It is quite extraordinary that one of the key proposals to come out of yesterday’s meeting between Merkel and Sarkozy was a demand that Eurozone countries out balanced budget legislation in place by 2012.

Balanced budgets are, of course, designed to constrain government activity. They’re not an economic policy: they’re a right wing political policy that says a government may not borrow to fund its activities.

So, unlike business, which borrows extensively to fund investment, and unlike households, the vast majority of whom could not ever acquire a home without borrowing, government is not allowed to borrow under these proposals even if it were appropriate for the government to do so to fund programmes that can supply considerable future benefit to the people of its country.

So, hospitals must be paid for up front. And so must schools. And roads. And all other infrastructure.

More than that, if the market fails to supply a enough demand to create full employment (as is the case now) then such a move would ban the government form intervening to create demand even though it is known that the only way to get out of the resulting recessionary downward spiral is for the governmentto intervene and stimulate demand until recovery occurs – when rightly it should pull back and repay its debts. In effect these laws would outlaw the only proven mechanism for defeating recession as created by Keynes in the 1930s.

To describe the measures as economic insanity is in the circumstances being kind to them.

It’s easy to see the logic behind such proposals though. All hospitals must be private in future if this is to happen; and so will all road building be privately funded. Education will now be under the control of the private sector and run for its benefit. Whilst if there are unemployed, so what? It keeps wage rates down for the benefit of business.

This is law would then be designed for three purposes. The first is to make sure that privatisation across Europe is guaranteed. The second is to advance the interests of the banks who will profit enormously from that process because there is so much more money to be made by funding infrastructure privately than through government (which in itself is the clearest measure of the inefficiency of the proposal and the massive likely cost to the taxpayer of doing it) and finally it’s designed to shift yet more of the resources of Europe to the rich.

Which is why it has to be vehemently opposed.

The EU thinks it’s saved the Euro, again.

It hasn’t.

This is a deal, summarised here, that to coin the current vernacular, kicks the euro down the road until the autumn,   but which has no hope of delivering a real solution.

Why not?

Because, clause 1,  no one knows if the Greek people will, as yet, put up with the austerity that is demanded of them.  But what we can say with certainty is that  the austerity demanded will not deliver growth, whatever this document claims.

Because, clause 2, no one has worked out whether the EFSF can pay for this deal.

Because, clause 2,  the IMF may not agree that the deal.

Because, clause 4,  Germany may not in the end cough up enough cash to reflate the Greek economy, and even if it does, Portugal, Ireland, Spain and Italy need the same deal, and  aren’t going to get it.  The awareness that a Keynesian solution is needed is hinted at in this clause, and then firmly run away from.

Because, clause 5,  when it comes down to it the  private financial sector will prevaricate, arbitrage, delay and generally obstruct any deal, seeking better advantage for themselves over all others who might participate, and that will mean that this provision will fail to deliver.

Because, clause 6,  Greece is not an exception and ignoring that fact means that clause 7 is farcical:  anyone who believes that the Irish government is going to pay in full debt that is beyond any imagination that it can  settle is naive in the extreme:   those signing  this deal were.

Because, clause 8,  this requires fiscal union and a fundamental reform the way in which the European Central Bank works, and getting agreement on that after the heat of the moment is very unlikely;

Because, clause 9,  the Germans aren’t going to guarantee other euro states debts forever;

Because, clause 10,  the Irish will try to renege, for all their worth, making a deal  on tax;

Because, clause 11,  reducing deficits to 3% of GDP is going to result in mass poverty, the destruction of welfare, the ending of healthcare provision, misery in old age, massive destruction of the state  in Europe, and in turn the destruction of GDP itself.  A commitment to the economics of the madhouse destroys the credibility of this agreement:  only a Keynesian solution can solve Europe’s crisis now, and this clause commits Europe to poverty.  Clause 12 does not change that.  The democratically elected governments in Europe will reject this package:  their electorates will demand that they do so.

Because, clause 13,  creating an economic police to impose the straitjacket will not make it work;

Because, clause 14,  reaffirming neoliberal  economic policies  is equivalent to signing  a Euro suicide note;

Because clause 15,  you can’t tell banks how to rate their loan books –  unfortunately;

Because, clause 16,  by the time we get to October all these weaknesses will be apparent.

And yet, I admit, all of those are just detail.

At its core this deal does not work for a number of much more fundamental reasons.  The first is the euro itself cannot work:  even with massive fiscal reallocation of wealth within the Eurozone the stress would remain too great: these economies are too disparate to have one currency.

Then there is the fact that, like it or not, , Ireland, Portugal, and almost certainly Spain if not Italy,  add debts that they cannot support and therefore, like it or not, European banks holding those debts are at  serious threat of insolvency.  This deal does nothing to address that issue.

Just as this deal does nothing to really stimulate growth:  it recognises that without growth Greece cannot repay its debts and yet the rest of Europe it demands cuts in government spending that can only result in a move towards stagnation or recession across Europe as a whole for decades to come.

In other words,  this is a fundamentally flawed deal,  and the flaw can be simply identified:  it is that this deal puts the stability of money above the importance of real economic activity that generates wealth for the people of Europe.  This is about bankers, yet again,  and not about putting food on the table.  This is about preserving wealth  and not about creating prosperity.  This is about maintaining division,  but not about delivering hope.

And because it fails to address any of those issues, this deal will fail.

Only when we take on the banks;  only when we realise that  real wealth is based upon the full employment of well-paid people  and only when we realise that it is the duty of governments to deliver hope can we go forward.  This deal doesn’t do that,  which is why the next version will be negotiated soon.