EC sanctions miss their mark

A cunning plan is set to be unveiled in the Eurozone to punish member states which commit the sin of either getting into big debt, running up trade deficits or allowing housing bubbles. Like so many cunning plans, however, this one misses the point.

The trouble with punishing sinners is that the ones most anxious to dish out the sanctions are often more guilty than anyone. As a certain, somewhat famous man once said: “Let he who is without sin cast the first stone.”

And that’s the snag. Eurozone bureaucrats have been busy listening to one sinner, and have thrown stones at all the rest.

The full sanctions will not be announced today. Maybe by the time you read this you will know more about it.

But in essence, the plan is to fine countries that run up big debts, trade deficits or allow the formation of a housing bubble. In other words, all countries that do things that are despised in Germany are to be hauled over the coals.

Of course, fining companies in debt seems a tad daft. And punishing countries that allow housing bubbles is a tough one because defining a bubble is pretty hard to do; until, that is, we can look back with the benefit of hindsight.

But what we are really seeing here is a victory for the Germanic economic model. It is the price that was paid for the EU bailout of Greece agreed earlier in the year.

But the Germanic economic model, if applied across the Eurozone, would be a disaster. It is not possible for every country to have a trade surplus, and if they tried the result would be economic depression. And maybe a trade war, too.

In a way, the recent claim by the Brazilian finance man, Guido Mantega, that: “We’re in the midst of an international currency war,” is a reflection of Germanic policy. See Print money, or it’s the end of democracy, says Bank of England man; stop printing money, or it’s trade war, says Brazil.

Back in 1944, Keynes wanted to implement a system in which surplus countries were fined and encouraged to trade with deficit countries. Now, EC sanctions that follow that formula really would be a good idea.

But when will that happen … err, did you see that? Just then, we saw a pig flying by overhead.