The Eurozone: Making Britain Look Smart

    The discussion about being for or against the Eurozone is never going to be a short one. The recent troubles in the EU have only given aid and comfort to the EU bashers-mostly on the British Right. Conservative Prime Minister David Cameron has struggled to keep his Conservative coalition together and on the reservation while many of his Tories are fanning the flames of Euro bashing recently.

    Cameron like Merkel in Germany is walking the tight rope. For all this the Europhobes aren't necessarily right but for now they sure look it vs. the Europhiles. How can they not?

     Look no further than the performance of the Bank of England vs the European Central Bank. Krugman had a piece out today about how despite headline 5.2 percent inflation in Britain the BOE continues to defend pursuing expansion not contraction in a core inflation argument-the argument is that the inflation is the result of shocks.

     Says Krugman: " I think you have to give credit to Mervyn King and company for nerves of steel here. They are under terrific pressure to panic over inflation, much as the ECB did when it raised rates earlier this year — a disastrous decision that is one of the reasons Europe is falling apart right now. The BoE arguably should be doing much more — raise that inflation target! — but compared with its bigger sister institution across the Channel, it has been an admirable example of courage under fire."

     http://krugman.blogs.nytimes.com/

    In some ways you could argue that Britain is the Scott Sumner ideal-no fiscal stimulus, in fact painful austerity but monetary expansion. While I don't agree-to say the least-with Cameron's austerity we can only appreciate the BOE's commitment to expansion.

   As I have suggested in previous posts, this points to the structural problem with the EU-either they must become more integrated or give up the ghost. The Europhobes aren't necessarily totally right but the way the EU has been structured can't work. Really you could argue that the Europhiles conceded too much to the Europhobes initially making it unworkable.