The Euro looks like the ERM


On 16 September 1992 the EU gave up on the narrow band Exchange Rate Mechanism. Italy was forced out of the narrow bands. Spain, Portugal  and others were also unable to hold their currencies against a strengthening DM.

The Euro is the ERM it’s more difficult to get out of. The ERM still left countries free to set their own interest rates and budgets. They had to juggle their policies to try to keep confidence going in their currencies. The failure to do so was pretty comprehensive, as the market ganged up on currency after currency. The ERM was meant to be a dry run for the single currency. Instead it set it back. When they did go ahead they simply ignored the fact that several leading players in the Euro had been unable to remain stable against the DM in the ERM days.

The ERM should have been a warning to the founders of the Euro. If markets could destroy a currency locking device, why did they think markets would leave a single currency untouched? They obviously forgot that the debt markets were still open. Investors and speculators can make their views known through the bond markets, just as they did through the currency markets for the ERM.

I find it sad that some of us have had to spend so much time and effort trying to explain why the ERM would not work, and now trying to explain why the Euro cannot work in its current form. It’s bad enough having to do it once. Having to do it twice is worrying. What part of the ERM experience did they not understand? Why do they think the debt markerts will now behave differently from the currency markets? It is after all at base the same argument. Economies have to be in line with one another for the project to work. If countries become uncompetitive against Germany – as they did and as they are again – there needs to be some way to relieve the pressure in the system.

The G20 is considering an IMF expansion. The IMF usually promotes a programme of budget deficit reduction linked to devaluation and appropriate monetary policy and interest rates, set by the sovereign government it is assisting. Euroland countries do not have the ability to devalue or to set their own money policy. This makes it difficult to see how IMF programmes can work. The IMF does not lend to California or New York, so how can it lend to Greece or Portugal?  I would prefer a Euroland fix of what is a Euroland problem.



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  1. Single Acts
    Posted November 4, 2011 at 6:11 am | Permalink

    Like many contributors I suspect, I am finding it increasingly difficult to reconcile very recent statements from the Chancellor with current statements from the PM or indeed to see any substantive difference between the three main parties in their approach to this issue.

    It’s rather like wat

    • Single Acts
      Posted November 4, 2011 at 6:12 am | Permalink

      Sorry that should read

      watching a slow motion car crash and being utterly helpless to stop it despite shouting “hit the breaks” at the top of your voice.

      • Disaffected
        Posted November 4, 2011 at 9:22 am | Permalink

        Fanatical political ideology has no logical sense to deter it from the aim of achieving a single European state at any cost. The aim is to be achieved with or without public consent. However, the method of stealth to achieve this aim has now been clearly exposed by the response to Greece if it dared to hold a referendum to let its public have a say in the matter. The language of fear used to threaten those who dare challenge the EU project.

        There is now only one option to this debate, the UK needs to be out of the EU ASAP. The voting of Lib Dem MPs show that they want EU governance over the UK. The Lib Dems need to be wiped off the political map.

        The true contagion is that you cannot believe a word Cameron or Osborne says, caught from Nick Clegg. Language of fear again being used to mitigate public opposition and criticism of this stupid ideology.

        • Tim
          Posted November 4, 2011 at 1:26 pm | Permalink

          So the G20 are considering raising the limits of the funds it currently holds. As it is only Europe that is in near danger of needing bailouts then common sense dictates it will be Greece, Italy, possibly Spain and Ireland who will need this money. Why is our Goverment committing potentail UK taxpayers money to this? You can’t fix a debt problem with more debt! I’m afraid Messrs Cameron/Osborne are not up to the job. Probably because these rich kids have hardly strayed outside of the Westminster bubble and into the real world!

        • BobE
          Posted November 4, 2011 at 2:04 pm | Permalink

          “the UK needs to be out of the EU ASAP”

          I totally agree. So vote UKIP people

        • uanime5
          Posted November 4, 2011 at 4:28 pm | Permalink

          I though the referendum was cancelled in Greece because it wasn’t supported by the Greek Government. In fact there’s evidence that the Greek PM was trying to use the referendum to unite the Government in his favour to try to win today’s vote of no confidence.

          • Jon Burgess
            Posted November 4, 2011 at 10:58 pm | Permalink

            No, it was unacceptable pressure from France and Germany that made the ‘threat’ of a referendum go away.

      • Rebecca Hanson
        Posted November 4, 2011 at 11:59 am | Permalink

        What’s missing, Single Acts, is a coherent alternative picture (or pictures) of how Europe could be configured.

        We also seem to be lacking a mechanism by which such a picture could be created.

        I’ve written several times (such as here 40% of the way down the page about how such a mechanisms could be created could rapidly operate to generate coherent alternative futures and am rather startled no-one seems interested.

        I shall be in London this weekend discussing the way in which mass online conversation and social media are reconfiguring the way democracy operates. Is no-one who has concerns about the Europcrisis interested in this topic?

        • Single Acts
          Posted November 4, 2011 at 12:17 pm | Permalink

          I would love to join you but sadly young master Single Acts has a third birthday party to attend in South Wales and my non-appearance would have extremely negative consequences.

          • Rebecca Hanson
            Posted November 4, 2011 at 9:32 pm | Permalink

            Our youngest has just turned 3 too. Here she is:
            She’s a seasoned campaigner at coming to consultations and conferences (hence why she’s on my photo as people are used to seeing me with her) with me but she’s getting a weekend off this time.

        • Robbo
          Posted November 4, 2011 at 2:05 pm | Permalink

          We have had a brief taste recently. An online petition passes the threshold for debate in Parliament, and the result is a decision by the MPs not to allow the people to formally register their will with respect to the EU.

          It will take more than mass online conversation to pull the levers of power from the clutches of the political class.

          • Rebecca Hanson
            Posted November 4, 2011 at 9:30 pm | Permalink

            Mass online discussion is in a completely different league to online petitions.

        • PayDirt
          Posted November 4, 2011 at 2:18 pm | Permalink

          Where are the discussions this weekend? Is it face2face or online?

        • APL
          Posted November 5, 2011 at 8:49 am | Permalink

          Rebecca Hanson: ” .. of how Europe could be configured.”

          Rebecca, there doesn’t have to be a ‘BIG PLAN’, politicians with big plans have got us into this mess.

          In response to your offer to help, I offer my alternative proposal on how Europe could be configured.

          Friendly Autonomous Independent Countries, FAIC for short.

          Where each country arranges its own affairs in a manner that suits its own population but cooperates with its neighbors and partners about inter-national affairs.

          • alan jutson
            Posted November 5, 2011 at 1:03 pm | Permalink


            Your comment is exactly as I was about to post.

            So I will simply second it, and agree.

          • Rebecca Hanson
            Posted November 5, 2011 at 4:26 pm | Permalink

            You are the one with your own ‘big plan’ which you want to impose on everyone else APC.

            I’m proposing structures which could facilitate powerful, productive and democratic exploration of the options.

          • APL
            Posted November 5, 2011 at 7:49 pm | Permalink

            Rebecca Hanson: “Mass online discussion is in a completely different league to online petitions.”

            Rebecca, aren’t we at this moment involved in a ‘mass online discussion’? How does this discussion differ to that which you are advocating/conducting?

            Rebecca Hanson: “I’m proposing structures which could facilitate powerful, productive and democratic exploration of the options.”

            Which in large part is what is going on here, no?

            By the way, my ‘big plan’, simply to allow the population of each country autonomy over themselves. Nothing radical and not that big.

            To John Redwood There is something very annoying about your ‘capture’ code gadget, several times you type in the code and the system returns an error, ‘ERROR: Could not read CAPTCHA token file‘, please have your techie guy fix it.

            Reply I will do so

          • Rebecca Hanson
            Posted November 6, 2011 at 10:14 pm | Permalink


            Yes, absolutely we are involved in mass online discussion here. But it’s hardly involving all European countries is it.

            For your next question I suggest you follow the link where they possibilities are explained in more detail.

            For you comment – don’t assume that something isn’t complicated just because you can describe it in one sentence.

            I think you’ve slightly missed the point I was making but rather than develop it here (where we’re maxed out on indentation) I suggest we swap over to the comments on today’s post on the Euro being the Death of National Democracies (where I’m about to comment near the top).

  2. lifelogic
    Posted November 4, 2011 at 6:29 am | Permalink

    “ERM part two the big one” coming to your area now – doubtless the BBC will wheel out the great “sage” John Major ( personal attack left out-ed)to give us his word of wisdom.

    He can perhaps tell us how many businesses and houses were pointlessly repossessed and liquidated due to his 15% interest rates just for his 2.95 DMark religion.

    “We learn from history that we do not learn from history”
    ― Georg Wilhelm Friedrich Hegel

    Usually there is a bit more of a gap, to give people time to forget or die off, this time nearly all can remember the auctions of repossessed assets and Major’s huge own goal. Many of the organisers of the ERM farce are still in power and have not even said sorry.

    So business in the UK cannot borrow or borrow cheaply for good projects but having thrown our money away on Greece and Ireland (promising us a profit and having lost most of it he) now proposes to waste more on the IMF.

    Yesterday the government claimed that the UK had never lost money lending to the IMF is this true JR?

    I suspect not in real terms? Anyway there will be a huge ‘opportunity loss’ in not using the money far more sensibly on getting UK lending going, fixing the banks, lowering taxes and firing the happiness index team and similar pointless government activity.

    Reply: The Conservative party as a whole did apologise for its mistake with the ERM. Labour, Lib Dems and CBI who pushed for membership did not apologise.

    • lifelogic
      Posted November 4, 2011 at 9:02 am | Permalink

      Chancellor George Osborne this morning radio 4 when asked how likely Greece’s departure was:

      “I wouldn’t say at the moment it was likely”

      Is he perhaps now going home to sing in the bath and practice his delivery tone for his – “Today has been a difficult day” speech?

    • lifelogic
      Posted November 4, 2011 at 9:22 am | Permalink

      To the reply: The Conservative party as a whole did apologise for Major’s mistake – well perhaps they did but did they promise not to do it again?

      Cameron is still chucking money down the same pointless drains as Major did by throwing it at Greece and Ireland and perhaps others.

      Saying I am sorry I taxed you, repossessed your house, closed your business down and gave your money pointlessly to George Soros but I am happy to do it all again anyway regardless and no you can’t have a referendum as I promised what do you think this is a democracy or something?

    • lifelogic
      Posted November 4, 2011 at 9:37 am | Permalink

      Major cost me personally several million with his absurd ERM and a huge amount of pointless stress for me and many people I employed and jobs pointlessly lost. Pointing out his correct GCSE’s is hardly very much of a personal attack more or a mitigating factor.

      I would just like him for once to apologise properly or even at all and recognise why his plan was doomed and perhaps help to stop a repeat.

      He does non of this.

      • Disaffected
        Posted November 4, 2011 at 4:00 pm | Permalink

        I do not want an insincere apology, fake promises, sophistry deceit, flannel or lies I want action as these people should heave learnt from the past. We watched the Franco german dictatorship threaten and blackmail a nation state not to give its citizens a choice whether they wanted to be bailed out or get of the EU. Cameron did absolutely nothing to support democracy; he urged the Greeks to come back from the brink! He also deliberately thwarted the British public from having a vote, sometime in the future, to decide Britain’s relationship with the EU. The three main parties included this point, in varying ways, in their respective manifestos. No credible reason why the Coalition should not have hindered the motion last week. As far as I concerned, Cameron has used his last opportunity to act in the national interest, promote the public’s wishes and behave like a Tory.

        You simply cannot trust these idiots in government. Even Estonia and Sweden have better plans for growth and Gibraltar better tax policies than Osborne and Co.The Government still pursues idiotic policies on the economy, energy, immigration, defence, foreign policy, welfare and public sector spending. They have proved to be completely useless. UKIP for me.

      • Bazman
        Posted November 4, 2011 at 6:41 pm | Permalink

        Oh how we cry when government policy affects us. Proper little Tory boy. As I consistently point out the rule is: As long as it does not affect me personally. The other farmer etc. We’ll see…

        • lifelogic
          Posted November 4, 2011 at 10:09 pm | Permalink

          It is nothing to do with me I spend very little indeed on myself anway – I just do not like to see good businesses, growth and jobs to go down the drain due to incompetent and too big government and politically driven nonsense like the EURO, the ERM, over regulation and so called “renewables”.

    • stred
      Posted November 4, 2011 at 10:30 am | Permalink

      I seem to remember pictures of Cast Iron Dave running around like a headless chicken when he was errand boy to Norman Lamont during the ERM shambles. Whether he remembered or undertood what was going on is doubtful.

      • lifelogic
        Posted November 4, 2011 at 3:04 pm | Permalink

        Perhaps he was running around looking for suitable diversions and PR spin like a happiness index or changes to the law of succession.

        If you get basic policy right you do not need such things.

    • forthurst
      Posted November 4, 2011 at 10:46 am | Permalink

      Has the self-proclaimed genius, Nigel Lawson, apologised for shadowing the Deutchmark, pressaging the chaos that would duly ensue when we later joined the ERM?

      • lifelogic
        Posted November 4, 2011 at 3:05 pm | Permalink

        No I think not – but he is right on the global warming exaggerations.

  3. Mick Anderson
    Posted November 4, 2011 at 6:46 am | Permalink

    It’s bad enough having to do it once. Having to do it twice is worrying

    If the human race could learn from other peoples mistakes, it would have advanced far further. I think this counts at least double for all political mistakes.

    • Robert Christopher
      Posted November 4, 2011 at 12:53 pm | Permalink

      And to learn from other people’s mistakes is wisdom; and a lot less expensive.

  4. norman
    Posted November 4, 2011 at 6:56 am | Permalink

    I can answer the question as to why we have to do it twice – this time we have the right people in place so it’s bound to work. It’s socialisms age old cry ‘this time it will be different’.

    Chris Huhne is reported as to have stated during cabinet yesterday that it’s not correct to say he was wrong about the Euro when he predicted it would be a runaway success. His reasoning? He wasn’t in government at the time and if he had been he could have made a success of the thing.

    Think about it, this is Chris Huhne saying this.

    God help us all because the current bunch certainly aren’t going to.

    • Single Acts
      Posted November 4, 2011 at 9:27 am | Permalink

      With regard to him not being in government, in all fairness, if Mr Huhne was not in the drivers seat, so to speak, he is not guilty.

    • A different Simon
      Posted November 4, 2011 at 10:24 am | Permalink

      Chris Huhne is presiding over the antithesis of a “runaway success” in the Dept of Energy and Climate Change .

      This will become abundantly clear when energy imports double the deficit and the lights go out .

      It’s difficult to reconcile his claims of success in life and business with his actual performance in Govt .

      He appears to have had enought get up and go to establish a consultancy advising on the risks of credit default . Profitability is pretty much a given in consultancy , event without all his connections and privilege .

      This has evidently not qualified him for his current role as much as working on the shop floor of an energy intensive manufacturing company would have .

      • uanime5
        Posted November 4, 2011 at 4:34 pm | Permalink

        It’s not Huhne’s fault that the UK will lose 8% of it’s energy generating capacity due to ageing power plants going offline by 2013. Especially since nuclear plants take about 10 years to build.

        Unsure whether to blame Labour as they did try to build new power plants but nimbies and environmentalists kept stopping them.

        • lifelogic
          Posted November 4, 2011 at 10:13 pm | Permalink

          The are only going off line due to Huhne’s and the EU’s discredited religion/exaggerations.

        • Jon Burgess
          Posted November 4, 2011 at 11:10 pm | Permalink

          You’ve answered your own point I think. As it takes so long to build a nuclear power station Labour has to share the bulk of the blame. They were in power for 13 years for goodness sake. It was their responsibility to secure a reliable source of energy for now and the future.

          • lifelogic
            Posted November 5, 2011 at 2:14 pm | Permalink

            Shale gas/gas ones are just fine and do not take so long to build (or convert) electricity (and on demand electricity) at circa 5 pence per KWH. Rather than Huhne’s 40p+ idiocy that at least he is now belatedly killing.

    • lifelogic
      Posted November 4, 2011 at 3:08 pm | Permalink

      Chris Huhne is that the some one who kick started to pointless Photo Voltaic house bling industry and then killed it stone dead by halving the absurd tax payer subsidies – what was the point of that exactly?

  5. John Page
    Posted November 4, 2011 at 7:07 am | Permalink

    Agree absolutely about the IMF. If France expects Lagarde to be able to turn the IMF taps on to support the doomed eurozone structure at the expense of the rest of the world, let’s hope they’ll be disappointed.

    Guido suggests a Commons vote to increase our IMF subscription yet again could prove an interesting challenge for Mr Cameron.

    Is there no limit to how much taxpayers’ money the eurozonefanatics are prepared to throw away on their doomed project?

    • Mick Anderson
      Posted November 4, 2011 at 9:44 am | Permalink

      In the unlikely event that there was a vote in the House, do you really think that three-line Whips would not be in force?

      To answer your last question; no, probably not, in spite of the sound-bites.

  6. Gary
    Posted November 4, 2011 at 7:12 am | Permalink

    It is easy to get out the euro. It is easy to get out of any enforced (fiat) legal tender system. Abolish the legal tender laws, open the mint to accept gold to coin, let the free market in currency take hold. And overnight the bad money will start to be driven out and honest money will spontaneously replace it. On the contrary it is much harder to maintain a dishonest Anti -free market money system

    That is a step too far for the moneychangers. They would lose their monopoly of usury and their means of enslavement.

    • uanime5
      Posted November 4, 2011 at 4:36 pm | Permalink

      The problem with using gold coins is that you’ll need a lot of gold.

  7. Sue
    Posted November 4, 2011 at 7:14 am | Permalink

    Reading Ed Balls’ Blog today, I doubt whether you’ll get Labour support in a vote to boost funding for the IMF to support the Eurozone.

    I think it’s the first time I’ve ever agreed with the man!

    • APL
      Posted November 5, 2011 at 9:30 am | Permalink

      Sue: “I’ve ever agreed with the man!”

      Stopped watch and all that …

  8. Chris Rose
    Posted November 4, 2011 at 7:16 am | Permalink

    It cannot be said too often: the IMF should not support the Euro and the UK should insist that it does not do so. Can we not get the Americans to agree with us on that?

    Only the ECB can rescue the Euro.

  9. Mike Stallard
    Posted November 4, 2011 at 7:22 am | Permalink

    What is becoming glaringly obvious is that the eurozone is controlled by Germany and France. Even the BBC admits this by constantly showing pictures of the two leaders together behind lecterns giving announcements. And France is the driver. M. Sarkozy went begging to China, not Mrs Merkel.
    It was under Mrs Thatcher that Monnet first brought his long held beliefs about the Social Chapter and about the equally important common monetary policy into public view. He was, of course, French.
    And now that the common currency has been “acquired” it is permanent. Very permanent.

    So all this stuff about reforming, changing and getting out are just hot air. You might as well try and change the bedrock of Europe – the CAP or the fisheries policy. Or tell the Pope that Dawkins ought to be a Bishop. Or tell the Chinese that Mao was a monster.

    • Gary
      Posted November 4, 2011 at 8:57 am | Permalink

      France appears to be the driver only because French banks are on the hook for eye watering amounts and so they shout the loudest. Germany is the driver.

      • Mike Stallard
        Posted November 4, 2011 at 12:21 pm | Permalink

        I totally agree that German bankers are in charge of the monetary side – along with the French.
        The rest of us are just spectators, watching the way the two of them push the other countries around.
        Both countries have a long record of doing just this, starting, of course very recently, but certainly going back to South West Africa, 1871, 1805 and Louis XIV.

        • David Price
          Posted November 5, 2011 at 6:43 am | Permalink

          You could go back a bit further to the 14th century and another French leader (Philip IV) leaning on another Italian leader (Pope Clement V who was actually French) to raid some other creditors (Templars).

  10. Richard
    Posted November 4, 2011 at 7:27 am | Permalink

    Your excellent article analyses the problem of the Euro from an economic perspective and your reasoning is spot on, but the EU is a wholly political project to bring about a superstate as soon as possible, with the Euro as a political tool to help achieve that ambition.
    We are seeing all the decisions made at the moment being made to stop any breakdown in the dream, delay is all that can be tolerated.
    And so any amounts of money wasted and and the long term impoverishment of Europe’s people is “a price worth paying”
    They are not taking decisions on the currency in a logical economic way, just like they acted in their defending of the ERM project.
    I still feel the Euro currency project will fail but I do fear the effects when it eventually does.

  11. Peter van Leeuwen
    Posted November 4, 2011 at 7:32 am | Permalink

    Mr. Redwood makes a very clear and understandable argument. Still there are aspects missing: why would Britain ever have joined the ERM if there weren’t economic arguments in favour of the ERM, why would China and other BRIC countries be interested in a successful euro if there were no economic arguments in favour of the euro?
    The democratic process proves messy indeed and the financial-political power of the EU rather limited faced with the ominous power of the financial markets. I would therefore understand it if the IMF were used to calm the financial markets and put leverage on countries like Italy.

    • JimF
      Posted November 4, 2011 at 8:43 am | Permalink

      Thank goodness for markets then. Maybe they are the closest thing we have to democracy. Why are you so dissmissive of democracy???

    • stred
      Posted November 4, 2011 at 10:35 am | Permalink

      At the time, the Germans were advising HMG to give up on the ERM before they managed to lose so much on the exchange markets.

    • forthurst
      Posted November 4, 2011 at 12:13 pm | Permalink

      “why would Britain ever have joined the ERM if there weren’t economic arguments in favour of the ERM”

      Clearly, they were spurious. Many politicians appear to be ‘momentum traders’, lacking the intellectual ability to perform independent research or logical analysis to reach an independent conclusion, petrified of being left off the bandwagon, career before country, they drag us from one disaster to the next.

    • Mike Stallard
      Posted November 4, 2011 at 12:24 pm | Permalink

      I read in the paper today that Italy is up for £1.8 trillion. British income tax for a whole year will not be enough to cover that.
      The IMF is quite out of its depth now and any talk of “loans” must be seen as “gifts”.

    • APL
      Posted November 5, 2011 at 9:28 am | Permalink

      Peter van Leeuwen: “why would Britain ever have joined the ERM if there weren’t economic arguments in favour of the ERM, ”

      Because in the last half of the last century – in fact since the end of the First World war, there has been a comprehensive and absolute loss of the will to govern the country by the people who love the trappings of power but not the responsibility.

      Hence the ERM, in effect delegating our economic policy to the Bundesbank, and in parallel the European Union, effectively delegating any and all domestic policy to the EU.

      As a result the political class is left as bit players in a sort of expensive street theatre, acting the roles of government but not actually governing.

      • Peter van Leeuwen
        Posted November 5, 2011 at 9:41 pm | Permalink

        @APL: Obviously you don’t hold Margaret Thatcher and John Major in high esteem (they took Britain into the ERM).

        • APL
          Posted November 6, 2011 at 8:33 am | Permalink

          Peter van Leeuwen: ” .. hold Margaret Thatcher and John Major in high esteem .. ”

          As time goes by and one reflects on EU related events, one is forced to the conclusion that the EU and British participation in it is largely a Tory matter.

          Major an absolute write off.
          Thatcher, on the EU had somewhat of a Damascene conversion

          Reply: The transfers of power under Labour 1974-9 and 1997-2010 were huge – why does no-one mention Nice, Amsterdam and Lisbon?

          • APL
            Posted November 6, 2011 at 9:06 pm | Permalink

            APL: ” why does no-one mention Nice, Amsterdam and Lisbon? ”

            I suppose Mr Redwood, it’s because I have voted Tory since I first voted for Margaret Thatcher, I feel particularly betrayed by the Tory Party.

            So , yes I hold you lot to a higher standard than say, the grubbing Kinnock, or the facile Blair.

            We used after all to expect a more nuanced sensible approach to running the country. But since it has dawned on, me anyway, that the Tory Party is indistinguishable from the Labour Party in their desire to capitulate to the European Union.

            I reserve particular opprobrium for the Tory party.

  12. Pete the Bike
    Posted November 4, 2011 at 7:35 am | Permalink

    Euro politicians believe they are above reality. They think they can control markets and populations. Arrogance and stupidity.
    In the UK we have a similar blindness with massive over spending on the grossly unproductive public sector and debt levels reaching a point where crisis is inevitable yet nobody is doing anything real. More arrogance and stupidity.

    • Jon Burgess
      Posted November 4, 2011 at 11:33 pm | Permalink

      I’d argue this is not a specifically European character trait, but something in all those who seek power above all else.

      There is something to be said for the hereditory principal, as at least sometimes you end up with someone who isn’t just in it for what they can get for themselves.

  13. Ruth
    Posted November 4, 2011 at 7:38 am | Permalink

    With Eurogeddon rapidly approaching, how are they so blind? And why, oh why, is our government talking of propping up the IMF with yet more of our money? You find it sad, I find it deeply depressing, this government is behaving no better than Labour would have.

    • Henry
      Posted November 4, 2011 at 3:21 pm | Permalink

      Remember the old saying? There’s none so blind as those who won’t see!

    • Electro-Kevin
      Posted November 4, 2011 at 3:52 pm | Permalink


      Insidious Monetary Fund

  14. Martin Cole
    Posted November 4, 2011 at 7:43 am | Permalink

    All very good factual points, very gently made. I was harsher in my own comments, on the same topic, made last evening, as I could not find it within myself to put the argument solely into economic terms. I believe one has to pose these questions concurrently with addressing the even more worrying fact that national democracies, were being destroyed all across the EU at the same time as the economic problems were being allowed to grow and fester.

    Although the argument about whether IMF aid should be conditional upon democracy is far too big for this space, surely all the countries within the EU, witnessed by their signatures to the EU Treaties, cannot deny that concept. I believe the democracies within the G20, if they today decide to boost IMF resources for the Euro Zone, should stipulate that any such funding is conditional on basic democratic rights and representation being established across the Euro Zone ( preferably direct and a la Swiss) before economic governance is imposed!

  15. Martyn
    Posted November 4, 2011 at 7:44 am | Permalink

    I see that when asked by a reporter “why British money should be put at risk to help bail out eurozone countries?” Mr Osborne said that taxpayers from around the world, including those in America and China, would be ‘exposed’. He also pointed out “that even if a country ends up being unable to repay any of its other debts, it will still have to pay the IMF”.
    Really? If the country is a busted flush, broke, bankrupt or whatever where does he think it will be able to get the money from to repay the IMF? Issue more worthless bonds or IOUs maybe? I wonder if anyone in charge of what is going on actually lives on the same planet as the rest of us. Or have my gyros toppled and it is actually me living in cloud-cuckoo land?

  16. James Reade
    Posted November 4, 2011 at 7:54 am | Permalink

    One word for why it was hoped the eurozone would be an improvement over the ERM and for why it is (or was) different – credibility. There was never the commitment to a totally fixed, irrevocable exchange rate in ERM, and the markets attacked that. If the irrevocably fixed eurozone rates were credible, there would be no market attack. If there was no hint that a break-up of the zone was even being considered, there would be little or anything to attack. But once that possibility begins to make itself known, it is attacked.

    Now, I’m not defending the decision to run ahead with the single currency, I’m just pointing out one of the arguments for why it is different to the ERM.

    • lifelogic
      Posted November 4, 2011 at 8:24 am | Permalink

      Indeed it is worse than the ERM as exit is hard and the confidence and credibility has gone over a much wider area. Yet still we have to listen to Shirley Williams types wittering on as if they were right all along (when the clear reverse is true) and it was just the fudged figures or the initial rates that were wrong.

      The road to hell is, perhaps paved with pleasant sounding people like Shirley Williams and the BBC trying to do “good” and be inclusive, fair, sustainable and push ‘equality of outcome’ down every ones throats. In total defiance of science, logic, history and human nature.

    • stred
      Posted November 4, 2011 at 10:45 am | Permalink

      Don’t you think Greece would be able to be more competitive and prosper if it left the Euro and that the loss would strengthen the Euro in the remaining area?

      You previous posts have challenged the idea. Do you think Iceland would have done better in the Euro after the spiv bankers left?

      You previously said you were ex Durham, Oxford and now Birmingham. I was asking as my son is studying in your field and I was concerned about the quality of teaching, but could not reply as I was away.

    • forthurst
      Posted November 4, 2011 at 12:31 pm | Permalink

      “If the irrevocably fixed eurozone rates were credible, there would be no market attack.” Maybe markets would see that something is wrong when such rates engendered property bubbles, severe trade imbalances, intractible unemployment. Are you suggesting that the EUSSR project is so sacred that the whole world and its resources should be applied to putting “Humpty together again”?

  17. alan jutson
    Posted November 4, 2011 at 8:22 am | Permalink


    If you find it difficult to understand the actions of our Politicians, us plebs out here have no chance.

    Within the last 48 hours we have had:

    Resignation – no resignation.
    Single government – coalition government – possible election.
    IMF -insufficient Funds – more Funds promised.
    No bailout – bailout.
    European central bank can cope – cannot cope
    No Borrowing – more borrowing.

    Add to that:
    You can have the money if the referendum answer is yes.
    You cannot have a referendum it will take too long.
    You get no money now if you leave the Euro.
    You cannot get back into the Euro immediately, should you want to return in a few years.
    We will let you off 50% of your debt, with no charge against any of your assets, but you can borrow more.

    The simple answer is clear, no one government has a bloody clue what to do, other than keep on spending, and keep on racking up debt, until all of the taxpayers in the western world are bled dry, and simply work for pocket money.

    Oh for a leader of someone/anyone who can see sense, and tough it out with these people(Government leaders), who are simply proven wasters.

    • alan jutson
      Posted November 4, 2011 at 8:24 am | Permalink

      Never mind, lets put a tax on plastic bags.

      • lifelogic
        Posted November 4, 2011 at 9:07 am | Permalink

        Also chose if we are to have a King or Queen in 60+ years and to adjust the finer details of the idiotic questions for Cameron’s absurd happiness index.

      • Bryan
        Posted November 4, 2011 at 9:55 am | Permalink

        Also the move to fortnightly waste collections in ‘Tory’ Councils must be helping!

        • BobE
          Posted November 4, 2011 at 2:20 pm | Permalink

          Remember we are all in this together.

        • lifelogic
          Posted November 4, 2011 at 3:12 pm | Permalink

          Must be soon time to rearrange the deck chairs.

      • Single Acts
        Posted November 4, 2011 at 12:22 pm | Permalink

        I’ll see your plastic bags and raise you the Welsh assembly decision to ban coin operated tanning booths

        (Apparently we now need to have a “suitably qualified person” in situ to ensure we stand in front of a tanning lamp correctly, or something…)

      • APL
        Posted November 5, 2011 at 10:41 pm | Permalink

        alan jutson: “Never mind, lets put a tax on plastic bags.”

        What an excellent idea Alan, why didn’t anyone else think of that one??

        Wait a minute, didn’t our great radical TORY leader just advocate the same thing?

        Wait another minute, didn’t the savior of the World, Flash G advocate the same thing before Dave?

        We elected a different party to get the same inane policies?

        Ah that must be democracy, EU style.

    • uanime5
      Posted November 4, 2011 at 4:48 pm | Permalink

      Try getting your information from a reputable source.

      One week ago the EU promised to write off 50% of Greek debt and give them another bailout. Greece had to fulfil certain conditions in exchange for this.

      Greek PM facing a vote of no confidence on Friday of this week. He is currently unpopular, even in the Greek parliament.

      Greek PM suddenly calls for a referendum on whether Greece should accept the bailout and the conditions of the bailout. Referendum will be held in January.

      EU tells Greek PM he won’t get the bailout before a referendum on whether Greece will accept the bailout. Also discuss whether to kick Greece out of the Euro or EU Greece opposes the deal they agreed to last week.

      Greece will run out of money in mid-November without the bailout.

      Greek Parliament opposes the referendum.

      Greek PM is still facing a vote of no confidence which he is expected to lose.

      • alan jutson
        Posted November 5, 2011 at 1:05 pm | Permalink


        But he did not lose, as “expected” so yet another twist..

  18. JimF
    Posted November 4, 2011 at 8:35 am | Permalink

    This is ready to play out interestingly politically here. Cameron and Osborne could be caught napping along with the dodo Libdems whilst an unholy alliance of Ed Balls’ Labour and Tory Eurosceptics shout “enough”.

  19. JimF
    Posted November 4, 2011 at 8:39 am | Permalink

    My thesis is still that Labour will find an excuse to become increasingly Eurosceptic and leave Cameron and the dodos on the sidelines. I’m not sure where this leaves Tory Eurosceptics, who will have been too late to build a solid UKIP-type right wing party against Labour.

    Cameron and the dodos will be left naked in the middle of the field.

    • Single Acts
      Posted November 4, 2011 at 12:25 pm | Permalink

      That would be a very smart political strategy. Labour’s problem might be as a collectivist central-planning statist party par excellence, it might be hard for them to condemn a european collectivist central-planning statist concept.

      Perhaps a few cast-iron pledges from Milli maybe the order of the day, or as a Democratic strategist from the United States once put it “fake right, run left”

  20. English Pensioner
    Posted November 4, 2011 at 8:41 am | Permalink

    The ERM didn’t work because the financial approaches of the various countries was completely different and to anyone who wasn’t an economist it seemed pretty obvious that the Euro wouldn’t work for the same reason. It is easy for governments and Prime Ministers to make promises about fiscal restraint, etc, , far harder for them to keep them !

    Surely It would be reasonable to expect that two countries which were hoping to merge currencies should keep the currencies at a fixed rate of exchange for a long period beforehand, say ten or so years and have maybe a couple of changes of government. If they could manage this without tensions, merger would be possible, if not no real harm would be done,

    The Eurocrats however are so keen to have an integrated Europe that they rush into everything headlong without any thought for the consequences in case the public should actually decide that they don’t like the idea.

  21. David Williams
    Posted November 4, 2011 at 8:51 am | Permalink

    The IMF should not be underwriting Euroland countries.
    Why doesn’t the ECB print some money for the GIPS?
    Why doesn’t, for example, Greece sell some of its 6000 islands or Spain some of its 5000km coastline?
    Why don’t Germany and France invest in their new empire?
    Debt amnesties and IMF bailouts are simply not fair.

  22. Brian Tomkinson
    Posted November 4, 2011 at 9:09 am | Permalink

    This situation has arisen because of the determination of the s0-called “elite” in Europe to forge a United States of Europe whilst at the same time pretending that they had no such intention. They have created a monster called the eurozone and, as is their wont, they are blackmailing the rest of the world to back them in their ambitions on pain of global economic misery. The loss of sovereignty that we were told was a voluntary sharing is now to be forcibly completed in the eurozone. Our own duplicitous leaders are preparing to “find” 10s of billions to give to the IMF to pay to this protection racket whilst telling us that they are doing no such thing.

  23. NickW
    Posted November 4, 2011 at 9:28 am | Permalink

    The IMF would definitely become involved (and would need to be involved), if / when a Eurozone country abandoned the Euro, or the Eurozone broke up.

    I think perhaps the G20 is quietly preparing for this eventuality.

  24. Andy
    Posted November 4, 2011 at 9:29 am | Permalink

    I totally agree with you. The Euro was always a stupid idea. The trouble is it isn’t the European Political class who are seeing their jobs, businesses etc destroyed. I’m deeply worried about friends in Greece, but there is nothing I can do to help them (financially) because of the mess Gordon Brown created here. I now think the only hope for Greece is to leave the Euro and reestablish the Drachma. The longer they stay in the Euro the less of their economy will survive.

  25. frank salmon
    Posted November 4, 2011 at 9:54 am | Permalink

    So, why don’t the GIPS set up their own currency – then we know where to go on holiday. Simples.

  26. Bryan
    Posted November 4, 2011 at 9:58 am | Permalink

    Am I correect in thinking that France has no money and its banks are technically bust?

    If not, why can’t they borrow a huge sum on the market to help fund the bailout?

    Reply: French banks are mneeting all the regulatory requirements and are therefore not “technically bust”. The French credit rating could come under pressure, as they do have substantial state debt and some weak banks

    • Mike Chaffin
      Posted November 4, 2011 at 12:38 pm | Permalink

      Is this still true under the terms of a Greek default?

      I’m not so sure it is. A haircut is one thing (voluntary writedowns which appear to be tailored to what the French banks can withstand) however if CDS clauses came into play the word from the markets is that the French financial sector would be wiped out.

      Credit Default Swaps are off balance sheet so there is no definitive way to say what a particular bank’s liabilities would be. Hence it is rumours and rumblings which suggest the French banks are up to their eyes in them.

  27. John Bowman
    Posted November 4, 2011 at 10:04 am | Permalink

    “What part of the ERM experience did they not understand?”

    I am now of the opinion that there is a collective madness – manifests in self-delusion, feeling of invincibility, being absolutely right and incapability of accepting error or poor judgement – among the political oligarchy in Europe (includes UK to avoid any doubt) brought on in those who have far too much uncontrolled power, the very thing that democracy is supposed to avoid by putting power in the hands of the People.

    Repeating the same behaviour with the expectation of a different outcome, is taken as a sign of madness.

  28. Caterpillar
    Posted November 4, 2011 at 10:08 am | Permalink

    “It’s bad enough having to do it once. Having to do it twice is worrying. What part of the ERM experience did they not understand? ”

    JR, I suspect that you have already learned that there is no point in trying to explain a second time, ‘they’ will not be listening.

    Frighteningly I would now prefer the UK to be battening down the hatches; recalling military, stockpiling fertiliser etc!

  29. Derek Emery
    Posted November 4, 2011 at 10:28 am | Permalink

    The EU elite don’t do economics, finance, markets or understand risks as their only real interest is politics that leads to complete integration of the EU. Therefore economic arguments that creation of the eurozone would lead to massive problems for the PIIGS who cannot to match German productivity and will increasingly become uncompetitive are meaningless waffle to the elite.
    Keeping the zone means perpetually low growth for the PIIGS so their debts can never be paid off but all this is unimportant compared with the political positive of integration.
    Because the elite have zero interest in the economic and competitive aspects of the EU it is doomed to low growth and ever-falling importance in world terms.

  30. Damien
    Posted November 4, 2011 at 10:48 am | Permalink

    “This is I believe a moral tale. It goes far to prove the revolutionary axiom that if you wish to destroy a nation you must corrupt its currency. Thus must sound money be the first bastion of a society’s defence”.
    Adam Ferguson ,When money dies: The Nightmare of the Weimar collapse

    • Martyn
      Posted November 4, 2011 at 8:12 pm | Permalink

      Interesting observation. There is another that I recall from somewhere in the past that says “it is not necessary to use force to take over a country, because that can be done by undermining public confidence in the police force, degrading its education system to the point where the majority are pooly educated and destroying the morale of its armed forces”.
      I have a horrible feeling that this has already happened to the UK….

  31. Anne Palmer
    Posted November 4, 2011 at 10:49 am | Permalink

    I see no point at all in this Country borrowing MORE money putting itself in further debt to give money to the IMF to “save the Euro”. Mr Cameron is far more concerned about the EURO than he is about this his own Country. How can he stop the IMF not giving money “to save the Euro”? Does he say, well you can give money to save the Euro but it much not be British Money? Is THAT how it works.
    Without doubt, Mr Cameron is puting the EU before his own Country, yet his allegiance is to this Country.

    Mr Cameron has without doubt put the European Union before his own Country. He has said he wants to repatriate powers back from the EU yet all he has to do is to cast aside the European Union’s Localism Bill that he is putting through at present and while he’s at it he can put a halt to the EU’s HS2 which is all part of the EU’s TEN-T policy which if it fulfils all its Commitments, this Government will have given away our Air space-traffic control, and our PORTS and 12 mile limit round our shores for the EU’s Single European Sky and its Motorway in the Sea.

    We have already been told that the Euro-zone will become one STATE, which some have always said was the final destination, yet some crave to go on to World Government, yet many deaths and war will come before that.

    • uanime5
      Posted November 4, 2011 at 4:53 pm | Permalink

      HS2 isn’t part of TEN-T, as TEN-T only concerns railways between Member States. HS2 is a purely domestic idea.

      • APL
        Posted November 5, 2011 at 8:26 pm | Permalink

        uanime5: ” as TEN-T only concerns railways between Member States.”

        I’ve suggested this the last time you said the same thing, Scotland is a member of the European Union, the HS2 will very likely be extended to Glasgow or Edinburgh. In time.

  32. oldtimer
    Posted November 4, 2011 at 10:51 am | Permalink

    At his post G20 press conference yesterday, Mr Sarkozy made it abundantly clear that the euro project was the central plank of French foreign policy and that Europe would blow up if the euro blew up. It is also clear that Germany does not agree that the ECB should do what it should do; within Germany that seems a political non-starter. It also suits Germany to benefit from a weaker euro versus a stronger DM. It now seems obvious that the EU “solution” is not a solution at all; so instead they are now trying to tap the IMF to bail out the constituent members that need bailing out. This depends on the BRIC countries coming on board; they seem wary and with good reason.

    My conclusion: nothing is resolved; nothing is in place; the crisis in the bond markets will continue; the final G20 statement will sound anodyne but, in essence, will be meaningless – a placebo for the world markets.

    • oldtimer
      Posted November 4, 2011 at 2:55 pm | Permalink

      Listening to the Sarkozy and Cameron post G20 press conferences on Sky, it is indeed clear that nothing substantive has been agreed, let alone done, to deal with the euro issues. Cameron was explicit about that, and that it was the job of the EZ members, not the IMF, to do it. He also said that any increase in the UK`s IMF obligations would come out of the existing Parliamentary authority and would not require a new vote. Do you know how much this is?

      Sarkozy – or Merkozy as some wag has dubbed the dynamic duo – went on at length about a financial transactions tax to divert us all from the fundamental failure to deal with the euro crisis. If Germany will not cough up the surplus it has earned through membership of the euro to bail out the deficit EZ members, I do not see how the EZ is going to survive as it is.

      Pointing out to Greece the exit from the euro was the defining moment of the past few days. But like everything else related to the euro, have they (the EU Commission) worked out the practical details of how this could or would be done? Probably not. Have the Greek public taken on board the deep hole they are in, with no possibility of escape? Probably not.

      The more we see of this shambles of a currency union, the more we should be disassociated from it and from membership of the organisation, the EU, that has sponsored it.

  33. Peter van Leeuwen
    Posted November 4, 2011 at 10:57 am | Permalink

    @ JimF
    Although I could understand the exasperation of some Brits (assuming you’re British) with their own democracy, and although the financial markets (the City) pays over 50% of the Tory election budget, I see not any similarity between financial markets and democracy. On the continent there are mainly fully functional parliamentary democracies with good proportional representation, i.e. governments based on a majority of the popular vote at the time of an election. The messiness of democracy is probably unavoidable and I don’t consider myself dismissive of parliamentary democracy at all. The problem with democracy seems with the British public: it is in British blogs that I read MPs or the government being called “traitors”. Maybe it is a cultural difference but I don’t come across this kind of language in the Netherlands or Germany. The (unavoidable) messiness in democracies I see e.g. in party politics: A Slovak party voting down a government in spite of agreeing with the EFSF, a Greek opposition seeming more interested in bringing down the government than having an viable alternative, a French president being very focused on a re-election, and Italian president clinging on to power, Belgian partie s unable to even form a government, etc. The Netherlands’ democracy isn’t any better, and opposition parties will extract concessions for any EU-support to the minority government.
    I would agree with you though that the “whip” of the financial markets may be needed as a reality check for very very slow democracies, but really, would you have called George Soros (the financial market) in 1992 “the closest thing we have to democracy” and somehow better than 650 directly elected MPs and a government?

    • Mike Stallard
      Posted November 4, 2011 at 12:33 pm | Permalink

      The joining fact is that both markets and politics ought to be free.

      Markets are just a place for free people to put their private money if they wish. They are then free to do with it what they like. They can risk it, invest it safely, put it to good causes or have a go at breaking the law (I hope they get caught!) They are free.

      Politics ought to be a place where you are free. Free to vote, free to have daft ideas, free to demonstrate, free to say unpopular things. Our country used, once, to be a place where you could do this. It demands a lot of tolerance, though, and, once, we were very much better at putting up with people who disagree with us than we are now. Then, we were much freer. Our tolerance now is being tested to the limit by people with a terribly different world view. When it snaps – watch out!

      • Peter van Leeuwen
        Posted November 4, 2011 at 10:57 pm | Permalink

        @Mike Stallard: Freedom is fine but I wouldn’t subscribe to a freedom so total that it were to create a “law of the jungle”. Society needs also to protect its values and civilisation achievements.

    • JimF
      Posted November 4, 2011 at 2:07 pm | Permalink

      Our Mrs Thatcher once said “you can’t buck the markets”. Since then we’ve seen a line of politicians trying to, from Mr Major through to your EU cartel politicians right now. So perhaps we are voting for people who spend what they haven’t earned, think they’ve abolished boom and bust and try to push water uphill. If the markets call a halt to such vainglorious attempts to buck the natural order of things, it is at the same time both scientifically satisfying that rules based in logic can’t be broken, and of assistance to people who democratically elect such fools that the markets break these systems before even worse damage is done to people’s lives (as Soros did to break the ERM)

      • Peter van Leeuwen
        Posted November 4, 2011 at 11:04 pm | Permalink

        @JimF: the still messy continental democracies may yet act fast enough to satisfy the markets. Time will tell.

    • forthurst
      Posted November 4, 2011 at 2:26 pm | Permalink

      “would you have called George Soros (the financial market) in 1992 “the closest thing we have to democracy”

      No, but I would have called John Major (degenerates into personal abuse about the former PM’s judgements-ed)

  34. GJ Wyatt
    Posted November 4, 2011 at 11:08 am | Permalink

    The Spanish and German press report that Italy has accepted the EU/IMF joint supervisory role that was put in place for Greece.

    Greece’s best course is is to resume its traditional role as a pariah state in the bond markets, default on its debts and leave the Euro and devalue. Unshackled by debt and interest repayments it would be in a position to address problems in its the economy. Of course the losses borne by its bondholders would be regrettable, but caveat emptor applies as much to them as anybody else.

    • oldtimer
      Posted November 4, 2011 at 2:59 pm | Permalink

      I agree. But it does not appear that the Greek public is yet ready to face up to the possibility of a return to the drachma; they want to cling to the euro; they do not want to face up to the austerity measures that that implies.

  35. Trevor Chenery
    Posted November 4, 2011 at 11:28 am | Permalink

    Totally with David Willams. When your back is to the wall it’s time to realise your unproductive assets which is what any good administrator and accountant would do.

    Greece could probably sell Crete for E100bn to the US as a forward base and the 52nd State. In addition a wholesale privatisation of a shed-load of other government-owned, state assets to the Qataris, Indians or Chinese – the Germans even – would probably bring in another E100bn.

    Exit the Euro, re-introduce the drachma and calm will prevail. Just do it. FGS and move on. Why is it so complicated.

    • sjb
      Posted November 4, 2011 at 2:38 pm | Permalink

      Because “a weak nation [such as Greece] leaving the currency would cost as much as 11,500 euros ($15,819) for every person in the country, or 50 percent of gross domestic product in the first year alone.”
      Source: UBS estimate (September 2011)

    • alan jutson
      Posted November 4, 2011 at 5:26 pm | Permalink


      I am a bit with your thoughts on this.

      What I cannot understand is why you allowed debt to accrue without having any assets on risk, then you let them default on 50% of the debt, then you are prepared to lend to exactly the same people again, another shed load of money, and again without the back up of assets at risk.

      Try that with the High street bank and see what happens, they will not even lend on a low risk project, when you have an unblemished record.

  36. Geoff M
    Posted November 4, 2011 at 11:39 am | Permalink

    Eng. Pens. is correct about fixed exchanged rates this is exactly what is going on around the Pacific rim with Canada USA NZ Australia, they are closing up. That is where the UK must concentrate its future. The EU is a sad old socialist state and has little to offer GB compared to the other countries who have HRH as their head of state (USA excepted).

  37. Iain
    Posted November 4, 2011 at 12:50 pm | Permalink

    Not just the Euro and EU, Cameron prioritises any foreign cause that crosses his desk before the people of this country, Libya and Aid are just a few examples of this.

    Cameron is a dangerous combination of Upper class and Metropolitan class, both have little regard for the people of this country, the Upper class part of Cameron sees us as uncouth undeserving plebs, and the Metropolitan part of Cameron sees us as unenlightened Little Englanders.

    When as a country we are in deep trouble we need leaders who you believe are on your side and would fight tooth and nail for country and you. Mrs T you certainly thought put country front and centre in all she did. Cameron? No, Cameron is more the type of person George Orwell described when he wrote “England is perhaps the only great country whose intellectuals are ashamed of their own nationality”

  38. stred
    Posted November 4, 2011 at 2:09 pm | Permalink

    On R4 today, an ex Greek finance minister said that Greece has actually increased public spending over the past year by 8%. This sounds familiar. Massive cuts and suffering but spending increased. How is this possible?

  39. MajorFrustration
    Posted November 4, 2011 at 2:27 pm | Permalink

    Expand the IMF – I notice on the Shaun Richards blog that the last time this was done was in 2009 and was seen by Gordon Brown as saving the world – well todate this uplift has yet to be implemented by the USA and has yet to go before Congress.

    This is a European problem and its for them to sort it out – its the only way they will learn.

  40. javelin
    Posted November 4, 2011 at 2:31 pm | Permalink

    I don’t believe the Euo will work even with fiscal integration. The reason is this.

    The are a few ways to regulate an economy – interest rates, FX rates, fiscal spending, wages and productivity.

    The Eurocrats have fixed interest rates and FX rates. They want to fix fiscal spending. This leaves wages and productivity.

    When has wage deflation / inflation ever been survivable politically? People simply will not accept wage deflation. There will be riots and changes in Governments.

    Productivity changes requires high investment and changes in cultue. Again this is very difficult politically. Look at the Thatcher revolution. In the EZ there is no money left for investment either. Also ask how the PIGS can change their culture to become more productive? These are farming nations dependent on the EU subsidies. So this will require the EU to give up the Common Agricultural policy. which wont happen. There will be riots by the French farmers.

    So EVEN if we get fiscal union in the EZ – then countries like Greece will have to go through massive wage deflation and productivity changes. Neither of which will happen because of the social implications.

  41. Disaffected
    Posted November 4, 2011 at 3:55 pm | Permalink

    I do not want an insincere apology, fake promises, sophistry deceit, flannel or lies I want action as these people should heave learnt from the past. We watched the Franco german dictatorship threaten and blackmail a nation state not to give its citizens a choice whether they wanted to be bailed out or get of the EU. Cameron did absolutely nothing to support democracy; he urged the Greeks to come back from the brink! He also deliberately thwarted the British public from having a vote, sometime in the future, to decide Britain’s relationship with the EU. The three main parties included this point, in varying ways, in their respective manifestos. No credible reason why the Coalition should not have hindered the motion last week. As far as I concerned, Cameron has used his last opportunity to act in the national interest, promote the public’s wishes and behave like a Tory.

    You simply cannot trust these idiots in government. Even Estonia and Sweden have better plans for growth and Gibraltar better tax policies than Osborne and Co.The Government still pursues idiotic policies on the economy, energy, immigration, defence, foreign policy, welfare and public sector spending. They have proved to be completely useless. UKIP for me.

  42. Martin
    Posted November 4, 2011 at 4:35 pm | Permalink

    You mention “uncompetitive economies” yet all the media coverage is about excessive government debt and borrowing. This government borrowing (like our own) is to pay Teachers, Doctors, Nurses, Police, Soldiers, State Pensions etc.

    As for Greece some political speculation of Referendum or not has been amazing for its impact on markets. I guess we can add maturity of government process to the list of things to be done.

    A translation of Mr Micawber’s dictum (from Charles Dickens) into Greek would be a good idea for their money policy (it would apply in our out of the Euro and even to our decimal currency!).

  43. uanime5
    Posted November 4, 2011 at 4:56 pm | Permalink

    It’s rather depressing to read so many comments from people cheering about how the Euro and EU is in trouble when this is very bad for the UK. If the Euro falls the UK’s exports will be hit hard.

    • Jon Burgess
      Posted November 5, 2011 at 12:22 am | Permalink

      I for one am delighted to have been proven right, that the EU and the Euro are fundamentally flawed. It tells me that my judgement is sound.

      This is going to be messy, whatever you or I think. But the longer the EU delays the inevitable break up of the Euro, by fruitlessly throwing more piles of taxpayers money at it, the worse it will be.

      The hardship all Europeans face is awful to contemplate, and I do not rejoice at that. But the blame for it lies squarely on the shoulders of the socialist European elite and their supporters of this idealistic utopian monster.

    • David Price
      Posted November 5, 2011 at 7:08 am | Permalink

      The focus of the EU is not about trade it is about political power and control. The end goal of the EU is for our financial centre to be dismantled and for there to be no UK, how is that good for us?

    • lifelogic
      Posted November 5, 2011 at 2:22 pm | Permalink

      We are not cheering – just saying “we told you so you fools and please do not throw yet more good money after bad” but with no great satisfaction. While also trying to get them to find a real solution (not short term sticking plaster) so that the problem is finally solved so we get democracy and some confidence can return.

  44. Alexis
    Posted November 4, 2011 at 5:16 pm | Permalink

    What part of the ERM experience did they not understand?

    I couldn’t agree more.

    The LMU
    The Snake
    The Snake in the Tunnel
    The ERM

    All failed. And you could include the USSR on this list. I am not aware of a single successful precedent for unifying currencies or controlling exchange rates.

    All have collapsed due to ‘unforeseen circumstances’.

    Why would any intelligent person have argued in favour of the euro – or try to argue in favour of it now? What evidence was there that it could succeed?

    • Jon Burgess
      Posted November 5, 2011 at 12:25 am | Permalink

      ‘It will be different this time. ‘

      Always the mantra of the delusional, deceitful or downright insane.

  45. Denis Cooper
    Posted November 4, 2011 at 6:19 pm | Permalink

    An essential component of the euro mania was the delusion that if the economies of countries were sufficiently aligned for them to meet the initial Maastricht “convergence criteria”, then sharing a single currency would by itself automatically lead to a further convergence of their economies.

    None of the first wave of euro countries had consistently met the stated “convergence criteria”, apart from Luxembourg*, but worse it was not long after the launch of the euro when it was noted that the economies of the countries had actually started to diverge.

    * From June 1998, “Is Europe Ready for EMU? Theory, Evidence and Consequences”:

    “Table 1 shows that the achievement of all five criteria was fulfilled on only 13 from a possible 120 occasions. Such a record in the period preceding EMU, when member states retained considerable control over their economies, is highly significant. Indeed, it is only Luxembourg, a country atypical of the other EU members’ economies, which appears able to consistently meet the 5 criteria, whilst of the remaining fourteen nations only three have ever secured total compliance with the convergence indicators: France (1990, 1991 and 1997), Germany (1990, 1994 and 1997) and Denmark (1990).

    Furthermore, if we take the average number of criteria met to provide an indication of the ‘fitness’ of a given EU member state to participate in EMU, it would appear that only Luxembourg, Denmark, France, Germany and Ireland come close to satisfying the convergence indicators permanently. Even for these countries, their inconsistency is problematic. Thus, the available evidence provides little support for the ability of member states to both achieve and maintain the stipulated convergence criteria for more than momentary periods. This situation is likely to result in the operation of a single EU currency becoming unsustainable in the medium – to long-term.”

  46. BobE
    Posted November 4, 2011 at 7:29 pm | Permalink
  47. Chris
    Posted November 4, 2011 at 7:32 pm | Permalink

    Splendidly realistic and refreshing Andrew Neill discussion with Michael Portillo, Louise Cooper and Campbell on the likelihood of Greece leaving the Euro (and the weaknesses of the Euro project).

  48. Bernard Otway
    Posted November 5, 2011 at 12:35 am | Permalink

    I hope that the CAPTCHA code is not a CENSORSHIP device BUT I keep composing words and then CORRECTLY with my wife WITNESSING input the code and guess what I cannot get my words accepted,this to pieces that probably are construed as controversial,YET words that I write appear in the press written by the likes of Hitchens ,Oborne,Delingpole,Mckinstry
    Phillips,Amrose Evans Pritchard,Max Hastings ,Kelvin Mackenzie YOU NAME THEM they say exactly what I say,SO if you are trying to STOP my words it is not working because they get repeated for instance on Question Time this week by Peter Hitchens,EVEN Ed Balls on
    CH.4 news[nearly fainted at that seeing I am usually the polar opposite of him].At times like this words such as those written by one of my favourites Mr Littlejohn today and
    Martin Samuel on the 92 yrs old lady who was not sold whisky because she had no ID
    but had her over 60 bus pass and pacemaker details,plus all the others AND my and other not famous people’s words too,they are OUR release from the pressure cooker emotions we
    BOIL UP inside ourselves because of the Ruling class.s contempt for us.IMHO it is better to have this release than to possibly (attract us to undemocratic means -ed – which this site condemns),especially as I have said these words are written ANYWAY and read by Millions,AND are getting stronger and stronger all the time,because they REFLECT US,I bumped into Kelvin Mackenzie recently and spoke for about 15 minutes,he sympathasises and understands you only have to read his full page on Saturdays to see that.

  49. Gordon McCann
    Posted November 5, 2011 at 11:42 am | Permalink

    After the election last year William Hague seemed to be saying that he was interested in rekindling bonds with the commonwealth.
    Since then there have been no more utterances on the subject, as if a shutter had come down across that particular ray of light.
    It has been said we do not learn from history but we should look again at what it has to say.
    We have battled with the continent and traded with the world.
    The commonwealth contains a third of the worlds population and a fair slice of its natural resources.
    If we cannot do business with that then we are sunk.
    I wonder if William Hagues day has yet to come?

    Conservative Councillor

  • 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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