Mr Redwood’s contribution to Foreign & Commonwealth Office Questions, 17 Jan

Mr John Redwood (Wokingham) (Con): Does the Minister agree that the gloom about the consequences of an early break-up of the euro has been greatly exaggerated, bearing in mind the very positive economic experience for eastern European countries from the break-up of the rouble zone—very similar to the euro—in the early 1990s?

The Minister for Europe (Mr David Lidington): I have to say that it is unusual to find my right hon. Friend looking to the example of the former Soviet Union for inspiration. We have looked across Government very carefully at what the consequences of a eurozone break-up might be, and one of the key differences between now and 20 years ago is that the economies and the financial systems of Europe are much more closely interlinked now than they were then. It is certainly our judgment that it would be damaging to the British national interest were a collapse of the eurozone or a prolonged recession in the eurozone to take place.

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  1. James Sutherland
    Posted January 19, 2012 at 2:53 pm | Permalink

    I think the key question is whether we see a ‘breakup’ or a ‘collapse’. Supposing Germany and the Netherlands chose to exit the Eurozone and revert to their own currencies? Of course there would be transitional costs – just as there were when they moved in the opposite direction – but no catastrophe. The Euro would drop in value, of course, but it’s been doing that anyway: nothing unprecedented there either.

    That done, the stable but less robust countries could follow their example. At each step, the weakest countries find the root problem, the steep differential between their own economies and the centre of gravity of the currency they are using, eroded a bit more.

    Rather like a long canoe or punt, one end forced high in the air by mismatched passenger weight until it starts shipping water. Forcing the heaviest guy out is likely to mean a fight, bloodshed and pain all round, risking capsizing the whole vessel. Having the fittest guy jump out and swim for it, though, is much less traumatic for everyone involved.

  2. Tom William
    Posted January 19, 2012 at 4:52 pm | Permalink

    As one might expect, given his portfolio, he can hardly agree and is only able to state the obvious, while appearing not to understand the analogy.

  3. Barbara Stevens
    Posted January 19, 2012 at 6:02 pm | Permalink

    The trouble is Mr Redwood many in this country think the EU and the troubled eurozone alikened to the old Soviet Union. They see the same level of political interpherence and the same level of laws thrown at them. They are, as most see, the same thing. As for the eurozone collapsing, when, or if will it happen. It appears they intend propping it up intil they cannot anymore, and it looks like we are helping via the IMF. Where is the money coming from? Are we borrowing to furnish out committments? If we are that’s very foolish indeed. Is it not time we called, time, on this silly agreement, made by the former Labour government. We should not keep supporting the eurozone nations like this, would they support us, I doubt it, it would have far to many strings attached.
    Therefore if this question arises for the house to debate and vote on this extra money for the IMF, I hope the so called rebels think of the UK for a change instead of those over the Channel. We have already committed far to much. Its time to veto and say NO enough is enough. Are we filling the gap Germany is failing to fill? If this be the case then our answer should be a firm NO. Why should we pay or support their failed systems?

  • 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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