Vaper Strain

National Review, September 2, 2013

As I write, I am vaping — yes, that’s the word — inhaling an odorless vapor from a plastic facsimile of a cigarette, battery-powered, bought for $10 at a local store, and good, it is claimed, for 400 puffs. The business end is fashioned to look like a filter. In another nod to nostalgia, the tip glows as I inhale. It’s not the real thing, nothing like. Plastic is neither leaf nor paper. It holds no memories of that old bar down on the Lower East Side, that conversation once upon when. There’s no tobacco, no combustion, none of the warmth, none of the evocative transience, none of the mouth-feel of cigarette or cigar, and it looks just a bit dumb. Walk into Rick’s with an e-cigarette and Rick would laugh. Then again, Bogie died at 57.

Whatever the aesthetics of e-cigarettes, as nicotine-delivery systems go they are a lot safer than the cancer sticks of old. There’s no carbon monoxide, no tar, very little, in fact, of tobacco smoking’s carcinogenic stew. To be sure, the Food and Drug Administration has detected tobacco-specific nitrosamines (a carcinogen) in the e-cigarette cartridges that contain the treats to come. A 2009 study revealed about the same quantity of TSNAs in cartridges as might be found in a nicotine patch, a total about one-nine-hundredth of the level found inside Joe Camel. The vaper (I know, I know) will inhale an even smaller portion, a tiny fraction of a minuscule amount. Furthermore, TSNAs were the only carcinogens detected in this study. Boston University’s Dr. Michael Siegel, a 25-year veteran of tobacco-control work (and a Centers for Disease Control alumnus), has noted that smokers of conventional cigarettes may inhale maybe 40 other carcinogens, not to speak of “thousands of [other] chemicals.”

But what about the antifreeze? This substance, more happily associated with autos than lungs, has seeped into the e-cigarette debate, setting up a scare or 50. The truth is that the FDA found some diethylene glycol — an important ingredient in antifreeze — in just one of the cartridges surveyed in the 2009 study, a dismaying result but almost certainly a rogue finding. E-cigarettes generally do contain, however, a base of propylene glycol to “hold” the nicotine and any added flavoring. Propylene glycol is used in antifreeze, but as a kinder, gentler alternative to its rough diethylene cousin, particularly when there is any danger of contact with food. As is explained in the compound’s Agency for Toxic Substances and Disease Registry toxicological profile (September 1997), “the [FDA] has classified propylene glycol as ‘generally recognized as safe,’ which means that it is acceptable for use in flavorings, drugs, and cosmetics, and as a direct food additive.” Move along, there’s nothing to see here.

As an alternative to propylene glycol, some e-cigarettes use vegetable glycerin as their base. This common food additive will affect their taste, but not your health.

And so far as the ingredients lurking in an e-cigarette are concerned, that ought to be about it. This is not, of course, a reason for arguing that research on these products should cease, or that stricter quality control should be opposed. Nor is it a claim that e-cigarettes are risk-free. They may, for example, inhibit lung capacity, at least temporarily. Beyond that and those pesky TSNAs, there is also the matter that most e-cigarettes will be used to deliver nicotine, a potentially addictive substance — albeit one that has been given up by tens of millions. Then again, much of nicotine’s famously powerful addictiveness can be attributed to the fact that it is being delivered via tobacco, a medium with naturally occurring monoamine oxidase inhibitors that seem to have a great deal to do (it’s a long story) with the difficulty of quitting smoking. Divorced from its leafy accomplice, nicotine is not that addictive, nor under those circumstances, to quote John Britton, who leads the tobacco advisory group for Britain’s Royal College of Physicians, is it even a “particularly hazardous” drug.

What about secondhand smoke, butcher of innocents, enricher of laundries? E-cigarettes give off little or no odor, and, although the research is still at an early stage, the health risks of secondhand vaping likely rest somewhere between zero and infinitesimal.

Considering all this (Dr. Britton has been quoted as saying that if everyone switched over to e-cigarettes it could save “millions” of lives), the medical world ought to be cheering the swift rise of a hugely safer alternative to demon tobacco. E-cigarettes are, so to speak, catching fire. In the U.S., sales are expected to hit $1 billion in 2013, twice the total of a year ago. That’s still only about 1 percent of the total spent on tobacco products, but it says something that Altria Group Inc. (parent company of Philip Morris USA), Reynolds American Inc., and Lorillard Inc. (which paid $135 million for blu eCigs in 2012) have all entered this market. Non-U.S. e-cigarette sales have been expanding rapidly too, reaching an estimated $2 billion in 2012.

But e-cigarettes have given tobacco’s fiercer foes, well, the vapors. Brazil, Norway, and Singapore have banned them. Others have imposed strict controls, including the prohibition of vaping in public places. Some British railway companies have exiled vapers from their carriages on the carefully considered grounds that they make other passengers “uneasy.” Such stupidities are not confined to abroad. A growing number of America’s politicians, bureaucrats, and other nuisances are on the offensive against e-cigarettes, including — if recent reports are true — New York’s nanny-in-chief, Michael Bloomberg. And he won’t be the last.

There are some legitimate concerns. There is a wide range of e-flavors, some of which, cherry crush, say, or chocolate (I’m not sure — on many grounds — about maple bacon), might appeal to a younger set, but such worries are best addressed by prohibiting sales to minors. Other objections — that e-cigarettes might act as a gateway to the real thing (in reality, they are more likely to represent an exit from it) or that they might re-glamorize smoking — are feeble stuff. This suggests that the real agenda is driven by the precautionary principle run amok, or, ominously, by something darker still.

Cynics might point to the loss of valuable tax revenues as the motive, but there’s much more to it than that. The campaign against tobacco began with the best of intentions, but it has long since degenerated into an instrument for its activists both to order others around and to display their own virtue. And with that comes an insistence on a rejection of tobacco so absolute, so pure, that it has become detached from any logic other than the logic of control, the classic hallmark of a cult. So mighty is the supposed power of this anathematized leaf that anything — even when tobacco-free — that looks like a cigarette or provides any approximation of its pleasures is suspect.

It’s too much, of course, to expect any respect these days for the principle that adults should be left to decide such things for themselves, but the chance that the e-cigarette could save an impressive number of lives should count for something. Europe’s sad snus saga suggests that that might not necessarily be so. For generations Swedes have taken a form of oral tobacco, a snuff known as “snus,” cured in a way that sharply reduces its TSNA content. Snus is available in the U.S., land of dip and chaw, but, within the EU, where no such tradition exists, it can be sold only in Sweden. Taking snus is not without risk, but it’s far less harmful than smoking. Its popularity in Sweden, especially with the guys, goes a long way to explaining why that country has Europe’s lowest incidence of lung cancer among men. It has been estimated that introducing snus elsewhere in the EU could save some 90,000 lives a year, but the EU’s capnophobic leadership has rejected the idea. Anti-tobacco jihadists are quite content, you see, to accept that the perfect can be the enemy of the good.

As America’s vapers might be about to find out.

Wrong Place, Wrong Time

Prit Buttar: Between Giants -The Battle for the Baltics in World War II

The Wall Street Journal, August 15, 2013

The finest English-language portrayal of the fate that came calling for the Baltic States in 1939 is  William Palmer’s  “The Good Republic,” a short novel written on the eve of the breakup of the U.S.S.R. that evokes both the horror that engulfed these nations and the monstrous dilemmas that the war left in its wake. Early in its pages, an aging émigré, back in his homeland after nearly 50 years, ruefully remembers how his (unnamed) Baltic country had, for a while, led “a charmed life . . . between mad giants.” That characterization is recalled in the title of Prit Buttar’s history of what happened when Nazi Germany and Soviet Russia carved up northeastern Europe between them before turning on each other.

The Nazi-Soviet pact of 1939 consigned the Baltic trio of Latvia, Lithuania and Estonia to Moscow’s sphere of influence. Mr. Buttar, a British physician and independent military historian, recounts how these three small countries were first forced to accept Soviet garrisons and then incorporated into the U.S.S.R. in August 1940 after elections that were as bogus as the choreographed “popular” revolutions that preceded them. The arrests, deportations and executions that followed were the standard Stalinist script.

When the Germans invaded the U.S.S.R. in June 1941, they quickly rid the Baltic States of their Soviet occupiers and were initially welcomed as liberators. This was an illusion that the countries’ Jews obviously didn’t share. Though Estonia had only a tiny Jewish minority, about 5% of the Latvian population (some 95,000 people) was of Jewish descent, as was around 9% of Lithuania’s (roughly 250,000). Most of these people were dead at the end of 1941, murdered by the Einsatzgruppen, German mobile killing squads.

The perception that the Jews had collaborated with Soviet rule reinforced older prejudice, and all too frequently Hitler’s butchers had local assistants. Mr. Buttar relates the dismal chronicle of the Baltic’s willing executioners with some skill, if, perhaps, with too little consideration of the way in which the Soviet destruction of the established political, economic and social order had eliminated the elements that might have put some brake on the descent into atrocity.

The danse macabre of ethnicity and ideology didn’t stop there. Had the Germans so chosen, they could have restored a measure of self-determination to the Baltic States and bought some strategically useful loyalty. But Hitler had other plans for the region. In his Teutonic take on manifest destiny, the indigenous populations, even purged of the Jews, offered little more than prospective labor for the greater German good.

As the Red Army pushed back and then west, though, the Reich’s leadership began to view the Baltic nations as a source not just of auxiliaries but of front-line troops. Latvian and Estonian formations were established within the Waffen-SS and fought in battles on the Eastern Front. Some of these recruits were true believers in the Third Reich, and some were simply opportunists. But a good number—knowing what the return of Soviet power would mean—signed up in the belief that they were choosing the lesser of two evils, their countries’ last hope, however remote. Others were the conscripts of any war, young men in the wrong place at the wrong time.

Mr. Buttar neither judges nor whitewashes these soldiers. But after going through his carefully balanced account of the predicament in which Balts found themselves in those years, readers will find it easier to understand why today’s reunions of Baltic Waffen-SS veterans, which include an annual parade through Riga, the Latvian capital, trigger not only outrage but also a degree of local approval.

The Red Army re-invaded the Baltic States in 1944 and in a sequence of brutal autumn battles evicted the Germans from Estonia and Lithuania. Several hundred thousand troops were cut off in Latvia’s “Courland Pocket” and continued fighting until war’s end in May 1945. Mr. Buttar is himself an army veteran, and it is from the military perspective that he relates the savage unraveling of the Baltic world during World War II’s last year. There’s plenty here on weaponry, on tactics and strategy, on the movement of units—and, as so often in volumes of this type, who won what decorations for what actions. Thus we are told that in January 1945 the soldiers holding out with desperate effectiveness against the Soviets were each “awarded a ‘Kurland’ badge or armband.” But what conditions were truly like in that cutoff redoubt has largely to be guessed from glimpses of exhausted men, references to continuous fighting and laconic details of “increasingly meaningless” battles fought on until the fall of the Reich many months later.

The Soviet “liberation” of the Baltic States, and their postwar reabsorption within the U.S.S.R., restarted the cruel machinery of Stalinist repression on an even more hideous scale than before. Unlike in 1940, however, tens of thousands of Balts took to the forests and staged a lonely epic of defiance often overlooked by historians. To his credit, Mr. Buttar takes his story through the postwar period. Partisan activity peaked in the mid- to late 1940s but was severely hampered by a wave of mass deportations—over 90,000 Balts were sent to Siberia in 1949. Despite this blow to its base, the resistance struggled on, outnumbered and outgunned, well into the next decade. They were hoping for effective Western support. It never turned up.

Our Climate-Change Cathedral

Rupert Darwall: The Age of Global Warming -A History

National Review Online, July 27, 2013

A 19th-century Scottish journalist, songwriter and poet is not an obvious guide to a 21st-century intellectual and political phenomenon, but when it comes to making sense of climate-change zealotry, there are worse choices than Charles Mackay (1812–89), the author of Extraordinary Popular Delusions and the Madness of Crowds (1841), an acerbic, often drily amusing study of the frenzies — from witch mania to the tulip bubble — that regularly possess our supposedly sophisticated species.

“In reading the history of nations,” wrote Mackay, “we find that whole communities suddenly fix their minds upon one object, and go mad in its pursuit; that millions of people become simultaneously impressed with one delusion and run after it.” One recurrent fantasy, he jeered, was that the last trumpet is ready to sound: “An epidemic terror of the end of the world has several times spread.”

This is not — exactly — to categorize alarm over the impact of anthropogenic global warming (AGW) as just another of these prophecies of doom. The notion that a sharp, man-made increase in emissions of carbon dioxide and other greenhouse gases could have a significant effect on the climate is infinitely more soundly based than, say, the dodgy math of a Mayan apocalypse, but that — by itself — is not enough to explain why global warming has so evidently turned out to be the right fear at the right time. To learn more about that, The Age of Global Warming: A History,an intriguing new book (released in the U.K. in March) by the British writer Rupert Darwall (full disclosure: an old friend), is a good place to turn, but read some Mackay first.

To Darwall, “the science [of global warming] is weak, but the idea is strong.” He duly discusses some of the scientific controversies that have arisen, but the underlying objection to today’s scientific consensus on AGW set out in his book is more fundamental. Like Karl Popper, perhaps the last century’s most able philosopher of science, Darwall believes that the essence of a properly scientific theory is that it is falsifiable: “It should be capable of being tested against nature and therefore [potentially] refuted by evidence. . . . The more a theory states that certain things cannot happen, the stronger the theory is.” Put another way: What would it take to persuade believers in AGW or, more important, those concerned by what it could lead to, that they are mistaken? The answer is — let’s be polite — unclear.

If it is not possible to construct a Popper-proof proof of a link between the rise in CO2 (and other greenhouse-gas) emissions and the (now, ahem, paused) increase in the planet’s temperature, then those who believe that there is such a connection are forced to rely on what is effectively a continuous poll of scientific opinion over what the data might mean. It is from this process that the much-cited consensus has emerged. That’s not as unreasonable as Darwall might think, but it is second-best science. And when, as Darwall rightly maintains, it has been tainted by the political importance of maintaining a consensus (and the consequent delegitimization of debate) it ends up as something even less than that.

But even those convinced of the reality of AGW — and the danger it could pose — should find Darwall’s book a fascinating, if uncomfortable, history of climate change as a political and intellectual phenomenon. Those who want to focus on detailed scientific debate would do better to look elsewhere, as would those itching for a rant. There are some clever, occasionally lethal, jibes, scattered throughout The Age of Global Warming, but Darwall’s work is no noisy polemic. It is calmly forensic — and deeply disturbing.

Inevitably, Darwall is unable to resist mentioning earlier doomsayers that have got it spectacularly wrong. These include old Thomas Malthus, the Nixon era’s Club of Rome, and William Stanley Jevons (1835–82), a genuinely brilliant English economist whose best-selling The Coal Question (1865) warned that Britain was going to run out of the coal on which its economy depended. He predicted that by 1961 it would need to produce a colossal 2.2 billion metric tons a year. By the time that 1961 actually showed up, Britain’s annual coal consumption was running at less than 10 percent of that figure: Somehow the country continued to function.  To be sure, the failure of these particular forecasts does not prove that all predictions are nonsense, but they are a vivid demonstration of the need for intellectual humility and, more specifically, of the perils of extrapolation. We cannot know how human ingenuity, chance, or simply the passage of time will change what once seemed so certain. We can, of course, do our best to anticipate what is to come, but in the end, it is only a guess.

The British economist Nicholas Stern, author of the 2006 report that did so much to shackle his unfortunate country to a fundamentalist view of AGW — and what to do about it — took a rather more robust approach. He carried out a cost-benefit analysis of the problem of climate change (something that, outside the U.S., few had bothered to do), but his report’s sometimes controversial methodology had room (as Darwall records) for assumptions that ran up to 800 years in the future, a distance across time that might have made even Nostradamus hesitate. No matter; the U.K.’s establishment found Stern’s work compelling, useful, or both.

Others have been won over by a more atavistic dread. There’s no doubt that one element in the mosaic of AGW panic is a continuation of the ancient anxiety that something — food, say, or water or fuel — will run out, an anxiety created by millennia of human survival at the edge of subsistence, an anxiety that, even now, need not always be unjustified.

Another important ingredient finds its origins in thinking that developed in response to 19th-century industrialization. Romantics fretted that accelerating technological progress was taking man ever further from an imagined Arcadian idyll. Harder-headed sorts worried that the fruits of capitalism were a threat to existing social, financial, political, and religious hierarchies. To read Darwall’s deadpan account of the sometimes lunatic proto-environmentalism of the first half of the 20th century is to be reminded that today’s greenery has profoundly reactionary roots.

The old, Marx-pocked Left traditionally took a very different approach. As Darwall explains, its view of man’s relationship with nature was essentially promethean. The planet was there to be mastered by science and the proletariat. The radiant future would be secured not by the bucolic values of an Eden that never was, but by technological progress. It was only when the failure of the Communist experiment became too obvious to be ignored by its Western sympathizers that the opponents of capitalism looked for another banner around which to rally. Red shaded into green, a shift — boosted by the likes of Herbert Marcuse — that Darwall correctly sees as a key moment in the growth of environmentalism as a political force.

That the evolving environmental narrative fit in so well with currents found running through many spiritual traditions — an aspect of this saga on which Darwall could have focused more attention — also did not hurt. A tale of flawed, fallen, wasteful humanity needing to be led by an enlightened elite (step forward, Al Gore!) back to the austere path of righteousness, wisdom, sacrifice, and restraint has a clear religious resonance, as does the often apocalyptic language of environmentalist discourse and the furious reaction of some of the faithful to any dissent or, to use a more appropriate word, heresy.

And then, of course, there is Charles Mackay’s inconvenient truth: The end of the world has long been good box office.

Mix these elements together and then throw in the warming trend seen in the last quarter of the 20th century and it becomes easier to understand why, once the moment came, AGW won so much acceptance so quickly. Borrowing from an observation made by the British philosopher and mathematician A. N. Whitehead (1861–1947), Darwall argues that an idea “works slowly before mankind suddenly finds it embodied in the world. It builds cathedrals before the workmen have moved a stone. So it [was] with global warming.” Environmentalists were already predisposed to believe the worst about what hydrocarbons could do.

It was not only the intellectual infrastructure that was in place. Darwall shows how a small, curiously influential group of the unelected — including the annoying Canadian Maurice Strong (the “international man of mystery,” of an old National Review cover story) and Barbara Ward, a pushy, devoutly Roman Catholic, devoutly left-wing former foreign editor of The Economist — had been working to drive the environment up the international agenda since the 1960s. These were typically cleverer-than-thou command-and-control sorts, sometimes, tellingly, with a touch of the mystic about them (Fritz “Small Is Beautiful” Schumacher included astrology in his large collection of spiritual enthusiasms). They truly trembled for the environment (by the early 1970s, Ward was predicting that we’d be pretty lucky to make it to 2000), but they also saw environmentalism as a gateway through which technocratic controls could pour. Better still, the fact that environmental problems often seep across national borders could be used as an argument for supranational regulation, something that fit in nicely with their vision of a world increasingly run from Turtle Bay, by — pass the Dom Pérignon — people very much like themselves.

Darwall recounts how, starting with a 1972 shindig in Stockholm, U.N. environmental conferences were convened. (He has kind words for the chlorofluorocarbon-bashing 1987 Montreal Protocol.) Above all, the concept of “sustainable development” was turned into a device that could be used to head off objections from Third World nations that Western environmentalism would stand in the way of their own badly needed industrialization. As Darwall describes this convenient “political fiction,” it was based on the thesis that “economic growth was . . . double-edged. When rich countries got richer, it harmed the environment; when poor countries grew, the environment benefitted.” To be fair, that’s marginally — marginally — less absurd than it sounds, but in any event it did the trick. As the 1980s partied on (environmentalism has tended to flourish in prosperous times), grand reports (Brandt, Brundtland) were written and institutional mechanisms — national, supranational, NGO — were put in place to help greenery along.

When AGW — with its blood-curdling new angle on the dire consequences of man’s excess –arrived on the scene, the natural response by many in the environmentalist community was to see it as a fresh stick with which to whip humanity into line. Official concern over AGW finally crystalized in 1988, thanks primarily to the efforts of NASA’s James Hansen and a supporting cast that included, of all people, Margaret Thatcher, filled with hubris and pride in herself as a scientist. All was set for the climate-change circus to hit the road, and it did so at a speed that showed how well the way had been paved. Other politicians jumped on board, joined in due course by big business playing the usual corporatist game. Less than four years later the 1992 Rio Earth Summit had been held, and the U.N. Framework Convention on Climate Change put in place. Darwall notes, albeit with some exaggeration, “After Rio, debating the science of global warming became superfluous. Politics had settled the science.”

The route the circus took from Rio to Kyoto (1997) to Bali (2007) and to Copenhagen (2009) is detailed by Darwall, a meticulous and occasionally caustic chronicler with a sharp eye for the intricate political and diplomatic maneuvering that this journey has involved.

But, as Darwall points out, warnings of climate disaster came with a catch: The helpful idea that economic growth in the Third World was benign could not — for AGW mavens — coexist with the inconvenient reality of surging greenhouse-gas emissions from some emerging economies. The climate-change jamboree held in Copenhagen was designed to resolve this contradiction. The ultimate objective was to extend the Kyoto concept of binding obligations onto the United States and, crucially, growing industrial powers such as China and India. For all practical purposes, it got nowhere.

In what Darwall sees as a reflection of the diminishing clout of the West, New Delhi and Beijing stuck to their chimneys. As a result, the Obama administration declined to agree to a deal. The EU was left humiliated and without the broad, binding treaty its leadership craved. Its only consolation was that there was (just) enough in the mealy-mouthed final Copenhagen Accord to, in Darwall’s words, “keep the whole negotiating process going on indefinitely and provide cover for European governments to continue with their global warming policies.” President Obama has, of course, recently signaled that he still wants to push the U.S. in a similar direction.

And so the jihad against AGW will likely lurch along, regardless of India and China, regardless of the uncertainties that dog the science, and regardless of the obvious stupidity and astonishing expense of some of the policies (we could start with biofuels, but Darwall offers up plenty more to choose from) that it has set in motion. It has become too big to fail.

But even if this effort is one day abandoned, Darwall suspects that the Western mind would fill the gap that it leaves behind by dreaming up yet another environmental crisis that can be avoided only by crippling the modern industrial economy.

The end of the world, it appears, will always be with us.

City Under Siege

The Weekly Standard, July 1, 2013

Take a visit to the cyber-belly of the beast, to a website run by the European Commission, the EU’s bureaucratic core, and you will be told that “the financial sector was a major cause of the [economic] crisis and received substantial government support.” Soon it will be payback time, in the form of Europe’s new Financial Transaction Tax (FTT), set to be levied at a rate of 0.1 percent on equity and debt transactions, and 0.01 percent on trades in derivatives. It will ensure that the financial sector “makes a fair and substantial contribution to public finances.”

We’ll see. This new “contribution,” potentially much more onerous than those fragments of a percent suggest, may or may not be substantial (taxes of this type have a record of backfiring), but the revenues predicted by the commission ($45 billion or so, but the math is fuzzy) could be eclipsed by the punch that the tax delivers to economic growth.

Whether the FTT is “fair” is fuzzier still. That’s because the real objectives of the tax​—​to be introduced by 11 eurozone countries in 2014​—​have little to do with that. To start with, the FTT is about​—​dread word​—​the narrative. Problems within the banks were the immediate cause of the crisis​—​it’s not called the financial crisis for nothing​—​but working out what caused those problems is a messier matter altogether. The number of plausible suspects rivals the haul on Agatha Christie’s Orient Express. Prominent among them is something for which the commission bears a great deal of responsibility​—​the euro, a reckless, politically driven piece of financial engineering that has outdone the worst of Wall Street’s mad science. With the single currency still the focus of potentially dangerous debate, it makes sense to keep attention focused on fat cat bankers and away from Brussels’s more discreet architects of financial destruction. Similar thinking helps explain why​—​when the euro’s troubles grew too big to ignore​—​there was so much talk of dodgy markets and dark Anglo-Saxon plotting.

Sadly, in a way, not all of this was​—​or is​—​deliberate disinformation. Much of continental Europe’s leadership class​—​across the political spectrum​—​distrusts “financial capitalism” of the Anglo-American kind, a venerable suspicion that appeared to have been vindicated by the fiascos of 2008. Why there is this distrust is a topic for another time​—​Roman Catholicism, socialism, and the twists of history have all played their parts​—​but that it exists is undeniable. The idea that free markets are the least bad way of allocating resources has limited appeal in a political culture still in thrall to the notion that some authority somewhere knows best, a belief that remains the essence of what the EU stands for. This is more than a matter of philosophical disagreement. So far as Brussels is concerned, Anglo-Saxon finance is not just objectionable, it’s in the way.

The euro was an attempt to override the market. A nation’s currency is a measure of its relative economic performance. If its value falls that’s a signal to investors and, in time, a chance to restore international competitiveness. By abandoning marks, francs, lire, and all the rest, the creators of the currency union junked a useful economic tool, replacing the collective sense of the market with crude administrative fiat. France was Germany was Portugal, and that was that.

As millions of jobless Europeans know, the market bit back. But the instinct of those managing the currency union was not to revert to market discipline, but to move farther away from it. There were bans on the short-selling of certain securities, attacks on credit ratings agencies that were at last telling some inconvenient truths, and, crucially, a vow by European Central Bank president Mario Draghi to do “whatever it takes” to save the euro, a declaration buttressed by the prospect of significant intervention in the sovereign bond market. Markets are far from perfect, and some of what has been done can be justified on pragmatic grounds, but it’s not difficult to notice the direction of a broader ideological current, one that is not good news for the City​—​London’s Wall Street​—​or, indeed, American financial firms interested in European business.

That current is sweeping an increasingly burdensome, increasingly made-in-Brussels regulatory regime, expensive and rigid, into the City and beyond. Much of it is profoundly antithetical to the intuitive, principles-based, flexible, and often self-regulatory approach that has done so much to transform Britain’s financial sector into a world-beating business. That some of these rules​—​such as the new Alternative Investment Fund Managers Directive​—​will (effectively) weigh even more heavily on enterprises headquartered outside the EU is bound to damage London’s status as a global financial entrepôt, diverting business beyond the reach of Brussels.

The commission doesn’t appear to be particularly concerned where that business goes. In fact, it would probably like much of it to go away altogether. Many of Britain’s continental partners agree. And jealousy is only a part of it. The inherently unruly (markets are like that) and, to them, morally suspect financial sector is an obstacle to the ideal of a technocratic, tightly controlled Europe. Meanwhile the “island sewer” (to quote a deputy director of the supposedly serious El País, Spain’s highest-circulation newspaper) acts as a low-tax, lucrative lure for some of the continent’s best and brightest: some 300,000 to 400,000 French citizens now live in the U.K., mainly in London. Perhaps most annoyingly of all, financial services’ large contribution to the U.K.’s ramshackle economy (directly and indirectly perhaps at least 14 percent of GDP, and a badly needed export earner) helps fund Britain’s fondness for going its own way, an independent-mindedness that its European partners could do without.

But if the pie is to be smaller, that doesn’t mean that those partners don’t want a larger slice of it. National rivalries still flourish beneath that shared EU flag. The mechanism of “ever closer union” is not infrequently used by one member-state against another. It is, of course, only a coincidence that the (Frankfurt-based) European Central Bank is seeking to introduce rules that would force the relocation of clearing houses that handle euro-denominated instruments (in any significant quantity) out of London into the eurozone, to Paris, say, or, uh, Frankfurt. The U.K. is suing to prevent this, but if the currency union deepens, or banking union comes into being, there will be more of the same to come.

Taken as a whole, Europe’s financial sector will shrink further​—​even after the bloodletting of the last few years. London, as its hub, is bearing, and will continue to bear, the brunt. Jobs in the City have fallen by roughly a third and now stand at a 20-year low. In part this is natural, the product both of hard times and the necessary reconnection of the financial sector to economic reality. In part too it’s a matter of mathematics. Tougher capital requirements and more restrictive limitations on leverage (and, possibly, areas of business) are a reasonable response to some of the disasters of recent years, but they will make much of the banking sector less profitable than in the mirage years, and that’s before we begin to factor in the costs of Brussels’s wider regulatory onslaught.

The FTT adds both further insult and injury. The belated realization that the tax may be even more destructive than its supporters intended (the governor of the Bank of France has warned of the damage it could do to the Frenchfinancial sector) may mean that it will be diluted prior to its planned introduction, but two key features​—​some targeting of trading volumes and extraterritoriality​—​will remain, and both will hurt London disproportionately. The extraterritoriality is particularly galling. A trade will bear the tax even if only one counterparty is in the FTT-zone, and so will a transaction where both counterparties are outside the FTT-zone (in London and New York, say) but trading a security (a Peugeot share, for example) where the issuer is based within it. The U.K. and the United States will be acting as the collectors of a tax that hurts one of their key industries​—​and they won’t get a penny for their pains.

As if all that were not enough, the intervention of Europe’s reliably authoritarian parliament means that new caps on bonuses have recently been approved. The bonuses of bankers classified as “material risk-takers” (including anyone who earns over $660,000 a year) will be capped at one times salary, or two times with the approval of a supermajority of shareholders​—​an arbitrary diktat at odds with more subtly designed measures preferred by the U.K. The possibility that similar limits may be imposed on asset management firms (a group that received no bailouts from the European taxpayer) gave the lie to the never convincing argument that these changes are about risk control. Rather, like the Swiss referendum in March that also imposed restrictions on executive pay, they are both an exercise in collective punishment and a manifestation of the neo-egalitarianism growing on either side of the Atlantic. There is something else at play. Members of the European parliament see themselves as the continent’s elite (check out the deeply discounted tax rates that most of them pay), the vanguard of a new Europe. Earning so much less than those arrogant, unnecessary bankers maddens them: The chance to put a brake on financial sector pay is difficult to resist.

That’s more bad news for the City. The cap will​—​surprise​—​hit London hardest (that’s where most of the EU’s “material risk-takers” are to be found) and will make it a less hospitable place for the type of international business that could just as easily be located in New York, Hong Kong, or Zurich. Not only that, mandating less flexible wage structures will discourage hiring, the last thing that London needs now. And if these changes do end up crimping total compensation, that will be a blow to Britain’s cash-strapped treasury, long accustomed to raking in a good bit of that income, among other large “contributions” (to use that fashionable word) from the financial sector.

And so British prime minister David Cameron finds himself in another European swamp. All he can do about the FTT’s extraterritorial reach is protest (the United States is also objecting) and maintain a fingers-crossed legal challenge. He could (very) arguably have vetoed the bonus cap under the Luxembourg compromise, a severely eroded understanding dating to 1966, which might still permit a veto in defense of a vital national interest even where no veto power formally exists. That would have been a long shot, but Cameron didn’t even attempt it. Going to the mat “against Brussels” in defense of bankers’ bonuses would have played no better in euroskeptic Britain than anywhere else.

But one important, and generally Conservative, section of the electorate might have supported him. Traditionally nervous about political uncertainty and understandably wary about being cut off from European markets, the City’s grandees have long endorsed​—​if on occasion through gritted teeth​—​British membership in the EU. That’s not going to change quite yet, but some of them must be beginning to see that staying in an EU fixed on its current course could well be riskier than taking their chances outside. Whatever he is now claiming, Cameron is not going to be able to nudge the EU in a different direction, and he does not have the imagination to see that Britain would be better off out. Sooner or later, the City will have to confront the fact that if the EU is the problem, Cameron is not the answer.

A sign that it may be starting to was a high-profile event hosted last month by London hedge funder Crispin Odey and designed to introduce Nigel Farage, the leader of the uncompromisingly Euroskeptic U.K. Independence party, and a former City trader himself, to financial types. A long-term and generous, if sometimes critical, member of the Conservative party, Odey has not switched his support to UKIP, but this looked a lot like a warning shot.

Cameron would do well to pay attention. The 3 percent scored by UKIP (which up until now has principally drawn its support from the right) in the 2010 general election cost his Tories their chance of an absolute majority. UKIP is now polling in the mid-teens or higher, a feat it has managed on a shoestring. If UKIP can begin to attract City money, and the credibility that can come with it .  .  .

It’s not easy being David Cameron.

An English Spring?

National Review Online, May 13, 2013

UKIP Conference, Birmingham, September 2012 © Andrew Stuttaford

They are still there, the English of an older England, frequently overlooked, frequently looked down upon, stubbornly hitched to an unruly history too grand just to be packed away.

On May 2, in local elections in a large swath of England (and a small slice of Wales), a good number of them did what the English — a less genteel lot than Masterpiece Theatre might suggest — do when provoked too far: They pushed back hard, casting their votes for the United Kingdom Independence party (UKIP), an eccentric homebrew of euroskepticism, “commonsense” conservatism, and anti-establishment mutiny.

Let’s get some caveats out of the way. Local elections halfway through the life of a parliament (the next general election is due in 2015) have long been used to protest against whoever’s in charge, and the scale of that protest is generally exaggerated by a low turnout. The angry vote. The turnout this time was some 31 percent, not so different from the tally (35 percent) for Britain’s last elections to the EU parliament in 2009, another contest in which UKIP, not so coincidentally, scored very well.

On May 2, this understaffed (a dozen paid employees in the U.K.), underspent, under-organized party won 147 of the roughly 2,300 seats that were up for grabs, compared with, um, eight in 2009, and took in around 23 percent of the vote, up from, well, no one was really counting last time round. It was (very) arguably the most sizeable surge by an outsider party since the Normans unexpectedly entered government in 1066. Labour topped the popular vote with 29 percent, the Conservatives followed with 25 percent, and their Liberal Democratic coalition partners trailed with 14 percent.

Now some more caveats: There were no elections in either Scotland — where voters dance to a very different tune — or the greater part of Labour-dominated Wales, or in most of England’s larger cities. This was an electorate that skewed right, something that helps explain the discrepancy between national polls (where UKIP has been scoring, not unimpressively, in the low-to-middle double digits) and the result of the May 2 vote.

And yet, something is going on.

The turbulent years that followed UKIP’s founding in 1993 are simple enough to decode: There’s the crankiness of obsessives at odds with conventional wisdom, and the infighting (long a UKIP trademark) that marks countless clusters of the opinionated. All the same, it is a measure of British unhappiness with Brussels that this odd little group took 7 percent of the poll in the 1999 elections to the EU parliament, when it was little more than the flag for an idea that no “respectable” party would embrace: Britain’s exit from the EU.

Five years on, UKIP had made little progress on the domestic front, but its share of the British vote in the 2004 elections for the EU parliament rose to 16 percent. Glory was followed by farce, a regular presence in the UKIP story, when one of its new MEPs and easily its most prominent face, a former Labour MP turned talk-show host, attempted to take over the leadership in a putsch that ultimately failed. He then quit the party. The voters were more loyal. In the next EU elections (in 2009), the 16 percent stuck with the only party willing to respond fully to the discontent that the supposedly euroskeptic Tories were too nervous to harness.

Much-derided Conservative “splits” over the EU (in reality a genuinely principled debate) had left the Tories with a reputation for feuding that proved to be electoral poison for the better part of two decades. This was made all the more deadly by the way that Tory unease over the EU was used by the Conservative party’s opponents to reinforce its reputation as an asylum for reactionaries with no place in the bright new Britain that Tony Blair was building. David Cameron had to do away with that caricature if he was to have a chance of returning the Tories to power. With little subtlety and some success, that’s just what he did. Climate change was in; “banging on about Europe” was out. As for UKIP, they were “fruitcakes and loonies and closet racists, mostly,” a dishonest and condescending jibe that played well — as it was designed to — with Britain’s metropolitan opinion-formers, but came to symbolize Tory carelessness with a right wing that, Cameron calculated, had nowhere else to go.

But that was before prolonged economic crisis drained the public’s confidence in a political class long known to be out of touch, but now seen to be out of its depth. The euro’s long agony and the EU’s increasingly  overt evolution into a nascent superstate have only helped reinforce the idea that those fruitcakes might have a few things right after all.

Britain has never been a hotbed of enthusiasm for the Brussels project, but it is striking to see some recent polls showing a majority in favor of U.K. withdrawal from the EU, a finding almost unthinkable just a few years ago. Tough times can force voters to confront reality, however uncomfortable. And in modern Britain there may be less to keep them reined in than in the past. Many Brits have become alienated from their country’s political process (a process that has, of course, been drained of much of its meaning by the intrusions of Brussels), an alienation bolstered by their all-too-justified suspicion of elite consensus, most strikingly, perhaps, in the area of immigration. UKIP’s much tougher line on immigration is a major element in its support.

Immigration has been a contentious topic in the U.K., as elsewhere in Europe, for over 50 years, but there is now a real sense that Britain has lost control of its borders, not least as a result of EU rules. With very little in the way of genuine popular consent, an island nation marked by only gentle shifts in its ethnic balance for centuries is being radically and rapidly transformed by an influx that accelerated dramatically during the Blair years. For a long time, to express much more than the faintest concern over this was to risk being dubbed, well, to recycle an insult, a “closet racist” or worse. An academic study splashed across the British press shortly before the May elections predicted that the “white British” would become a minority of the population in the second half of this century, a status that they have lately achieved in London. Extrapolation can be an extremely unreliable tool, but data such as this help explain why many Britons believe that there has been too much change too soon.

The U.K. is not a country familiar with populist revolt. Both the Labour and Conservative parties have traditionally been broad enough churches to accommodate within their ranks populist strains of Left and Right respectively. Since the Blair and Cameron modernizations, that may no longer be so true as it was. Even so, any insurgent party in Britain still has to contend with another formidable obstacle: the electoral system. It’s not by chance that, until now, UKIP had notched up real success only in EU elections, which operate under a system of proportional representation. Domestically, elections are first-past-the-post, a set-up that squeezes smaller parties, and one that presented euroskeptics with a very specific problem. Voting for UKIP rather than the mildly euroskeptic Tories risks handing victory to the Conservatives’ far more europhile rivals on the left. UKIP took only 3 percent of the vote in the 2010 general election, but even that was enough to cost the Conservatives some 20 seats and a clear majority. An even better UKIP result  in 2015 will almost certainly hand the keys of 10 Downing Street to Labour, with consequences that many potential UKIP sympathizers would detest.

Persuading them to risk voting for UKIP nonetheless is going to take more than the accumulated discontents of recent years, but if anyone can pull that off, it will be Nigel Farage, UKIP’s leader, who has emerged as one of the most effective politicians Britain has seen for a long time, and without whom the result of May 2 would have been an impossibility.

Comes the hour, crumbles the euro, crashes the economy, comes the man. A smoker who enjoys a drink or three, Farage is a charmer and a chancer, an ebullient and eloquent speaker with a quick wit, a nice line in self-deprecatory humor, and a public persona that is the jaunty, Jack-the-Lad antithesis of Britain’s increasingly pharisaical political class. Farage can do anger when he has to, but he is a revolutionary who does not take himself too seriously. A clever operator, perhaps, but a back-of-the-envelope administrator, reassuringly contradictory qualities that have only added to his subversive appeal. As the Daily Telegraph’s Tim Stanley put it, people voted for UKIP “partly out of anger and partly for a laugh.” It was, he concluded, “a very British revolution.”

More a warning shot than a revolution, I reckon, and distinctly more English than British. But, whatever the future holds, the next few months are likely to be tricky for UKIP, which will now find itself subject to closer scrutiny than ever before. That may prove an uncomfortable experience for some of its newly elected councilors, political novices who may find themselves hopelessly out of their depth or burdened with résumés that won’t look so good under the media microscope. Even in the run-up to the election, it was evident that UKIP did not have the resources to properly screen its candidates. There will be more embarrassments to come.

Meanwhile the party will keep working on building its support from the bottom up, local election by local election, trying to establish the grassroots networks without which it has little chance of winning many (or any) seats in the Westminster parliament, playing the retail politics — opposition to a contentious high-speed railway here or an unwanted wind farm there — that is already contributing to UKIP’s appeal. And the outreach to what Farage often refers to as “patriotic old Labour” will continue. That’s an effort that is already coloring the agenda of a self-described libertarian party that has always had its (to return to that lazy adjective) populist elements (the emphasis on immigration control and law and order, say, and, more recently, opposition to same-sex marriage) and has now dropped its earlier commitment to a flat tax that allowed it to be smeared as too soft on the rich. There will be further nods in a leftward, statist direction, as UKIP’s mood music — that’s the best way to describe its program — shifts. It may be less of stretch than might be assumed. Even some of the former Tory voters who now support UKIP are perhaps better understood here in the U.S. as being (very) roughly equivalent to the Reagan Democrats of old, with all that that entails.

In May 2014, there will be new EU parliament elections, a contest in which on current form UKIP could possibly come top, boosting its momentum still further. But for now attention will revert to the impact that the party’s surge will have on the Tories. The results of the May 2 vote contained scraps of bad news for Labour and the Liberal Democrats, but it’s the Conservatives who are looking at catastrophe in the 2015 general election. David Cameron’s earlier attempts to head off the UKIP challenge — most notably his implausible promise of an improbable referendum on EU membership — have failed. Now the Tories have to try something else. It may be a far tougher line toward the EU (good luck with getting that taken seriously), and, although this comes with considerable electoral risks of its own, it may be a lurch to the right.

Who knows? What it will be is desperate.

Landscape After

Marci Shore: The Taste of Ashes - The Afterlife of Totalitarianism in Eastern Europe

National Review, April 3, 2013 (April 22, 2013 Issue)

Warsaw, Poland, May 1998 ©  Andrew Stuttaford

The new dawn that broke over Eastern Europe in 1989 was bright, but the landscape it illuminated was exhausted, a territory of shadows and regret, where hope was jostled by apprehension and old demons stirred. To read some of the accounts of that time and that place is to confront sadness unexpected after the jubilation on the Wall, the Hungarian border, or Wenceslas Square — a melancholy echoed in Marci Shore’s beautifully written, discursive, and by her own admission “deeply subjective” new memoir, a work of well-told history and perceptive reporting that is both less than its title promises and rather more. Either way, it could have done with an index.

Don’t read The Taste of Ashes expecting a survey that covers all of the old Eastern Europe. With the exception of Romania (does that count?), the Balkans do not really feature, nor do Hungary and the former East Germany. There’s a brief excursion to Lithuania, but the other Baltics and the rest of the Soviet far west are notable only by their omission. This is a volume centered on Poland, the Czech Republic, and Slovakia, but quite a bit of what Shore discovered there could easily have been found elsewhere in the region. Thus, in early 1995, she returns to Prague and visits the house of an apolitical elderly couple, all too typical of a generation throughout Eastern Europe whose lives had been impoverished by Communism, but ruined by its fall:

The Velvet Revolution had brought freedoms they had no use for, and in any case had not the money to enjoy. Their whole adult lives they had worked under the Communist regime, and that regime had promised they would be cared for in their old age. Now the social contract had been broken. For their generation the revolution had come too late. For Pan Prokop and Paní Prokopová, it would have been better had it not come at all.

That, of course, assumes that — had it survived — the crumbling economy of Communist Czechoslovakia would have been in a position to deliver on those undertakings, something that is by no means certain.

Shore is an associate professor of history at Yale, a Generation X intellectual of somewhat progressive hue. Thus it may not be surprising that her description of her time in the Eastern Europe of the “post-Communist moment” — doubtless further skewed, in a form of confirmation bias, by the views and experiences of those with whom she chose to associate — comes with a sigh of disappointment. History failed again. The rise of the philosopher king, Vaclav Havel, was not accompanied by the rise of a philosopher people.

There’s prim tut-tutting about the profusion of pornography, and, more justifiably, about the increase in crime and the persistence of the inertia, passivity, and conformity of the “realm of the not possible” that was so much of the Communist state. There is little about the revival in free enterprise, but plenty on the resurgence in national tensions. Shore spent time “working as an intern for an ethnic-conflict project at an American-funded research institute.” Ex-Yugoslavia was in flames, and other long-suppressed conflicts had reemerged into the space that Moscow had once policed. In Romania, Shore investigated tensions between ethnic Hungarians and ethnic Romanians. Fair enough, interesting enough, but all this risks giving an unbalanced impression of a region where most just wanted their lives to be “normal,” an adjective that Shore happens to hear used by a Romanian politician, but that was voiced often in Eastern Europe in those days. When the old regimes fell, achieving a “normality” defined in largely Western terms was a widespread objective.

This idea is reflected in a clever phrase deployed by Shore to describe 1989’s upheavals: “Time, seemingly halted for so long, suddenly leaped forward.” And if the results of the leap have been uneven, they have still been impressive: “To tens of millions of East Europeans the end of Communism brought countless good things — above all a freedom the vast majority of people never imagined that they would live long enough to see.”

But in one sense, time did count, and it counted very much. Shore trains her historian’s eye on the impact of the Communist years, with a keen focus on the telling detail and defining atrocity. And she takes a longer view than most. The rise of the red flag over what her husband, Yale professor Timothy Snyder, dubbed the “bloodlands” in his magisterial book of the same name cannot, she correctly stresses, be seen in isolation. The subtitle of Shore’s book refers not just to Communism but to totalitarianism. In her view, the different stages in the evolution of Eastern European Communism must be read as links in a chain that stretches back to World War II, Nazi occupation, and the Holocaust and, before that, to the Depression, the rise of Fascism, and even to “the dizzying possibilities of the 1920s.”

It is widely recognized that war and Nazi misrule were critical in clearing a political, military, and (perversely) moral space for Eastern European Stalinism, and the link between the war and the troubled decade that preceded it is hardly a secret. The connection to the “unhinging” 1920s is more novel. Shore uses the microcosm of a group of 20th-century Polish poets as a window into the revolutionary fervor that enveloped large sections of the European intelligentsia in a decade happier, luckier Americans remember for jazz and Al Jolson.

Those poets — many of them of Jewish descent — dominated her book Caviar and Ashes and crop up again in The Taste of Ashes. From the later 1920s onward, they exchanged the (to them) ultimately unbearable uncertainties of nihilism for the messianic determinism of the far left, a faith that they — and a number of their associates — were eventually, and crucially, to put at the disposal of Stalin’s Poland. That’s a timetable that suggests to me that the original sin from which the nightmares Shore describes were to flow was the Bolshevik Revolution of 1917. After all, it was Lenin’s blood-soaked millennial upheaval that frightened many into Fascism as a supposed last bulwark of civilization. And it was Lenin’s revolution that drove its followers worldwide into a Communist cult that became dangerously intertwined with Stalinism years before the alibi that was Auschwitz.

To attribute so much of the blame to Lenin fits awkwardly with the emphasis that Shore’s narrative places on Hitler. The Holocaust is justifiably central to our reading of Eastern Europe’s dark 20th century, but its role as Stalin’s enabler needs more nuance than Shore gives it. Equally, notwithstanding the pantomime anti-Semitism (a gargoyle hounding of phantoms) that still, shamefully, persists in these lands, the horrors of the Shoah are less critical — other than for the hideous absence that it left behind — to our understanding of the region today than Shore appears to suggest. In a book billed as wide-roaming, she devotes perhaps too much space to what is now, tragically, only a tiny, introspective, often conflicted minority of Polish Jews. A minority of a once slightly larger minority (the Communists arranged a final anti-Semitic purge in 1968), they stay put in a country that groups of visiting Jewish teenagers — there to mourn at the death camps — regard (Shore recalls) “as a cemetery.”

Theirs is a disturbing, compelling story, but it crowds out a broader discussion of the encounter with a Communist past in which so many Eastern Europeans were profoundly compromised and then, “in a world where all the rules had changed,” left exposed by the opening of files that were either devastatingly ambiguous or, worse, all too clear.

There could have been more too in this book on the appeal of totalizing ideology to so many intellectuals. It is a topic that obviously interests Shore (it surfaced in Caviar and Ashes), but she gives too little attention to a phenomenon that still endures, if more benignly, even in the attitude of those such as the former dissident and Velvet Revolutionary who opts out of the, yes, normal politics of the new era: “To be engaged” is, in his view, “to forgo clean hands,” an abdication that is itself a declaration of absolutist thinking. Shore notes that “dissidence . . . had often been born of communism”: Once a believer, always a believer — all that changes is in what. That dangerous thrill remains.

Shore concludes the book with a tale of meeting a “bright young” member of the Polish new Left, who thanks her for Caviar and Ashes — a work he regards as rehabilitating those Marxist intellectuals of seven decades ago. Shore contradicts him, explaining that their fate is a “tragedy.” “But I didn’t read it as a tragedy!” says the bright young man. “I read it as a romance.”

We have been warned.

Cyprus Sinking

National Review, April 3, 2013 (April 22, 2013 issue)

It says something about the lunatic calculus of Europe’s monetary union that the Republic of Cyprus, a slice of a Mediterranean rock known mainly, if not always fairly, for sunshine, no-questions-asked banking for murky Russian money, and a history of ethnic conflict, has shared a currency with Germany for the past five years. And it says perhaps even more that in 2010 and mid-2011 its two largest banks passed EU-wide “stress tests” that, revealingly and not so revealingly, hugely downplayed the risks that banks were running with their holdings of government bonds. And, yes, those two Cypriot banks had a lot of government bonds — Greek-government bonds — and a great deal of other business in the hard-pressed Hellenic Republic besides. Wait, there’s more: Together those two banks in 2011 had assets equivalent to over four times Cyprus’s GDP. Overall the country’s banking sector had assets that amounted to more than eight times GDP. What cannot go on, won’t. By the second half of 2011, Cyprus was in the grip of a growing financial crunch.

After securing an emergency loan of € 2.5 billion from Russia, Cyprus’s former AKEL government (“Communists,” but not really) turned belatedly, in June 2012, for help to the bailout-hardened troika of the European Commission, European Central Bank, and IMF. Negotiations dragged. It took the election of the new center-right president, Nicos Anastasiades, in February finally to break the logjam. Anastasiades had a clear mandate to agree to structural and budgetary reforms of the type that the troika was looking for, but he balked at demands that depositors with Cyprus’s banks share in the pain. The longer-term consequences for Cyprus’s banking sector, a mainstay of his nation’s economy, would, he knew, be disastrous.

That was not something that worried Angela Merkel. She was said to have said that Cyprus “must realize its current business model is dead.” Helping out the banks in an offshore tax haven was never a proposition likely to appeal greatly either to the chancellor herself — no friend of international finance at the best of times — or to German voters. They are due to go to the polls in September. After years of bailouts that they never liked and that were designed to rescue a currency that they never wanted, there was an obvious danger that coming too generously to the aid of an oligarchs’ playground would be a handout too far. And so Germany played a major role in insisting that any bailout be accompanied by a “bail-in” that would shift a good part of the cost of a rescue onto depositors with Cyprus’s banks.

The Cypriots caved. The euro-zone nations and the IMF would together provide € 10 billion in new loans, but depositors in Cyprus’s banks would have to chip in too, a grim first in the grim history of the euro-zone bailouts. Deposits of over € 100,000 would be subject to a one-off tax of 9.9 percent. Then came an additional, dangerous twist. Depositors with less than € 100,000 would also be taxed — in their case, at 6.75 percent, a levy that made nonsense of the understanding that, within the EU, such smaller deposits are meant to be insured. That breach of faith could easily be seen as an unsettling precedent, especially elsewhere in the euro zone’s troubled periphery.

The Cypriot leadership probably chose to penalize the smaller fry in this manner because they worried that taking too much from the high rollers risked damaging what was left of Cyprus’s offshore-banking business, but it created such an uproar — on the island and beyond — that its overwhelming rejection by the Cypriot parliament a few days later came as a surprise to no one.

It was back to the drawing board. What emerged on the second go-round a few days later was structured somewhat more sensibly. Bank deposits of less than €100,000 are protected, but Cyprus’s second-biggest bank, Laiki, will be restructured out of existence, quite possibly wiping out all uninsured deposits on the way. Its larger rival, the Bank of Cyprus, has been rescued, but this will come as cold comfort to its major depositors, who are likely to end up taking a shellacking so brutal that there will be little to choose between their fate and that of their counterparts at Laiki.

The good news was that this kept the troika committed to the €10 billion loan. That would, said Anastasiades, be enough to stave off bankruptcy. More modest than most euro-zone politicians, he did not claim that his particular chapter of the currency union’s interminable crisis was over, merely that it had been “contained,” an idea echoed by the fact that draconian “temporary” controls on the movement of money out of the country have been put in place. Even so, the president was being too optimistic. The banking sector is shrinking rapidly. Many other businesses have been badly damaged by the calamities of recent weeks and are now facing the prospect of operating in a near-siege economy — conditions that are, in addition, unlikely to attract the foreign investment that Cyprus will now desperately need. Making matters worse still, money will leak out, despite the controls. GDP will contract sharply, perhaps by as much as 20 percent over the next couple of years. Unemployment will soar.

With the economy in free fall and government debt-to-GDP set to rise to some 140 percent after the bailout, it will take a miracle for Cyprus to avoid a return to the begging bowl — a miracle so far-fetched that even Cyprus’s most senior cleric, Archbishop Chrysostomos II, cannot believe in it. The influential archbishop, admittedly long a strong nationalist, is urging abandonment of the euro, which would trigger the nation’s outright default. That won’t happen for now. Anastasiades has pledged to stick with the single currency. A majority of his fellow citizens are probably behind him in that, at least for the moment, for reasons that are easy to guess. A reversion to the Cypriot pound would mean a devaluation that would wipe out much of what’s left of the republic’s shredded savings, threaten massive inflation, and further disrupt an economy that has already lost its bearings. But the argument is not all one way: There’s a decent case to be made that an eventual exit from the single currency would, for all the pain, be the best possible way of repricing Cyprus back into the global economy. This is a debate that is far from closed.

In any event, the most intense phase of the Cypriot storm appears to have subsided for now, but it has left the euro zone even more battered than before. The two most dangerous threats to the survival of the currency union in its current form are a massive bank run and voter revolt. The disaster in Nicosia has made both more likely.

Let’s start with the banks. Depositors throughout the currency union have now been given a sharp lesson. Deposits above € 100,000 are riskier than they had previously assumed, a message reinforced by a series of comments from various euro-zone leaders who in the wake of the Cyprus deal, despite some hemming and hawing, made it clear that a new template is being put in place. Large depositors, bondholders, and other sources of wholesale money to a euro-zone bank are being warned that they should expect to take a hit if that bank runs into trouble. Properly tweaked, that’s a good principle — moral hazard and all that — but, with confidence in the euro zone and its often undercapitalized banks still shaky, now was not the moment to assert it. That was especially so in a week that had seen the introduction of strict controls on the free movement of capital — supposedly temporary (time will tell; precedents are not encouraging) — within a currency union that had allegedly consigned such restrictions to history.

This will mean that banks seen as vulnerable (or banks located in countries seen as vulnerable) will find it even more difficult — and more expensive — to attract funds. (Well, would you deposit more than € 100,000 with an Italian bank?) This is a perception that feeds upon itself, and, in the right wrong circumstances, can easily set the stage for panic. Even those with (supposedly insured) deposits below € 100,000 will have been left uneasy by those few days in which it appeared that the euro zone’s leadership was prepared to go along with a deal in which smaller depositors took a hit. Since then, there have been repeated reassurances that such deposits are safe. Protesting too much? Just maybe, and there’s no getting away from one uncomfortable truth: Those insured deposits are guaranteed at the national level, not by the euro zone as a whole. A guarantee is only as good as the guarantor. Insured depositors in Greece have, therefore, to hope that, in the event of a crisis, the Hellenic Republic is good for the money, or at least for a third bailout.

One possible, partial response to that part of the problem would be to institute a deposit-insurance scheme jointly guaranteed by all euro-zone members, but that would risk inflaming the source of the second great threat now stirring within the euro zone: democratic politics. One reason that deposit insurance has not expanded beyond national borders is the suspicion, most notably in Germany, that signing up for a broader European scheme would be signing yet another blank check, something that would be not only bad housekeeping but a quick way to antagonize the voters. The bailouts have long been unpopular among the electorate in the euro zone’s (reasonably) solvent north, but the eurofundamentalism of most of its political class has meant that, despite some heroic efforts in Finland, this sentiment has done little to derail the trainloads of cash and commitments heading toward the currency union’s embattled periphery.

That’s not to claim that relatively frugal sorts such as Chancellor Merkel have enjoyed making the handouts. They have not. The tough line that they are taking on Cyprus and, by extension, on banks throughout the euro zone is clearly intended to show that there are limits to their generosity with their taxpayers’ money and to the risks that they are prepared to take with their voters’ patience. In a recent poll, some 26 percent of German voters said they “could imagine” voting for a party that was opposed to the single currency. In late February, a new, achingly moderate center-right party, Alternative für Deutschland, was formed to appeal to just such voters. AfD won’t win, but if it takes even a few percentage points in September’s vote, it could make the election rather closer than Mrs. Merkel would like. She won’t want to give AfD any more ammunition than she has to over the next few months, which is just another reason to think that the next bailout drama (keep an eye on Slovenia) may be even uglier than the last: Bank depositors in the euro zone’s other struggling regions will, doubtless, be watching carefully — and anxiously.

But while politicians in the euro zone’s north have to contend, for the most part, only with the threat of voter revolt, those in the periphery have to contemplate dealing with far tougher opposition. If parliamentary approval for the final memorandum of understanding that seals the deal is required, there may be some sweaty interludes in Cyprus (the parliament’s speaker has already signaled his opposition), but the best guess must be that Cypriots are likely to be too traumatized to do anything but go along with the terms of their rescue for now. But the spectacle of their pauperization will not play well with their kin in Greece, already radicalized by years of slump and increasingly hostile to the idea of sticking with the painful austerity that many of them regard (not always completely incorrectly) as self-defeating. That austerity is the price of continued support from the north, not least because, without it, voters in Finland and elsewhere would likely finally say that they had had enough. Rock, meet hard place. For now the somewhat unwieldy Greek coalition government is sticking to the troika’s script, but its leaders can read the opinion polls — and their message of growing anger — as well as anyone else. Meanwhile, in Italy the success of Beppe Grillo’s insurgent (and anti-austerity) Five Star Movement (M5S) in the February elections has led to political paralysis. At this writing, there is still no government in Rome, and the prospect of new elections cannot be ruled out. M5S continues to ride high in the polls. The humiliation of Cyprus will be unlikely to have hurt its case. Meanwhile, Silvio Berlusconi’s PDL, itself deeply skeptical of the troika’s agenda, is also polling well. In the aftermath of the Cypriot deal, Italian bond yields rose, and Italian bank shares fell.

To repeat myself, if you had a deposit in an Italian bank, what would you do?

Tick tock.

Time Was On His Side

Rupert Loewenstein: A Prince Among Stones - That Business With the Rolling Stones and Other Adventures

The Wall Street Journal, March 18, 2013

If Jeeves had ever written a memoir of his time with Bertie Wooster, it would have been discreet, faintly disapproving, quietly affectionate and just a tiny bit dull. Step forward Prince Rupert zu Loewenstein-Wertheim-Freudenberg, a Jeeves of sorts to the Rolling Stones for close to four decades, their “bank manager” but also, as he notes in his new memoir, the band’s “nanny, frequently, psychiatrist, on occasion.” Sure enough, his account of his years with Their Satanic Majesties is discreet, gently disapproving, resolutely unshockable, undeniably affectionate and just a tiny bit dull.

Yet, as an archly written comedy of manners, “A Prince Among Stones” has its merits. The prince hails “from a certain sort of distinguished background,” and, by Gotha, he wants you to know it. Fair enough to mention a lineage stretching back to a Duke of Bavaria who died, poor fellow, “repelling the Huns in 907,” but to conclude the book with page after page of Loewenstein genealogy may be a bit much for readers just hoping for insight into who did what to whom in Studio 54. On that, the prince is, for the most part, loyally, infuriatingly silent, preferring to pepper his paragraphs with names boldface only in the most self-referential of worlds, that of a European high society in which the participants are primarily defined by family and connections. When Mr. Loewenstein introduces us to one of his acquaintances, we quickly learn that his father “was married to . . . a niece of Aspasia Manos, the commoner who married King Alexander I of the Hellenes.”

The prince himself was born on Mallorca months after the launch of the Third Reich. His parents were somewhat bohemian Bavarian aristocrats, who were both also of part-Jewish descent, a fact that is only briefly alluded to in the book but which adds a dark resonance to Mr. Loewenstein’s carefully understated story of a privileged yet vagabond upbringing. He spent much of his early childhood in Paris until, at the age of 6, he fled France and the Wehrmacht for England. He eventually became a British subject but never truly left the Continent behind. By his 20s he was enjoying “a very jolly international time.” He shares anecdotes of a strangely antique midcentury, including grand hotels, Rothschilds, an Agnelli, two guano heirs and a Venetian countess—a roll call enlivened by traces of his endearingly bone-dry humor.

Read one way, the social whirl that Mr. Loewenstein records could easily be viewed as the last hurrah of a deracinated aristocracy, cut adrift from history by the fall of the empires their families had ruled and served. But this is no snooty tale of genteel decline. Dynasties that flourish for a thousand years do so for good reason. Mr. Loewenstein relates how, as a successful and well-connected stockbroker, he headed up a consortium to buy a London merchant bank in 1963. Deal done, “the dolce vita days were over,” he laments, but the bank fared well.

And then, in late 1968, “the art dealer Christopher Gibbs” (a description too bland to do justice to a character even  Keith Richards  remembers as “adventurous”), who Mr. Loewenstein had “met, in that wonderful French phrase, dans le monde,” asks if he “would consider taking care of the finances” of the Rolling Stones. Mr. Loewenstein’s wife, in the know thanks to her “reading of the popular newspapers,” helps him sort out who these ruffians are. Until then “the name of the group meant virtually nothing to me.” He had (of course!) already “tripped over”  Mick Jagger at one of “the new style of informal parties,” an encounter that he, the grander grandee, had managed to forget.

This revelation sets the tone of slightly superior distance that the prince maintains from his unruly protégés throughout the book. There’s talk of “tomfoolery,” of “criticisable” behavior, of “sniggering like schoolboys.” And there is what may be the most spectacular washing of hands since Pilate: “The Stones had their own dressing rooms or caravans where, in the privacy of their own space, Keith, Mick and the other artists could do whatever they wanted,” he writes. “What went on behind those closed doors was entirely their business. I understood that it was part of their own particular way of preparing for a show.”

But perhaps detachment both from the rock ‘n’ roll circus and, to a degree, from the England in which he had settled helped Mr. Loewenstein see the potential in Jagger’s errant crew. In matters of business, “calm dispassion is essential.” A mildly artsy upbringing had left him open to dealing with musicians too scruffy and too chaotic for most City financiers of that era. He understood that in swinging London the old hierarchies had swung apart. Besides, he was “rather bored.”

What he discovered was that the Rolling Stones’ finances were a shambles. What he appreciated was that they need not be so. For all their countercultural baggage, the band was a business, one that needed running properly. Mr. Loewenstein spirited them out from under the grasp of the British taxman and, so far as he could, replaced one-sided commercial arrangements on which they were on the wrong side with ones in which they were not.

As much as Mr. Loewenstein did not like their music (“I never played a Stones track by choice”), he recognized their strength as performers, a talent that, he saw, could be profitably exploited—but by the band and not just by promoters and other scavengers. So here, too, Mr. Loewenstein took charge, not only sorting out the contracts, and the merchandising, and the sponsors, but doing his best to bring a little more Ordnung, financial or otherwise, to the touring process. A leading figure in an “ancient” (naturally!) Catholic order, Mr. Loewenstein even modeled the band’s meet-and-greets on papal audiences. The author’s famous ancestor had died in an attempt to repel barbarians. A millennium later, his descendant embraced them, enriched them and, on the way, did pretty well for himself.

Just Say No

National Review Online, February 14, 2013

Have we just witnessed a cynical attempt to induce an old ally to sacrifice itself for the benefit of the United States? Possibly: Foreign policy is not for the morally squeamish.

Look no further than Philip Gordon, the U.S.’s assistant secretary of state for European and Eurasian affairs. In January, Mr. Gordon hurled himself into Britain’s contentious debate over the EU with the observation that America viewed the U.K.’s continued participation in that wretched union as “essential and critical to the United States.” This did not play well with Blighty’s euroskeptic hordes, a crowd all too willing to suspect that Uncle Sam takes John Bull for granted. An indignant Nigel Farage, leader of the insurgent euroskeptic United Kingdom Independence party (UKIP), snarked that, as the U.K. had rejected the Americans’ suggestion that it might lend a hand in Vietnam, the U.K. would also “say no to them over the EU.”

Undeterred, Barack Obama waded into the controversy a week or so later, releasing some comments shortly before David Cameron was due to deliver a much-anticipated speech on Britain’s role in the EU. The timing was intended to stiffen the back of a prime minister under immense domestic political pressure from his euroskeptic critics. The president began softly enough, politely underscoring “America’s close alliance with the United Kingdom,” but then came to the point: The United States values “a strong U.K. in a strong European Union.” Following Cameron’s speech, that message was echoed by Joe Biden, never a man afraid to repeat the words of others, during the course of a visit to Europe earlier this month: “We believe the United Kingdom is stronger as a result of its membership [in the EU]. And we believe the EU is stronger with the U.K.’s involvement.”

On one level, that was not so far from what Cameron had ended up saying. In his speech, he called for a reformed, “leaner, less bureaucratic union . . . with the single market at its heart,” a union open for business with the rest of the world, a decentralized union that would return powers to its member states but that would have room within it for a smaller group of countries on a pathway to “much closer economic and political integration,” but no sin bin for those who did not. If that is a vision in any way connected with reality, the State Department ought to be able to relax.

Of course, it is not. Fears among the EU’s leadership (alluded to by Cameron in his speech) that a restructuring on the lines he proposed could lead to the union’s unraveling will mean that it will never take place. If Britain is to loosen its ties to Brussels, it will have to do so on its own. That would involve persuading all the other 26 EU countries to go along (since changes to the EU treaty require unanimity). That’s not going to happen either.

No matter, Cameron has guaranteed British voters a referendum once his implausible negotiations for an impossible deal have been concluded. It will, he explained, be “a very simple in or out choice. To stay in the EU on these new terms; or come out altogether.” So would that be something for the White House to worry about? Not really. The Conservative manifesto for the general election, due in 2015, will include a promise to hold a referendum. But here’s the catch. The Conservatives will almost surely not win that election, for any number of reasons that we don’t need to go into now.

Even in the astounding event of a Tory victory, what then? Doubtless there would be an elaborate pantomime of negotiation — there is still a large constituency within the EU (including, most importantly, Germany) that would like the Brits to stay in — and doubtless a few crumbs of concession would be tossed Cameron’s way. Indeed there were sections in his speech where the prime minister already seemed to be signaling his willingness to find a way to accept them. For older Britons, this brings back memories of the 1975 referendum that rubber-stamped a cosmetically “renegotiated” deal with the precursor to the EU. And a rerun of that would probably be what they would get.

Disregard the polls currently showing that a majority in the U.K. would opt for Brexit (yes, that’s the term). That’s just venting. Given their druthers, because of anxiety about what lies outside, reinforced by skillful scaremongering (and there’s been quite a bit of that lately), most Brits would prefer to remain within the EU, albeit one that is less intrusive. The nature of the EU — an “ever closer union” — means that that is not on offer. But presented with a prettily packaged excuse to avoid confronting that unpleasant reality, and battered by warnings from the great and the good of the supposedly hideous implications of quitting, the British electorate would almost certainly stick with the devil it knows.

So Cameron’s gambit is highly unlikely to get anywhere, let alone lead to Britain’s escape from the EU, and yet the Obama administration still seems oddly concerned. In part this may be a feint, aimed not at London but at Brussels, Berlin, and Paris, crafted to demonstrate to a bloc of some consequence that the Brits might be euroskeptic but their cousins across the pond most definitely are not.

And in part it may be caution. Cameron is right: “Democratic consent for the EU [within the U.K.] is now wafer thin.” If the Labour party were to shift in a more euroskeptic direction, the political equation would change dramatically. Despite electoral logic and some tentative maneuvering, that’s not likely for now. The party’s leader is firmly in the Brussels camp. But its supporters are rather less so. All things considered, the White House may have thought that spreading a little of what euroskeptic blogger Richard North has dubbed FUD (fear, uncertainty, and doubt) over the consequences of a Brexit might be a sensible preemptive step.

More than that, the EU is in a tense, febrile state. The underlying structural failings of its monetary union, combined with a nutty determination to dig that hole still deeper, may well force the countries of the euro zone (and perhaps others) into a degree of integration that will, however much they might try to avoid it, necessitate amendments to the EU treaty. Those will be amendments to which the Brits will have to give their assent (unanimity, remember). At that moment, whatever the fate of Cameron and his referendum, the U.K.’s relationship with the EU will be up for discussion. As matters now stand, it is, to put it mildly, unlikely that the country will opt to join any inner core, but, by spreading a little FUD in advance (with more, unquestionably, to come), the U.S. is obviously trying to contribute to the creation of a climate of opinion within Britain that will prevent the U.K. from wandering too far from the heart of Brussels’s realm.

And as to why the administration should try to do this, well, that (if it is thinking straight) is where the cynical sacrifice of an old ally would come in. The EU is fundamentally anti-American. Designed as a counterweight to American power, it is a project that, lacking any genuine positive identity of its own, defines itself by what it is not. What it is not, its grandees like to emphasize, is America. Economically, the ideas of its founders were rooted in central planning at home, and, in dealings with the outside world, mercantilism. But British membership (and the example set by the success of Thatcherite reforms within the U.K.) has helped nudge the EU on a somewhat different (but not irreversible) course, more open to free markets and free trade and thus more to Washington’s liking (for instance, talks on a U.S.-EU free-trade deal are set to start in June). Similarly, Britain has acted as a brake on the construction of a common — and overarching — EU foreign policy that would, almost by definition, make the union an increasingly awkward partner for the U.S.

The problem is that the EU’s original suspicion of free enterprise has never disappeared, and hard times have given it fresh life. There are clear signs that Britain can only block so much for so long (the evolution of EU financial regulation is just one harbinger among many of trouble to come). The trudge toward a common foreign policy continues. Nevertheless, so long as the Brits stay relatively close to the center of the EU’s decision-making, there remains a decent chance that Brussels’s more damaging initiatives can be diluted, delayed, or derailed. Seen from an American viewpoint, there is thus a brutal logic to convincing the U.K. to hang in there, even if, from a British angle, it makes no sense at all.

But what if the White House is not looking at this question in the coldly Machiavellian way that Americans have a right to expect? One alternative interpretation of Obama’s effort to insert himself as a counselor into Britain’s unhappy European marriage is that his administration is still in thrall to the Cold War calculation that regarded (Western) European unity as a strategic good in its own right, an obsolete notion kept alive today by intellectual laziness in Washington and, somewhat more legitimately, by an appreciation of the genuinely useful role played by the EU in the transformation of the post-Communist part of the continent. It’s a mindset that has led successive White Houses — Republican and Democratic — to view the EU’s progress toward that ever closer union with insouciance, or even, sometimes, enthusiasm. A more tightly unified EU, gushed Condoleezza Rice back in 2005, would be a “positive force.” Maybe the Obama administration has simply succumbed to this delusion, and cannot grasp why Britain would not wish to sign up for the ride.

Then again, there could be a yet more troubling explanation. Does Obama look across the Atlantic to Brussels and rather like what he sees, an entity developing in a supranational, “progressive,” environmentally correct, corporatist, and technocratic direction that is not so far removed from his own agenda for this country? If he does — and it’s not so far-fetched an idea — he won’t have much sympathy for a bunch of what he doubtless sees as “bitter” Brits clinging to what’s left of their independence.

But whatever the reasons Messrs. Obama, Biden, and Gordon had for saying what they did, from the British perspective it is clear what David Cameron’s response should be. He should pay absolutely no attention.

Cameron and the Euroskeptics

The Weekly Standard, February 11, 2013

David Cameron leaves things late. Leadership by essay crisis, it has been called, a nod to procrastination by generations of students. But his belated response to the mounting political turmoil over Britain’s membership in the EU​—​a speech proposing an in/out referendum​—​won’t save him from disaster in the 2015 general election.

Some early responses were encouraging​—​outrage from EU parliamentarians, a disapproving Obama administration, cries of good riddance in France, and, according to one grandee, “shock” in Davos​—​but British voters were not so easily taken in. Polls showed the Conservatives trailing Labour by a little less, mainly on the back of a few percentage points grabbed from the euroskeptic United Kingdom Independence Party, but Cameron’s speech was no game-changer. UKIP still stood at around 10 percent. UKIP, which largely draws its support from the right, took just 3 percent of the vote in 2010, but that was enough to cost the Tories some 20 seats​—​and an overall majority.

That’s the math forcing Cameron to call for a referendum he had always opposed. With his own (largely euroskeptic) Conservatives mutinous, UKIP polling in the teens, the economy faltering, and 2015 drawing closer, something had to be done. Cameron’s calculation was straightforward. With no other establishment party (for now) backing a referendum, and with UKIP (thanks to Britain’s first-past-the-post system) having little prospect of winning a parliamentary seat, let alone forming a government, the Tories are tempting euroskeptics with the only chance of the in-or-out showdown for which they have been pining. By contrast, voting UKIP in 2015 would divide the euroskeptic vote, help (europhile) Labour and the (euromaniacal) Liberal Democrats, and risk throwing that opportunity away.

The referendum timetable has been organized to underline that point. Nothing much will happen for now. Instead, Cameron will go to the polls in 2015 with a request for a mandate “to negotiate a new settlement with our European partners.” Once those negotiations have been concluded there will be a “referendum [in 2017, most likely] with a very simple in or out choice.” The referendum is thus dependent on Cameron’s reelection: Vote for him, or the nation-state gets it.

That so many UKIP supporters have yet to be won over is, to a degree, a reflection of the way the party has become an expression of broader popular discontent with the liberal status quo. UKIP is “about” more than the EU. But there’s something else: On closer inspection Cameron’s proposal looks less than convincing, and that’s even if we ignore the fact that his chances of victory in 2015 are on the order of a snowball in hell, or Romney in California.

There is a credible way for the U.K. to exit the EU (it involves Article 50 of the EU’s Lisbon Treaty; I’ll spare you the technicalities), but Cameron’s “negotiations” are not it. Anything involving the repatriation of enough powers to impress enough euroskeptics would need a new treaty to be agreed on by each EU country, a tall order for reasons that are both practical (there are currently 27 member states) and philosophical. The EU is driven by the idea of “ever closer union,” a process that only moves in one direction. Once a competence has been transferred from the national level to the EU it cannot​—​must not​—​be handed back. Were Britain to win an exception to this principle, it would make a shambles of what the EU is meant to be. “Europe,” warned the EU’s prominenti, is not “à la carte.” Britain was either in or, well, the rest was left unsaid by just about everyone other than the French.

Cameron understands this. He has framed his proposed negotiations​—​they should be part of a wider effort to create “a leaner, less bureaucratic union”​—​in a way designed to address this concern. If the broader Brussels menu could be made more attractive, Britain would need fewer special orders. Given the rhetoric in Berlin (sometimes), Stockholm, Prague, and elsewhere in the EU’s north and east in favor of Britain’s more free market tack, this is an approach that ought to make sense.

But talk is cheap. When it comes to actually doing something to reduce the Brussels deadweight, the EU’s more economically liberal governments typically fall silent, still in thrall to the European dream to which most Britons​—​who were told they were joining a “common market”​—​have never subscribed. And when Cameron asks for support for a less dirigiste treaty, that dream (or nightmare) will stand in his way. For once negotiations start, where will they end? After all, the EU’s electorates are restless, and profoundly divided about what they want from “Europe.”

Within hours of Cameron’s speech, a leading member of Angela Merkel’s party was talking darkly about the dangers of opening “Pandora’s box,” a comment then echoed across the continent by a cast of characters that included the finance minister of the crumbling Hellenic Republic, Pandora’s repeatedly bailed-out basket case, sternly warning of the dangers of renegotiations, a performance that would suggest that chutzpah as well as cynic is a word with roots in ancient Greek.

Cameron may be gambling that the euro’s problems will force that box open regardless. National politicians sucked into the eurozone’s drama will keep trying to bypass the need for treaty revision and its awkward requirement of unanimity (as they did with the 2012 Fiscal Compact, which is formally a side-agreement) in their efforts to fix the currency union. But the far deeper integration that this repair work must eventually entail (and for which the Brussels bureaucracy is pushing) cannot be achieved without it. Amending the treaty would require British consent, and that could be Cameron’s moment. The U.K. would never be expected to opt into any EU “core,” but the price of doing nothing to impede its formation ought to be agreement to the sort of looser association that most Brits would anyway prefer over a clean divorce.

That’s how this story could work out, but it relies on improbable contingencies, stretched assumptions, and tightly crossed fingers. Many euroskeptics​—​even if they could be persuaded that Cameron has a shot at victory in 2015​—​would not regard that conclusion as a happy ending. What they want is a clean break. What they fear is that even the half-decent second-best solution​—​a looser association​—​will not be what it could be thanks to David Cameron. He may be frustrated by the EU, but he doesn’t have the imagination to risk anything approaching separation.

What, I suspect, they anticipate is that he won’t even get that chance, that the eurozone will struggle on as is, and that Cameron will be thrown a few scraps at the end of pantomime negotiations, which he will then declare to have been a triumph. This will set the stage for a referendum in which a misled, there-is-no-alternative British public will vote for the “yes” for which Cameron has already declared​—​an odd thing to do ahead of any negotiations​—that he will campaign “heart and soul.” That is not the language, and these are not the scenarios, designed to reassure euroskeptic hearts, minds, or even souls in time for 2015.