View of the Euro from 1997

In 1997 I published the Penguin book “Our currency, our country” setting out the case against the Euro. Amongst its predictions were:

“There have  been riots in the streets of France against the spending cuts the currency scheme requires. Three quarters of the German people are opposed to the abolition of the DM, despite their government’s insistence that it must go aghead. 1 in 8  Germans, 1 in 8 French people, 1 in 8 Italians and almost 1 in 4 Spaniards are out of work. Despite that, their governments think that donning the single currency hair shirt is more important than promoting growth and prosperity.”

“You cannot have a single currency without a single interest rate, a single banking policy, a single budget policy and a single Finance Minister  or Central Bank Governor. You are led inevitably to a single taxation policy and a single economic policy”

Current plans for European union “are likely to cause greater tensions between countries and peoples in western Europe than if we had no such plans”

“The single currency is like rejoining the Exchange Rate Mechanism, locking yourself in and throwing away the key”

“There is no single right rate for the pound against the DM”

“The Council of Ministers and the Commission would gradually seek  more and more to control budgets and deposits”

“Ministers would be left defending tax increases or spending cuts which they had not wanted and probably disagreed with”

“The European authorities are introducing taxation by the back door, using national governments as their tax collectors. In recent years one of the ironies has been the fact that European rules have insisted on budget cuts and budget reductions in domestic policy in each country whilst expanding the European budget. It is this that will lead to ever more common taxation  and the harmonizing of tax rates at the higher end of the range. It is this which above all else will render European countries less competitive”

“The single economic policy of the Treaty is incomplete. It is all about exchange rates, money and inflation;it ignores jobs, income and output.If pursued to its conclusion, it could easily alienate the voters of Europe, who think jobs and income are more important than financial matters…. One currency, one Bank,one interest rate would lead inevitably to one budget and one economic policy, as politicians struggled to cope with the unruly forces the Euro unleashed”

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21 Comments

  1. Stuart Fairney
    Posted November 27, 2010 at 2:45 pm | Permalink

    Just for balance, may I suggest a selection of quotes from various Euro enthusiasts including Messrs Mandelson, Clarke, Heseltine, Blair etc explaining what a great idea they considered the project to be

  2. Johnny Norfolk
    Posted November 27, 2010 at 2:57 pm | Permalink

    You told us so.

    Yet people are still defending it. You do wonder if some of these supportes have a hidden agenda, or are they just thick.

    • lifelogic
      Posted November 27, 2010 at 4:46 pm | Permalink

      Surely they cannot all be that thick – they must just have a coordinated pro EU agenda script. They always sound as if they are reading out the same, pro EU, PR release – addressed at the level of dim 10 year old children. Rather like a bad double glazing salesman taking to a foolish potential buyer.

      It is also invariably in line the with the BBC line of questioning & Polly Toynbee type of “thinking”.

      The same people all strangely seem to believe in the great global warming exaggeration, renewable/sustainable energy (with virtually no actual production thereof), high taxes & big government, that immigration is always a good thing and that no one should be allowed to breath, burp or go to the loo without a licence, a training certificate and an annual update course with a training company (usually run very profitably by a relative/friend of someone in power.

      They believe all this but cheerfully admit (indeed are often proud of) not having the faintest idea of engineering, science, energy production, running a business or proper economics. Their information seems to come mainly from the Guardian, EU and UK government propaganda, the EU funded propaganda organisations, a media studies or similar degree and the lines of the latest pop music.

  3. Denis Cooper
    Posted November 27, 2010 at 3:32 pm | Permalink

    Your predictions have turned out to be more or less accurate, but of course those who are ideologically committed to the creation of a European federation deny that the present difficulties have anything to do with the euro.

    They would have us believe that a country can almost always have the wrong interest and exchange rates, rates which at any time are better suited to the state of the economy in another country, and yet that will have no damaging economic effects.

    Just another aspect of the “nothing whatsoever to do with the EU” line which is routinely trotted out whenever some unwelcome development is being attributed to an EU law or policy.

    And on Question Time Kenneth Clarke not only denied that the euro was in any way to blame for Ireland’s predicament, he went further and claimed that it was an irrelevant issue because we would never join it.

    It reminded me of this in August 2005:

    http://news.bbc.co.uk/1/hi/uk_politics/4199540.stm

    “He now says his enthusiasm for UK euro membership has cooled.

    He told the Daily Mail on Wednesday that the issue was not a barrier to him leading the party.

    “I said that the question of Britain’s admission wouldn’t arise for at least 10 years.

    “That’s not controversial, it’s pure blind obvious. I don’t think we’re going to have any more silly arguments about treaties and constitutions. The constitution is dead.” ”

    It didn’t take much working out to see that spring 2007 would be the most likely time for the resurrection of that dead EU Constitution to be attempted.

  4. Rich
    Posted November 27, 2010 at 4:20 pm | Permalink

    The real scandal is that no matter who you vote for in the UK, you will end up electing a government which favours more integration.

    • Bob Eldridge
      Posted November 28, 2010 at 1:50 pm | Permalink

      Unless you vote for UKIP

  5. Kenneth
    Posted November 27, 2010 at 4:38 pm | Permalink

    What you said would happen is coming to pass. Unfortunately the BBC denied such views any meaningful platform.

    The BBC has not changed very much and therefore you are still swimming against the tide, the direction of which is far too influenced by the BBC.

  6. Johnny Zero
    Posted November 27, 2010 at 5:58 pm | Permalink

    It appears that all Senior Members of UK Political Parties, with a few exceptions such as yourself have decided long ago that it is in their personal interest and not the National Interest to follow the European Integration Agenda.

    Even to pull us out from the dreadful Human Rights Laws seems beyond them. As small Eastern Bloc Countries refused to join the Greek Bailout, why should we join the Irish Bailout? If we are not members of the Euro, what are we doing supporting it with loans? These are huge amounts of money and I feel that the Government are supporting our Nationalised Zombie Banks behind our backs.

  7. English Pensioner
    Posted November 27, 2010 at 7:07 pm | Permalink

    “One currency, one Bank, one interest rate would lead inevitably to one budget and one economic policy, “
    Insisting that Ireland has a similar coropration taxation rate as the other countries in Europe is the first step towards a common budget and having the same rate for all. It will then be found that a particular country has, say, a lower income tax rate than some others, and this will be considered unfair competition and will need to be raised accordingly. Ireland is just the start.
    Afterthought: If Germany considers Ireland’s corporation tax rate to be to low, why don’t they lower their own? Oh silly me, I forgot politicians never lower taxes unless they look like losing an election!

  8. Boudicca
    Posted November 27, 2010 at 9:37 pm | Permalink

    British Democracy is a sham. With our FPTP electoral system and Prospective Parliamentary Candidates effectively chosen by the Party Leadership, we are left with a choice between to potential parties of governance and one potential coalition partner with virtually the same policies on a whole range of subject. They are exactly the same when it comes to the EU.

    There is a real rage building up in the UK about our political elite and the political systems they use to ignore the British electorate. The British people are overwhelmingly Eurosceptic yet our opinion and wishes are ignored by our so-called representatives. This situation can’t last – sooner or later there will be a riot.

    • Stuart Fairney
      Posted November 28, 2010 at 8:27 am | Permalink

      I agree although I don’t find riots especially bothersome, what really concerns me is the potential rise of nut-case frings parties. You have to say following economic disaster and the very obvious common agenda of all the parties, the time is right for such a party.

      • alan jutson
        Posted November 28, 2010 at 5:24 pm | Permalink

        Stuart

        As I recall it happened in Germany a number of years ago when Hitler came to power when the Country was in Chaos, and other troublesome leaders of fringe Parties gained substance in other Countries.

        Alas many of those who were living then, and could remember clearly the events at the time, are not about now.

        Sadly History has a habit of repeating itself, we never seem to learn any lessons.

        • Kenneth
          Posted November 28, 2010 at 8:53 pm | Permalink

          I fear the eu quango experiment will ultimately lead to at least 27 extreme (words left out) nationalist organisations across Europe. (sentence left out)

    • Bob Eldridge
      Posted November 28, 2010 at 1:58 pm | Permalink

      I quote
      “Political parties, too, almost always have the original purpose of attaining exclusive despotic domination; a slight impulse toward a philosophy is almost always inherent in them. Yet the very narrowness of their program robs them of the heroism which a philosophy demands. The conciliatory nature of their will attracts small and weakly spirits with which no crusades can be fought. And so, for the most part, they soon bog down in their own pitiful pettiness: They abandon the struggle for a philosophy and attempt instead, by so-called ‘positive collaboration,’ to conquer as quickly as possible a little place at the feeding trough of existing institutions and to keep it as long as possible. That is their entire endeavor. And if they should be pushed away from the general feeding crib by a somewhat brutal competing boarder, their thoughts and actions are directed solely, whether by force or trickery, toward pushing their way back to the front of the hungry herd and finally, even at the cost of their holy conviction, toward refreshing themselves at the beloved swill pail. Jackals of politics!”

  9. Sally C.
    Posted November 27, 2010 at 9:43 pm | Permalink

    What no-one expected back in 1997, was that the ECB would actively debase the Euro from the word go. The ECB’s primary aim was to ensure the acceptance of the Euro by the 300 million people being forced to use it from January 1999. They decided that the easiest way to do this was to keep their key interest rates artificially low from the start – far too low, as it turned out, for many of the new member states. Ireland is a perfect example (but the same applies to Spain, Greece and Portugal).
    For decades prior to joining the Euro, short term Punt interest rates traded around 11%. In 1992, the Irish were forced to raise their short term interest rate to 17% as they struggled to keep the Punt inside its ERM bands. (At the same time, Norman Lamont was forced to raise our Base Rate to 12% in an effort to keep Sterling inside its ERM bands. On September 16th, he even promised to raise Base Rate again to 15% before the markets, and infamously, George Soros, intervened.)
    Despite the nightmare of that experience, Ireland committed itself to join the Euro. Bertie Ahern was Taoiseach at the time. He has a lot to answer for. Short term interest rates in Ireland gradually fell to a record low of just over 3% by January 1999. The result of such low interest rates ( exacerbated by the 12.5% corporate tax rate) was a massive expansion of credit, as the banks went on a lending spree. The property market in Ireland ( and elsewhere in the Eurozone) went through the roof as the ECB did nothing to rein in the credit expansion, despite the ECB President’s constant refrain, ‘We are firmly anchoring inflation expectations.’
    In fact, the ECB was not only expanding credit by intervening in the open market to keep their key interest rates artificially low, they were also ( and still are ) debasing the Euro by indirectly financing the ever growing debts of profligate member states like Ireland and Greece.
    This is due to the way that the ECB prints money.
    The ECB accepts Eurozone sovereign bonds as collateral for their lending operations. European banks have been more than happy to buy Greek and Irish bonds because they know that they can use these bonds to borrow money from the ECB at 1%. As the interest rate they pay to the ECB is much lower than the interest rates received from Ireland or Greece, this has been a profitable and risk free trade for the European banks. Unfortunately, when the ECB accepts Irish or Greek bonds as collateral against a loan, it is effectively printing brand new Euros and in this way, it has been monetising Greek and Irish debts.
    More recently, the ECB has been accepting government guaranteed bonds issued by the Irish banks and building societies as collateral for new loans. I was astonished to read in the Irish Times, that Irish Nationwide Building Society had issued 4 billion Euros of government guaranteed bonds which they had no intention of selling to investors. They were issued solely to be taken straight round to the ECB, in order for Mr. Trichet to give Irish Nationwide 4 billion newly minted Euros. This is the link.

    http://www.irishtimes.com/newspaper/finance/2010/0908/1224278447479.html

    The ECB has been encouraging irresponsible behaviour on the part of the Eurozone governments and their banks. The Euro as a currency is completely out off control. The average person living in the Eurozone knows that they and their country are in trouble but unfortunately, they do not see where the trouble has come from.

    We can be sure that their politicians will never tell them.

  10. Mike Stallard
    Posted November 28, 2010 at 12:52 am | Permalink

    Poor little Norway! Poor little Switzerland!
    They make us Europeans look like paupers.
    As I go round the world I am coming to realise that there is a change going on.
    In the 1960s people respected the Europeans and English and US above all others. Today, I notice that Singaporeans, Chinese, some Indians, Arabs and Japanese carry the same clout that we used to have.
    I do not think that we Brits have quite woken up to this yet.
    Maybe our pound and the Euro and the Dollar are just historical memories and are about to get blown away?

    • alan jutson
      Posted November 28, 2010 at 5:26 pm | Permalink

      Mike

      Much truth in what you say.

  11. Geoff not Hoon
    Posted November 28, 2010 at 9:06 am | Permalink

    Mr. Redwood. I have to admit it was 2001 before I came across your excellent book. I referred to it and you only recently to a friend and he made the same comment as me. Whether we wanted it or not we have membership of the ‘Union’ and increasingly come closer to monetary union regardless of what our leaders say. Given this situation where do you believe we will be in ten years time, even further down the road of the Euro and more Brussels unelelcted government or the opposite?

  12. A.Sedgwick
    Posted November 28, 2010 at 11:20 am | Permalink

    The noteworthy point to me about your book is the political honesty. Although many political and business grandees were hoodwinked a lot us weren’t. It has the hallmark of the pyramid selling scam which I first remember first about 30 years ago when all sorts of otherwise sane people ended up with their spare room or garage filled with c..p washing powder. What concerns me is politicians like yourself are not disowning the established party system as Jenkins,Owen, Williams & Rodgers did in 1981 for less good reasons than we have today. The mood is much more receptive for some real honesty and common sense in politics with the will of the people paramount not the survival of the main political parties.

    The 30 year anniversary of the gang of four is 26 March 2011.

  13. Alan Wheatley
    Posted November 28, 2010 at 2:27 pm | Permalink

    A further consequence could be that the need for UKIP will become superseded by events, which, John, may be the only thing in this whole sorry mess that you can be pleased about!

    • Simon
      Posted November 30, 2010 at 9:22 am | Permalink

      Alan ,

      I don’t see the EU dispanding but even if it did thats not the end of the story .

      Our political parties , civil service , television , newspapers , online media , Police and education system will remain infiltrated by the enemy within .

      Time is on their side , eventually there won’t be enough of us left who remember what life was like before .

  • About John Redwood


    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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