“Told you so is not a policy”. I think the Uk is right to say that if Euroland wants to go ahead with a proper single country union to back up its single currency, we will not stand in the way. I just want us to use such a moment to get a very different deal for the UK. We could not possibly lose more power to Brussels now, and need a lot of power back to run our own affairs democratically at home. My critics tell me this is wrong.
Losers do not like a smartie pants. The Euro area is the loser. The critics have so far been proved right. They put too many currencies into their scheme. They did so before those countries had controlled inflation, controlled their budgets and learnt how to limit their debt.
Worse still they went ahead without having a proper interventionist central bank to regulate the cash and capital of Euro area based banks, and without the means or permissions to run a co-ordinated sovereign debt funding scheme. As a result they now have a twin crisis, a banking problem and sovereign debt problem.
I have always said the least costly and least damaging option from here is to break up the union before it does more damage. I have also always said this is not the UK’s call, and it looks as if Euroland still wants to make a go of it. In which case, they need to do much more to put right the fundamental weakness of their scheme. In a phrase, they need a single sovereign to stand behind their single currnency. It has to be all for one and one for all. Their leaders have to seek to secure democratic consent to a huge leap, from national identities and democracies to European identity and democracy.
The problem is two and two can equal three. In a united Euroland, the rich countries will clearly be worse off. They will have to raise extra taxes, to send money to the poorer parts of the union. Transfer payments within successful currency unions like the dollar and sterling areas are many times the current level within the Euro zone. If Liverpool needs higher Council spending or more benefit cheques, London sends them the money. If Athens needs more cash to pay the wages and more money for the unemployed, Berlin will have to send them the money. If Germany wants to know what it will be like, it will be a longer and deeper and dearer version of what they experienced in West Germany when they entered their currency union with East Germany.
The trouble with currency unions that are too big, or include areas that are too divergent, is they may not even work in the long term interests of the poorer areas receiving the extra taxpayer subsidy. The price for Greece receiving the additional aid will be more European control over her democracy, and no ability to devalue to kick start her economy from higher exports. The send them aid model of economic development often does not work, leaving the poorer countries permanent pensionsers. They divert their political energy to demanding more cash from the centre, instead of using it to earn a more prosperous living by their own efforts.
I fear the Euro area would be a case of two and two makes three. I doubt if any area within the zone would be better off in the long term, to say nothing of the problems of identity in making people feel they belonged to a new state they belonged to. European union could become the most disuniting force of all.
August 9, 2011
All very sensible points – all the pro Euro politicians, John Major and the BBC pro EU propaganda unit should be hanging their heads in shame at this entirely predictable mess they have helped to create.
The chance however of Cast Iron Cameron (with the Libdem ball and chain round his ankle (thanks to his silly lefty, green, election campaign) doing anything sensible on renegotiation is rather small I fear.
He should first sound out the people to strengthen his position something he refuses to do.
I see that Livingstone blamed the riots on the “cuts” (What cuts) on Newsnight last night but then also on the lack of jobs (caused by a too large state). He seems a little confused but his words are very dangerous.
August 9, 2011
The ‘cuts’ he refers to are the ones the Government has implemented and is trying to implement. The poorest in society do not appreciate having their benefits and pensions cut so that the Government can pay off the banker’s debts and give the rich a tax break.
The lack of jobs is caused by the private sector hiring cheap immigrants, rather than the British public. Also a large state provides more jobs so it’s better at reducing the lack of jobs.
August 9, 2011
“a large state provides more jobs so it’s better at reducing the lack of jobs.”
Good idea lets all work for the state – perhaps digging holes and filling them in again or similar – then the government can pay us all with money from the magic money tree, we can buy or food from the magic supermarket and live in magic houses heated by magic energy and all drive magic cars.
August 9, 2011
If I were a Greek, I wouldn’t like to be governed by France and Germany.
Hey – wait a minute……..
August 9, 2011
Indeed – but Cameron, Blair, Major, Brown, the BBC and most MP’s clearly like this direct rule of the UK by unelected French, German and other functionaries.
August 9, 2011
Don’t forget Ted Heath who originally drove us into this eventual mess!
The inanity of VAT is a price we have to pay when we had a perfectly rational Sales Tax, which is VAT in a simpler, single stage form. He also saddled us with the CAP and the Fisheries Policies, neither of which work!
August 9, 2011
Indeed and helped give us the Michael Martin as speaker of the house of commons just in case he had not done enough damage already.
August 9, 2011
“Their leaders have to seek to secure democratic consent to a huge leap, from national identities and democracies to European identity and democracy.”
It’s never previously crossed their mind to seek consent.
August 9, 2011
Oh, I am sure it has -they just know the answer will be no: so, instead, they appeal to the greed of the politicians who hand over sovereignty bit by bit: and pay for propaganda at the BBC, and other organizations forced to fly the blue rag with gold stars.
The end result of the euro zone, is, as predicted, a mess. The end result of the democratic deficit will be tyranny and war. It would be better to accept defeat now with just the financial mess, but, of course, they will not – therefore, we are headed to war.
August 9, 2011
(Anti German comment removed-ed)
When will Cameroon extract his digit and demand some re-patriation for agreeing to all this nonsense???
Pigs may fly but it’s nice to dream. My local Conservaive MP has lost my vote over his nonsensical reply to my quetion vis-a-vis the Express Campaign.
August 10, 2011
Pity about the piece being considered anti-German – some of my best friends are Germans. I was simply re-iterating a view previously aired in a respectable National Daily.
But let’s get real – who would invest in a company (the EC) that could not file annual, audited accounts and was technically bankrupt? The Government appears to think that we can.
August 9, 2011
…and it never will cross their minds!
This video of Paul Staines v Paul Flynn perfectly illustrates the thought processes of a typical politician. He obviously knows better than the people he serves and will quite happily ignore their views i.e. Paul Flynn.
August 9, 2011
Yes .. i watched that .. i was thinking dictator instead of representative.
August 9, 2011
There are two flaws with your logic:
1. If the UK is advocating fiscal federalism (and assuming the eurozone countries come to a similar flawed consensus it is their best route ahead) the UK will not be able to negotiate a return of powers in return for nodding this through. The attitude in Brussels will be “the UK is in favour of this, so why are they asking for something ‘in return’ for measures they said they wanted anyway”.
2. The eurozone countries could introduce fiscal federalism without any new treaty involving the UK (beyond the change to remove the ‘no bailout’ clause which cast-iron Cameron already agreed to without asking for any powers back). The EFSF has been set up as an intergovernmental arrangement between the eurozone countries, and the legislation to enhance its powers agreed on July 21 is being put through the parliaments of eurozone members only and not Westminster. The model would be that of the original Schengen treaty which the UK never signed. Therefore there would be no UK veto on the new treaty ‘to trade’ for allowing the fiscal federalism which Osborne says he wants to go ahead.
Rather than pursue such bad negotiating tactics, it would be better to honestly argue that fiscal federalism would be bad for the economies of euroland (and therefore ours indirectly), bad for their democracies, and that it would be contrary to the UK national interest to allow a powerful entity to emerge on the other side of the channel with de-facto power to dominate a EU legislative process that creates the supreme law of every EU member-state including the UK. Then if the Continentals want to go ahead anyway they at least know (i) that the UK will want something in return for these serious objections which we have articulated (rather than pretending to agree with them like Osborne), (b) when it fails the UK will again be shown to have been the voice that should have been listened to which could be useful credibility in the future. That would truly be making Merkel, Sarkozy and Co “face the consequences” of what they are doing today, rather than merely the consequences of earlier mistakes by Kohl, Mitterand and Co.
August 9, 2011
P.S. I read your article in The Telegraph today, which is a good one whose objectives i support wholeheartedly. Unfortunately the Lisbon treaty contains a mechanism for ‘enhanced co-operation’ which allows a group of at least 1/3 of EU member-states (i.e. the eurozone qualfiies) to by-pass any British veto when establishing new forms of ‘co-operation’ within the structures of the EU (i.e. without any need to go to a separate Schengan style treaty). Therefore the UK cannot negotiate this veto over EU institutional involvement in setting up eurozone ‘fiscal union’ in exchange for a generalised opt-out mechanism because we already gave up that veto.
The only limit on the use of the ‘enhanced co-operation’ procedure is that it should not extend EU powers beyond those permitted in the treaties. However the cast-iron One has already agreed to remove the no-bailout clause which opens up the doors to fiscal transfers. Nor can an Irish referendum be expected to prevent it because the change, though implying the end of self-governing status for Ireland in tax-and-spend decisions, is being presented as a minor one for which the self-ammending provisions of the Lisbon treaty can be used.
There really is no alternative but for re-negotiation based on what the UK wants as a minimum for remaining in the EU, rather than futile attempts to negotiate what we want in return for what the other countries want but can achieve already with the existing treaty. And the main barrier to that serous negotiotian is Cameron himself.
August 9, 2011
We shoulkd simply refuse to pay any more of our “contributions” until, 1) the EU finally manages to gets its books through the audit, and 2) allows us to re-patriate local (i.e. National measures). Whatever happened to that magic con-word “subsidiarity”?
Tell them at the same time that they can fine us all they want – we just simply refuse to pay. A de Gaule, “Non” is sadly lacking here.
August 9, 2011
I’m not an economist but Ive never understood how you can have one currency and several economies with their own economics instruments – surely one goes hand in hand with the other – get rid of your currency and you must become part of a large union like the US. Did Agrentina not peg their currency to the US $ many years ago doing effectively the same thing?
Then you have the question of democracy – many of the Euroland states have entered the Euro without the consent of their own people, signing away sovereingty without the consent of the people – is that not known as treason?
August 9, 2011
A Government cannot commit treason because treason can only be committed against the Government.
August 9, 2011
Wrong! In the UK treason is committed against the Crown and Country. This is certainly NOT Parliament. All UK Commissioners should be clapped in the Tower awaiting treason charges since they cannot serve two masters – the EU (which they are pledged to do) and the Sovereign.
August 9, 2011
Then again, two plus two might become five:
Balanced budgets are already entering into constitutions, Mediterranean EU members are beginning to restructure their economies, there are excellent entrepreneurs in countries like Italy and Spain, and just look what a successful economy Germany has become after joining with a impoverished former communist economy. This large trade-block will make interesting trade-deals with emerging economies and has the clout to e.g. enforce entry to the Indian service market, which should be interesting for our British EU-partners.
In the business of making self-fulfilling prophesies, it is better to keep optimistic and hopeful, like Americans show us time and again.
August 9, 2011
Germany was one of the slowest growing economies in the world in the first decade of the euro, as the too-high (for them) euro interest rate sucked capital out of Germany to fuel the booms and asset bubbles in Ireland, Spain etc. The current pannicky capital flight from the eurozone peripherals is creating a temporary upward blip in Germany’s otherwise long term low-growth trend, but this is a one-time effect. Indeed latest figures show it already peetering out.
http://online.wsj.com/article/SB10001424053111903366504576485990755198856.html
People confuse German’s trade surplus with a strong economy, but almost any manufacturing econony will have a trade surplus. Manufactured goods dominate international trade even though most advanaced ecnomies are now dominated by services which don’t show up in the trade figures.
August 9, 2011
These may be your views, but I see no evidence of an appetite in the Conservative Party leadership to enter into any determined negotiations. It’s my belief they will go along with it as enthusiastically as they dare, making complaining noises as a smokescreen.
As for leaders securing democratic consent for the leap from national identities to a Euro identity, it’s wishful thinking to believe that will happen. The history of the EU has been foisting itself by false pretences and subterfuge, and the Euro with its predictable crisis has been another device to inflict what couldn’t be done by seeking democratic consent.
For that matter, I maintain there are only two states with regards to the EU; being a member, in which case you are part of a club, the very essence of which is to bring about a single European state, or you are not.
August 9, 2011
“I doubt if any area within the zone would be better off in the long term, to say nothing of the problems of identity in making people feel they belonged to a new state they belonged to. European union could become the most disuniting force of all.”
This.
I absolutely agree that, for the euro in particular, its survival depends on its constituent parts agreeing to a level of economic integration that verges upon a federal structure, but what the transnational progressives need to realise that this will never now include the whole of the EU. That dream lies in ashes, there will be a core of nations that are willing to be part of a larger state, but it will probably only include half of the EU members. I know an a-la-carte europe seems horrific to them, but they need to come to terms with it and the sooner the better.
August 9, 2011
Now is the time for our Government to take the initiative and start the detailed planning processes for the three big issues facing our Western Society.
1. The collapse of the euro and the EC and hence our withdrawal. It is inconceivable that any European countries will allow Germany to dictate their economic policy – see Second World War.
2. The limitation of derivative speculation as a means of enhancing bank returns without any connection to the real economy.
3. Economic management for countries without growth. The assumption that we must have growth is illusory.
All other measures are merely playing at the edges with sticking plaster.
August 9, 2011
The externally organised amalgamation of companies with the intention of the good bringing up the bad has had the opposite effect – for instance British Leyland.
For “external organiser” substitute the Council of Ministers and for “companies” substitute countries, and what is there to believe the result will be anything other than a disaster.
The UK needs to be as far away as possible, preferably out of the EU.
August 9, 2011
I want to say how very much I enjoyed your excellent article in the Daily Telegraph this morning. Well said.
August 9, 2011
Whe can only hope that the markets force decisions on the Eurozone in the same way as they did when John Major (0-2 ‘O’ levels) tried to keep us in the ERM.
With the many of the external stakeholders in the US economy recognising that trusting their wealth to a bunch of crooks who use it to create enormous wealth for themselves by means of Wall Street spivery and to invade countries denominated as threats to Israel and to the pre-eminence of the $, by deliberately weakening the Euro by trying to proceed with their vision of a multicultural EUSSR rather than a staple platform for growth, the Eurofanatics are irresponsibly and selfishly creating a world without a single trustworthy major fiat currency; Switzerland and Japan are having to take emergy measures to fend off hot money, leaving commodities, the staples of human existence, the sole remaining depository for saved wealth.
August 9, 2011
Once again I largely agree with Freeborn John, with one or two quibbles over legal details.
However I would like to ask JR why the Conservatives –
1. Favoured EU enlargement, arguing that “widening” the EU would prevent unwanted “deepening”.
2. But allowed it to be made a standard requirement for accession that all new EU member states would have to commit themselves to joining the euro as soon as the conditions were deemed correct – which has been the case with all countries which joined post-Maastricht.
3. Yet still claimed that many of the new countries, especially the Eastern Europeans who would value their new freedom from Soviet domination, would become natural allies of the UK within the councils of the EU.
4. And now want to consign all those potential allies, both those which are already in the eurozone and those which aren’t yet in the eurozone but are legally committed to join it, to a federalised eurozone, a eurozone which is to be run on very different terms to those which they previously agreed, without any if those countries being offered the option of reverting to or retaining its own currency.
5. Keep avoiding any mention of the radical treaty amendment which has already been agreed on March 25th:
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2011:091:0001:0002:EN:PDF
without Cameron asking for or getting any quid pro quo for allowing the leaders of the eurozone states to do more or less whatever they may agree to do, without non-euro countries having any further say on the matter.
Reply: I argued against widening as a way of diluting the power of the centre, as it was clear the EU used every widening to tighten its grip over memebr states. I therefore share your disagreement with those Conservatives who claimed to favour widenign in the name of loosening.
August 10, 2011
“I told you so” may not be a policy but it is a source of huge satisfaction to know that one was right and the others wrong.
We are at a similar moment in this matter as the fall of the Berlin wall was for Communism.
I expect about the same amount of contrition from the proponents of the failed Euroi as we had for the failed Soviet method – none!
I do believe we need someone to republish a full and updated list of statements by politicians and clerics on the Euro etc, just so we can see who had good judgement and reasoned analysis and who were plonkers.
August 11, 2011
It has never been in Britain’s interest for there to be a single dominant continental power. We didn’t fare too well under William the Conqueror, we resisted the would be dominance of King Philip of Spain, we weren’t too fond of the Austro-Hungarian empire, Kaiser Bill or Adolf Hitler. So what’s different now?
We should be actively campaigning to break up the Eurozone – yes, indeed, Perfidious Albion. It won’t work, of course, but we can succeed in detaching peripheral members.
“You can a man who boozes by the company he chooses
So the PIIGS got up and walked away.”
Sorry about that one.
August 12, 2011
The cost of bailing out the periphery at the moment is about E300-400 billion (actual cash subsidies that need to be paid to allow the PIIGS to survive). This can be delayed via the EFSF for perhaps a year, by Eurobonds for another 2-3 years.
If the Euro breaks up and PIIGS are thrown out of the Euro, the losses to banks will be of a similar magnitude (E300 billion) and there will be significant economic fallout as the economies adjust abruptly.
The problem is that the Euroliars (the Guy Verhofstadts and Barrosos of the world and to a lesser extent Sarko) want to go for a gradual stealth union. They are refusing to even think about the economic costs and they lie and lie – there is no alternative, euro brak up = end of a single market. In their world if they can delay the problem by 3-5 years, they hope to force a gradual fiscal union on taxpayers in the Northern competitive bit of Europe.
Their solution was to delay and this suited to the status quo people like Merkel. They hoped the problem would just go away.
I see three major problems with this:
1) The PIIGS citizens are not going to agree to German fiscal overseers.
2) The Taxpayers of Germany andnorthern Europe are certainly not going to agree to hand over E300 billion to the feckless South.
3) The problem is now too acute to go away just because the politicians wish it were not so.
Yet to get anything like enough money to solve the problem, many of the Southern states need larg cash infusions or a blanket guarantee. Either will require constitutional level treaty amendments. I can’t see the Northern taxpayers agreeing to pay or the South agreeing to German oversight.
There is one way this may be achieved – if the ECB agrees to blanket buy stuff and is willing to risk insolvency. Then they can make the cost of collapse even higher and perhaps scare northern taxpayers into agreeing.
I’m not surprised Osborne is cheerleading the fiscal union. It will limit immediate downside, and internalise the costs to the Euro, whereas bank bailouts due to PIIGS would hit the UK as well.
When teh Euroliars come and ask for their treaty negotiation, the UK should demand a dismantling of the social chapter, the abolition of the foreign stuff and control over fisheries. They’ll be in a such a rush as they barter with the North and South that disembowelling the worst idiocies should be possible.
BTW Continuing the Euro disaster will be very bad for the periphery if they agree to German oversight – think Alabama. If they don’t get German oversight expect another crisis a few years later.
Reply: The results of a break up may not be total loss as you imply – there could be devaluation and haircut on some loans, but unlikely to be total write off. The issue for us is to persuade the UK government to demand enough when they ask our agreement to the next stage of fiscal union.