European economic government or governance?

The EU got it right the first time. All those member states in the Euro do need a single economic government. They are limping towards it, crab like and dishonestly. Countries like the UK that have stayed out of the Euro need to stay out of the many moves to economic government, and should use these negotiations to loosen Brussel’s grip on them at the same time as Brussels has to tighten it over Euro members. It should be done by Treaty change so we can have a referendum on the proposals and all that is related to them.

As I explained repeatedly during the big arguments over the Uk joining the Euro at the start of the era of UK federalist government in 1997, joining a single currency is like sharing a bank account with the neighbours. It’s not something most rational poeople would ever do, in the interests of staying friends with the neighbours.

If you must, you need to control the neighbour’s spending and borrowing, to make sure there is enough money in the joint bank account when you need it, and to make sure the neighbour does not draw out too much of what you have earned and put his feet up. That is what the argument with Greece is all about. Germany goes out to work in world markets and earns a surplus. Some now think Greece, which has run up a large overdraft, should be able to draw on the German earnings to repay some of the debt.

That is, of course, what has to happen if you wish to keep the joint bank account and keep the bank manager happy – that is what they are now reluctantly recognising they have to do to keep the single currency going. If I were a German I would strongly want to have much more Brussels authority over Greek spending and borrowing, so their drawings on the common bank account do not get out of hand. That is what yesterday was all about.

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25 Comments

  1. APL
    Posted March 26, 2010 at 8:22 am | Permalink

    Geoff Hoon on R4 this morning: the skills of parliamentary experience are not readily translated into everyday life.

    So now can we hear less of: ‘ we should be paid on a par with a banker in the city ‘ rubbish.

  2. Acorn
    Posted March 26, 2010 at 8:40 am | Permalink

    How long before Strasbourg and Bruxelles are replaced by Berlin and Bonn? (Keeping Luxembourg for tax purposes naturally).

  3. alan jutson
    Posted March 26, 2010 at 8:42 am | Permalink

    First Regulation
    Then Finance laws
    Then Tax laws
    Then Policing laws
    Then EU armed forces

    Integration gets ever closer.

    See our EU contribution has increased greatly over the last 12 months (£800 million more than the Government thought it would according to press reports) after the Blaire Brown deal of a few years ago, when they negotiated our rebate away in return for more influence.

    The result more like effluence.

  4. Derek Duncan
    Posted March 26, 2010 at 8:44 am | Permalink

    Yes, and if we were in the Euro, we would have the other states telling us what to do!

    Let’s trade with them, but let’s not get intimate with them!

    • APL
      Posted March 27, 2010 at 9:42 am | Permalink

      Derek Duncan: "but let’s not get intimate with them!"

      Too late, the UK has been forcibly violated by the EU, while the politicians who supposedly have the UK best interests at heard have stood by and egged the EU on.

  5. Simon D
    Posted March 26, 2010 at 9:10 am | Permalink

    I entirely agree. It will be interesting to see if the problem ends at the Greek border or if it spreads to other Club O’Med countries. If it does the integrity of the Euro (and the Federalist project) cannot be sustained in the long run.

    My worry is that throughout Europe the necessary economic measures to return economies to sensible borrowing levels cannot be delivered politically. We have already seen Greek workers and trade unionists out on the streets of Athens. It will also happen here. If you have people foolish enough to go on strike here simply because their employer (not making anyone redundant or reducing their wages) decides to crew aeroplanes with 15 instead of 16 what do you think will happen if real cuts are proposed in the public sector entailing real job losses and cuts in services?

    The bottom line is that Governments can lie (aka ‘spin’) to their electorates and get away with it but they can’t lie to the bond markets. As with the ERM the Chancellor may wake up one morning and discover he, the pound and the country have collectively fallen through the ice.

  6. Donna W
    Posted March 26, 2010 at 9:28 am | Permalink

    Thank the Lord (and especially for Sir James Goldsmith, RIP) that we have stayed outside the Eurozone. Withour Sir James' Referendum Party in 1997 – which forced Labour and the Tories to guarantee a Referendum on whether or not to join the Euro – Blair would have taken us in.

    What a shame for this country that Sir James died so young. He could be leading the fightback against the EU helping itself to our sovereignty, with the connivance of this Labour Government. He might have given Cameron a bit of backbone to declare that the Treaty is illegal with the promised Referendum and it will be repealed under a Tory Government.

  7. Citizen Responsible
    Posted March 26, 2010 at 9:34 am | Permalink

    JR- “joining a single currency is like sharing a bank account with the neighbours.”

    This is a good analogy. I can’t believe the EU elite who engineered the single currency did not anticipate these problems. They were predicted and voiced by those who opposed it. The IMF is offering financial aid to Greece. However, the EU elite do not want finance institutions in Washington, where the United States wields a lot of weight, to have a direct influence within the Euro zone. They are therefore developing a concept for establishing a European Monetary Fund (EMF) patterned after the IMF. This will mean that countries falling into financial difficulties will have to agree to more rules that will hand over greater economic control of their national economies to Brussels/Berlin with the consequent loss of national sovereignty. I believe it’s all going according to plan.

  8. Letters From A Tory
    Posted March 26, 2010 at 9:34 am | Permalink

    Yesterday will probably have placated the financial markets and the German voters, but I was speculating on my blog today whether this could really hurt Brown if Cameron can push him into a corner about giving further powers to the EU.

  9. Denis Cooper
    Posted March 26, 2010 at 9:38 am | Permalink

    Interesting headline, because “government” and “governance” are not the same thing.

    As becomes apparent if you just put the two words together into google, when references like this:

    http://www.uea.ac.uk/env/cserge/research/fut_governance/edm03_15.pdf

    are thrown up.

    “Governance is by no means an entirely new term (Pierre and Peters, 2000, 2), but its popularity has undoubtedly grown in the last decade or so. Rhodes (1996) uses it to refer to six different phenomena … ”

    “Our main aim in this article is not to explore, let alone empirically assess, all these definitions, but simply to identify what most differentiates governance from government and subject that to more detailed empirical analysis.

    Traditionally, governance was used as a synonym for government (Stoker, 1998, 17), but nowadays they are treated as being analytical distinct. For Bevir et al., (2003, 13), governance is a ‘shorthand phrase for encapsulating the changing form and role of the state in advanced industrialised societies.’

    Inevitably, different branches of social science use the term governance in slightly different ways …”

    To extract the essence of what is going on here, undemocratic or at best quasi-democratic “governance” is being deliberately promoted to dilute and eventually displace fully democratic “government”.

  10. Brian Tomkinson
    Posted March 26, 2010 at 9:42 am | Permalink

    How much does it cost UK taxpayers to be members of the EU? How much does it cost businesses? What benefit do we get in return for our money? Are you sure we won’t be asked to contribute to bailing out Greece? I doubt that the EU member states would like to contribute to bailing out the UK.

  11. Denis Cooper
    Posted March 26, 2010 at 10:55 am | Permalink

    Merkel knows that whatever agreement she makes will not only have to get past the German parliament, but also the Federal Constitutional Court.

    The "no bail out" clauses, Articles 123- 125 TFEU, are not just part of EU law but are therefore also part of German law, and any attempt to circumvent them is likely to be challenged before that German court.

    In principle we could do the same here, because although the UK is not part of the eurozone it is still a party to those treaty articles – all the provisions relevant to EMU apply to the UK, apart from those explicitly excluded in the UK's "opt-out" Protocol 15 – and by virtue of Acts of Parliament the EU treaties are part of UK law, and therefore under our national law Gordon Brown has no lawful authority to agree to any part of the treaties being contravened.

    However it would need a challenge from some person or organisation with the resources to take the case to the Supreme Court.

  12. hatfield girl
    Posted March 26, 2010 at 11:52 am | Permalink

    The treaty changes needed for economic government can be tacked onto the the Croatian Accession Treaty, along with all the constitutional and other guarantees for Germany, Ireland and the Czech Republic that got Lisbon through.

  13. John Broughton
    Posted March 26, 2010 at 1:47 pm | Permalink

    John – I hope that DC will, as you suggest, use these circumstances to loosen Brussel's stranglehold on the UK.

  14. JimF
    Posted March 26, 2010 at 2:36 pm | Permalink

    This is entirely consistent with Labour's philosophy about internal UK micro-economic redistribution, though. Pretty well we are sharing our bank accounts to the extent that the profligate and elite bankers here in the UK are being bailed out by the working class. It's the same thing, really, just on a Continent-wide basis.

  15. Ray Veysey
    Posted March 26, 2010 at 3:41 pm | Permalink

    What you haven't stressed enough is that it's just 1 neighbour that will be in the joint account, it's the whole bloody street. Including that dodgy looking crowd with all the kids at number 15, and the several homes with a police record.

  16. PayDirt
    Posted March 26, 2010 at 4:35 pm | Permalink

    But as Greece is so so much in debt there is no real hope it can pay back the creditors. All else is just delaying the moment of truth when Greece will default and the creditors will lose out. To give more money to Greece is simply too risky so just who now is giving them more credit and why?

  17. PayDirt
    Posted March 26, 2010 at 5:08 pm | Permalink

    Such things could start war. (It started before in the Balkans.)Greece cannot pay back the money it has borrowed, so creditors will feel justified to walk in and take what is theirs… this is more and more likely to happen the more Greece borrows. Stop the rot now before the Germans take over Corfu, etc etc.

    • Citizen Responsible
      Posted March 27, 2010 at 6:34 pm | Permalink

      You may have read how earlier this month, two senior German politicians told Bild newspaper that Greece should consider selling its uninhabited islands for debt redemption along with some ancient artifacts. The Greeks reacted with outrage.
      http://www.guardian.co.uk/business/2010/mar/04/gr

  18. waramess
    Posted March 26, 2010 at 7:09 pm | Permalink

    Do I detect an apologist for EU? Could my faith in human nature be destroyed?

    We are in the EU, no matter that we are not in the Euro; it will not likely protect us from being a part of the single EU government.

    Is it not an outrage that we can see this possibility on the horizon yet the people who are supposed to own this country are not offered the possibility of choice by their representatives? A matter of the proverbial tail wagging……

  19. Ray Veysey
    Posted March 26, 2010 at 8:31 pm | Permalink

    Sorry I missed the "not" in "not just 1 Neighbour".

    It was said about 3 weeks ago that we will end up contributing to the payout for Greece, not directly maybe, but as some of the money will come from the "big pot" and we have put our money in the "big pot" so we will be paying out for a failed eurozone country. That has now been confirmed.
    The only bright spot is that all these manouvers may require a change to the treaty not covered by the "self amending" bullshit. So we could get our referendum yet !.

  20. SJB
    Posted March 26, 2010 at 11:11 pm | Permalink

    JR writes: "… joining a single currency is like sharing a bank account with the neighbours."

    "Ever closer union" surely means partners is the better analogy 🙂

  21. Lindsay McDougall
    Posted March 27, 2010 at 2:16 am | Permalink

    It is for this reason that we have to insist on having a very different form of relationship with the European nations. We should simply repeal our Act of Accession to the Lisbon Constitution on day one of taking office, declare the need for a two ring Europe, and declare the "permanent" EU President and Foreign Minister to be personae non grata. If France and Germany won't give us our freeedom, we should also repeal the Nice, Amsterdam and Maastricht Acts. Enough is enough. We have long passed the point where a bust-up is avoidable.

  22. Jedibeeftrix
    Posted April 1, 2010 at 9:01 pm | Permalink

    A reassuring article, as I was beginning to wonder if any British politician recognised the EMF for the opportunity it is:
    http://jedibeeftrix.wordpress.com/2010/03/13/oppo

  23. Credit Report
    Posted April 28, 2010 at 3:18 pm | Permalink

    Great I really like your blog and I have learned something from it. Thank you very much for your post share.

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    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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