Is this a watershed moment for Europe?

Ignore the people fretting about a “two speed Europe” today. There’s been a two-speed Europe for at least as long as the Euro has existed. Actually, it's been a multi-speed Europe, when you count things like the Schengen area, the EEA and, indeed, the EU itself. There’s no problem with having a multi-speed Europe, if Britain’s in the right lane. The real question is whether any of this will mean anything after the real world has its say.

The EU really has done some good things – it has helped to make war among European states unthinkable, and upheld free trade when some governments might have preferred protectionism. But history shows that variety is the spice of life. One of Europe’s great strengths throughout history has been its divisions, which allowed small states to try out things like the rule of law and protections for property rights where bigger states didn’t need to bother. Quite often, harmonization for the pikes means death for the minnows.

So the Prime Minister deserves congratulations for his vetoing of the proposed EU treaty, which would have paved the way for a Financial Transaction Tax. As the ASI and others showed in reports this year, it would be a disastrous tax for Britain while doing comparatively little to the rest of the EU. And a step away from the harmonization road is welcome, and long overdue.

What does the future hold for Europe? If we lived in normal times, it would be pretty clear. We would be on the road to a core of countries who will basically act as a single state, with increasingly harmonized tax, spending and regulation, with fiscal transfers at a federal level so that, ultimately, German taxpayers will be paying for Italian pensions. Countries like the UK, Sweden, Norway and others would have a few toes in and a few toes out. (I’m sure this is what Sarkozy really wants as well – Ireland was granted an exemption from the Financial Transaction Tax without much fuss, but this is a convenient way of pushing the more troublesome UK out of future decision-making.)

But these are not normal times, and that’s what’s been so strange about today’s coverage of the summit. Most of the media seems to have forgotten that Greece is functionally bankrupt, Italy is heading there, and there are plenty of other big dominos that are ready to fall as well. Tom’s post yesterday was prescient: all of this is a distraction from the real world of insolvent states. None of this has anything to do with the eurozone crisis. 

This summit’s grand positioning reminds me of that odd plan to unite France and the UK on the eve of France’s fall to Germany in 1940 — ambitious, and deluded. However lofty the rhetoric is, however significant Cameron’s veto seems, events will probably render all of this moot. The EU may not be interested in reality, but reality is most certainly interested in the EU.