU institutions for the new deal.
But he accepted that the EU still had a lot to do to.
“There are very big question marks about how to stop contagion. Clearly the markets have got great doubts; they are just as bad now as before the summit.
“What we are still waiting for is a very significant tangible expression of collective determination to implement labour market reforms, product market reforms and pension reforms.”
It could take “months and years of painful and controversial reform”, he said.
Officials in Brussels yesterday set out initial details of how efforts towards securing a “fiscal compact” to resolve the crisis in the single currency would be conducted.
Despite being alone in vetoing participation, British officials will take part in “technical discussions” over the formation of the new rules on debt and deficit limits.
The European Court of Justice will enforce what are meant to be strict central controls on the economies of participating member states.
Hungary and the Czech Republic have said they will not join the new agreement unless plans for tax harmonisation were dropped as signs of cracks among the other 26 nations appeared.
Lord Lamont, who presided over Britain’s dramatic crash out of the European Exchange Rate Mechanism in 1992, said it was clear the markets did not have faith in the EU’s proposals.
“We need to get on with this a bit faster if the euro is going to survive in any sort of form. The choice is between contraction or explosion,” he told BBC radio 4’s Today.
“There is not time left. Italy and other countries cannot go on with interest on their bonds near to 7%. At some point there is going to be a real crisis.”
