If constructive means giving in to every new rule and regulation brought in by EU civil servants, all of whose instincts derive from economies and cultures that are very different to that of the UK, few Tories would back that.

But if constructive means the UK concentrating on membership of the Single Market, and wishing the euro-zone all the best as it pursues deeper fiscal integration, then very many Tories would favour that.

In the debate on the EU, I believe that the burden of proof lies with those who seem to think that over-regulation and interference in UK domestic affairs is some kind of masochistic “price” the UK ought to be willing to pay for free trade. Free trade is a good in and of itself. It is not something that needs to be balanced out by economic self-harm.

Though you have hit the nail on the head with”
“”"”Neither is the party’s eurosceptic rhetoric likely to be toned down. The Tories are scared that losing votes to UKIP could cost them a parliamentary majority in 2015 and lead to a humiliating defeat in next year’s European elections””"”"” …
the recent local election has clearly shown that (cast Iron) Camerons referendum promise is not trusted by the voters. Also I might point out that the essence of democracy is not promising one thing to the public & then weaseling out of that promise claiming “Statesmanship”, this attitude is not reinforcing democracy it is destroying democracy all Europe over Europe. See Blair’s “Constitutional treaty promise” & Cameron “Cast Iron Lisbon referendum guarantee”. Today’s modern politicians have lost the confidence of the voters & have only themselves to blame when something horrendous takes its place.

“Gottfried Feder (27 January 1883 – 24 September 1941) was an economist and one of the early key members of the Nazi Party. He was their economic theoretician. Initially, it was his lecture in 1919 that drew Hitler into the party.”

“Adolf Hitler met him in summer 1919, and Feder became his mentor in finance and economics. He was the inspirer of Hitler’s opposition to “Jewish finance capitalism.”

I guess that tells me about all I need to know.

If a country can’t borrow, then the amount the public sector can spend is strictly limited by tax revenue, and that would make it impossible to rescue itself from recession, since the public sector would be extracting as much from the private sector as it spends.

And no matter how “virtuous” that might seem, in practical terms we saw the consequences in the Thirties.

The other problem with banning borrowing by sovereigns is that lenders don’t buy sovereign debt for patriotic or sentimental reasons, but because financial institutions – pension funds, insurance companies, endowments, etc – have specific future liabilities to meet, and therefore have to have predictable future income from default-free instruments.

In a normal country with its own sovereign fiat currency – think the US, UK, Japan – sovereign debt is that default-free instrument. Since such a country controls the supply of its own currency, it cannot be made to default. In financial language, it has no solvency limit.

In a country that borrows in a foreign currency, or in a common currency like the euro, sovereign debt is no longer default free, since such a country cannot create the currency it needs to pay its debt.

So the Bond Markets are not being perverse or tyrannical at all. They are simply recognizing that the euro-area is a very strange beast in which what would in a normal country be default-free no longer is. Hence the risk premium that they – quite correctly – impose on the euro periphery from time to time.

Please remember that the first duty of a pension fund is to its pensioners, not to the ego of the guys in Brussels.

There shouldn’t be any surprise here. When Spain entered the euro, interest rates fell dramatically. But when you have a semi-developed economy and a very poor post-secondary education system, you lack the technicians and managers who could put that cheap investment credit to good use, so you build houses with it instead, since house-building roughly matches the skill set of your labour force.

And then, if cheap credit is all that is driving the building of houses, no-one does any good market research, so inevitably you build houses for a market that doesn’t exist. There never were any million eager house buyers itching to buy a house in Spain, even in the good times.

And the next thing you discover is the difference between a house price bubble and a house building bubble. When individuals buy houses in a bubble, and the bubble collapses, the really unwise buyers default early, and the rest make an effort to keep making their payments. So the US and UK saw their problems early on, and today mortgage backed securities have become sound investments again. I own some myself.

In Spain, on the other hand, the houses remain unsold, the credit is owed by developers, Spain’s laws allowed bad debts to sit unrecognized for years, and now it is finally catching up with them and it’s yet another thing for the taxpayer to deal with.

Meanwhile Spain’s Banks overall owe about E400bn to the EuroSystem, via the Bank of Spain and Target2.

“Europe’s recovery in the real economy has taken hold and is becoming self-sustaining.”

Terrific, right? Except that that is what Rehn said in Spring 2010, more than two years ago, and since then euro-zone unemployment has risen from 10% to 11.9% and the euro-zone growth rate has fallen from plus 0.6% a year to minus 0.9%.

The point I am making here should be obvious. A phrase like “solving the euro-zone’s problems” is just an empty sound-bite if no-one actually manages to do anything *effective* to that end.

It is like someone talking about “getting to grips with my weight problems” while they reach for another cream cake.

And this is completely typical for the euro-zone and its defenders. They talk in vapid generalities and enthusiastic slogans, but never in terms of specific numbers, because they can’t. The numbers don’t back up the pro-EU arguments, so slogans are all they have left.

And this is true on a bigger scale. These days you hardly ever read a mainstream economist defending the EU or euro or the ideas behind them, because trying to mount a quantified defence is simply too embarrassing.

So all the EU is left with is defences by people like the author of the column above, who assumes his conclusion and writes as if the EU/euro is a huge success, and all we have to do is round up a few straggling sceptics.

The EU needs to get off its snooty high-horse and think seriously about opening up the Treaties and fixing the basic system, because the policies the Treaties are imposing are killing their economy.

Countries have to be able to borrow money just like most of the rest of us have to – whether it’s the mortgage on our home, car or student loan. It’s the way the world works.

van Rompuy is actually calling Cameron’s bluff on the referendum, probably prompted by repeated questions by UK journalists in press conferences about renegotiation.

In the same Guardian article, one of the UK’s so-called “allies”, the Netherlands, also says that it’s not interested in reopening the Treaties. The focus today is rightly on resolving the eurozone’s problems and not UK navel-gazing. As van Rompuy also mentioned in the article, the UK always has the option of using Article 50 in the Treaty, i.e. the exit clause.