“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.