Mr Draghi tries to reassure Germans – and the Spaniards


               Mr Draghi has recently tried to find a third way. He thinks making Euro member states choose between belonging to a country called Euroland or leaving the currency altogether is too stark a choice. He thinks there is a middle ground where they can have a single currency without a  single government and single budget.

             So how does he think this can be brought about? He is realistic enough to say the present framework ” left the Euro area insufficiently equipped to ensure sound economic policies and effectively manage crises”. He says there does need to be more common government, but it can fall short of a proper unified state with major transfers of cash from rich to poor.

              He seeks, when speaking to the Germans ” true oversight over national budgets. The consequences of misguided fiscal policies in a monetary union are too severe to remain self policed. …we need guarantees of competitiveness… The euro area is not a nation state where persistent cross regional subsidies have sufficient popular support…there need to be powers at the centre to limit excessive risk taking by banks…. there also needs to be a framework for bank resolution…”

            When speaking in Spain this becomes creating four building blocks for  a “Genuine Economic and Monetary Union”. ” 1) An integrated financial framework, a so called banking union   2) a form of fiscal union that recognises our deep economic interdependence  and the need for collective action 3) an economic union that supports the competitiveness of the Euro area as a whole….4) a political union

               He is describing the same agenda in different terms to audiences who want very different things. There is, however, at the heart of Mr Draghi’s two versions an inherent contradiciton on the issue of subsidies and transfer payemtns around the union. The language in Spain implies they are on the agenda, and the language in Germany says they are not.  “Economic interdependence  and the need for collective action implies solidarity payments from rich to poor”, when he is telling the German audience they will not have to make such payments. Which is it to be? The answer will then  tell us how tough the budget discipline on each member state has to be. There remains the small issue of how the EU manages to impose the discipline.

              The truth is there is no middle way. If the Euro is to work it will take substantial transfers from rich to poor, as well as a common fiscal and banking policy. That means a state called Euroland replaces the member states in very important areas of policy. It also means German surpluses have to be partly  taxed away for the benefit of the poorer areas, with the rest  transferred by the banking system to where they are needed.

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  1. Pete the Bike
    Posted August 30, 2012 at 7:38 am | Permalink

    You’re right Mr Redwood. There is no middle way. In or out. In a zero democracy super state ruled by bureaucrats and bankers or out. If we are out then we need leadership and courage which is sadly lacking.

    • sjb
      Posted August 31, 2012 at 5:00 pm | Permalink

      Surely – from a Eurosceptic point of view – the “leadership and courage” is needed more now to start the campaign to get the UK out of the EU.

      It seems most unlikely that the Conservative Party will ever promote leaving the EU. UKIP under Nigel Farage’s leadership has failed to garner sufficient support from the electorate and it is submitted will never do so.

      When Roy Jenkins and other former cabinet ministers could no longer support the Labour Party they were brave enough to set up a new political party (SDP), which arguably contributed to the Labour Party reversing its more radical policies.

  2. lifelogic
    Posted August 31, 2012 at 5:47 am | Permalink

    Indeed no middle way and no real democracy and the single country route is not likely to work for long without huge damage and protest.

    Good new on squatting laws, at long last, starting tomorrow. So Hips, M4 Bus Lane and no more squatting and absurd legal costs to evict hopefully.

    • Timaction
      Posted August 31, 2012 at 9:40 am | Permalink

      We just need to be out of the EU. Fullstop. Trade and friendship can be achieved outside not inside the undemocratic, costly, marxist dictatorship and home to failed politicians. There are no benefits at all from our membership and I invite any of our leading politicians to demonstrate otherwise. Every one of their points can be disproved. From immigration, to trade, to fishing, to agriculture, to our borders, to costs, to regulations, to jobs, to sovereignty, to justice etc

      No need to guess where Mr Clegg is heading in 2015 or sooner!!

      • uanime5
        Posted August 31, 2012 at 4:06 pm | Permalink

        One of the major benefits is the ability to trade with the EU without being subject to import taxes. This makes the UK valuable to US companies as these companies can gain access to the European markets without having to learn another language.

        • libertarian
          Posted August 31, 2012 at 5:47 pm | Permalink

          Which is why the majority of US companies opened their European Operations in Ireland and Switzerland !!! Jeez do you ever research anything?

          • uanime5
            Posted September 1, 2012 at 3:16 pm | Permalink

            What’s your source for this?

        • Timaction
          Posted August 31, 2012 at 6:05 pm | Permalink

          Are you aware that we have a trade deficit of over £50 billion with the EU (Last available figures 2010)? That we have a trade deficit with Germany alone of £20 billion. So just remind me who would loose out if they tried any import taxes?
          Our trade with the EU is distorted by onward transit via Rotterdam to the rest of the world and Northern Ireland as the Irish don’t have deep enough ports. Our trade is increasing and above that of the EU with the rest of the world. The EU is a dying undemocratic benemoth very unwelcome by most right minded people in the UK.

          • uanime5
            Posted September 1, 2012 at 3:23 pm | Permalink

            The UK has a trade deficit of £50 billion because we make very little and import everything else. As long as the pound is stronger than the euro this is unlikely to change.

            The UK would lose far more than any EU country if trade ceased because the UK will lose the buyer for 53% of its exports but the most any EU country will lose is 15% of theirs. Never forget that the loss of the UK market is shared among 25 other EU countries, while the UK bears the whole loss from the lack of the EU market.

            No matter how much the Europhobes hate the EU it will not disappear, not will it cease to be the largest market for the UK.

        • lifelogic
          Posted August 31, 2012 at 7:15 pm | Permalink

          Clearly we can have this without any membership as a Greater Switzerland/Norway perhaps.

        • Single Acts
          Posted August 31, 2012 at 7:53 pm | Permalink

          Aren’t import taxes the proviso of the WTO not the EU?

          • uanime5
            Posted September 1, 2012 at 3:27 pm | Permalink

            Try importing something from the US and find out. If it costs more than £15 you have to pay Import VAT and a handling fee.

      • Disaffected
        Posted August 31, 2012 at 4:26 pm | Permalink

        1. By leaving the EU we save over £50,000,000 a DAY plus £60 BILLION a year due to EU trade barriers, business regulation, waste, fraud, administration costs and the destruction of our fishing industry.

        2. According to Open Europe, EU business regulations cost over £20 billion a year.

        3. UK national debt will exceed £1.4 TRILLION at the end of this Parliament by which time Osborne’s cuts will not even EQUAL our EU contributions!

        4. EU renewable energy rules will DOUBLE electricity bills by 2020.

        5. The EU now controls Immigration, Business and Employment, Financial Services, Fishing, farming, Law and Order, Energy and Trade. It now seeks to control Foreign Affairs and Tax.

        6. Cameron thinks it is in our national interest not to leave the EU.

        • Timaction
          Posted August 31, 2012 at 6:11 pm | Permalink

          In November 2014 the UK will cease to be a democracy as the EU will gain qualified majority voting in a huge number of competencies (Lisbon Treaty signed in a back room by Gordon “I promise a referendum” Brown). We will only have 8% of the votes. How do you think our EU cousins will vote when they look greedily at our financial services and who should pay more than the £11 billion net? We have only ever had a positive contribution once in the lifetime of our membership. 1971, the year we joined. Wasting good money after bad ever since. Our politicos have lied to us ever since. Wake up England!

        • lifelogic
          Posted August 31, 2012 at 7:18 pm | Permalink

          “Cameron thinks it is in our national interest not to leave the EU.” Does he really think this? If so why does he not give his reasons for this odd position.

          Does he have any reason we never hear them why does he not want a greater Switzerland?

      • sjb
        Posted August 31, 2012 at 8:54 pm | Permalink

        Timaction wrote: There are no benefits at all from our membership and I invite any of our leading politicians to demonstrate otherwise.

        • lifelogic
          Posted September 1, 2012 at 12:24 pm | Permalink

          They never do beyond the lies of 50% of our trade and better to be in and have influence. No one put forwards any rational arguments in favour they just say they do not want to be a Greater Switzerland then give no reasons at all for this position.

    • Bazman
      Posted September 1, 2012 at 1:15 pm | Permalink

      Good news for squatters as they now get six months very expensive to the taxpayer, but free to themselves, accommodation at Her Majesty’s pleasure. Another silly subsidy to landlords and second home owners in another ill thought through and pointless law criminalising without think of the true cost by the government that will line the pockets of the absurdly expensive and complex legal system by millions over coming years. Legislation should be based on common sense and facts not by ‘feeling’ what is right in some foolish media type way by certain types bent on persecuting the population by bleeding the state and getting cheap votes helping a minority. Would you not agree lifelogic? Ehh? What? Sorry we didn’t get that.

      • lifelogic
        Posted September 2, 2012 at 8:02 am | Permalink

        Clearly squatters (or property thieves as they clearly are) will not go to jail very often, but just be moved on or better still they will just not break in the first place.

        • Bazman
          Posted September 3, 2012 at 6:32 am | Permalink

          Moved on to where and how will they stay out of jail? By the expensive legal system no doubt. Prevent squatting? Another fantasy.

  3. Adam5x5
    Posted August 31, 2012 at 6:14 am | Permalink

    This EU project can only work if there is a single fiscal policy. The countries can retain an element of government and taxation control – similar to the US.

    Any other method is doomed to failure.

    • lifelogic
      Posted August 31, 2012 at 7:43 pm | Permalink

      Indeed but this system is clearly an end to any real democracy that remains and likely to break up, anyway, for this reason sooner or later.

  4. The PrangWizard
    Posted August 31, 2012 at 6:21 am | Permalink

    The amount of intellectual effort being used in thinking about and discussing the Euro State et al. is depressing and frustrating, when, if England were out, we could be talking about building our nation again. We are in sore need of a National Champion. But we are where we are and I wish I were somewhere else. A start must be to give England its own parliament.

    • Single Acts
      Posted August 31, 2012 at 9:01 am | Permalink

      Yes, more politicians, that’ll fix things.

      • The PrangWizard
        Posted August 31, 2012 at 10:39 am | Permalink

        Think it through. An English parliament is more likely to vote ‘EU-out’ than the present British parliament, which would need to be dissolved. I take it from your irrational dislike of politicians that you do not approve the existence of the Scottish parliament and the Welsh and NI Assemblies, which are recent additions. But why should England not have a Parliament of its own to be on the same basis as the other nations?

        • Denis Cooper
          Posted August 31, 2012 at 5:00 pm | Permalink

          Not if like the British Parliament the English Parliament was still packed with the officially approved candidates of the pro-EU Conservative, Labour and Liberal Democrat parties; that problem would still have to be overcome.

        • Single Acts
          Posted August 31, 2012 at 7:54 pm | Permalink

          The English assembly/parliament is unlikely to have competence in such an area.

        • sjb
          Posted August 31, 2012 at 8:44 pm | Permalink

          ThePrangWizard wrote: An English parliament is more likely to vote ‘EU-out’ than the present British parliament […]


          • The PrangWizard
            Posted September 1, 2012 at 9:37 am | Permalink

            There would be many new faces, prospective members of an English parliament would have to appeal to a new consituency with new policies. Many existing British MPs would find it impossible to change coats and be believed. Present parties would have had to change stance too and they would lack credibilty in many areas, existing new ones which currently campaign for an English parliament and for an EU exit will grow and be allowed their voice. The English people would demand be properly consulted on issues on which they are currently denied a real choice.

          • sjb
            Posted September 1, 2012 at 5:00 pm | Permalink

            What major policies do you think the Con/Lab/Lib parties would change and/or introduce just because the proposed Parliament would now legislate for English matters only?

            Even if elections to the proposed English Parliament were under proportional representation – unlikely because that would need the support of one of the major parties, which would harm their chance of winning a majority of seats – do you really think UKIP + English Democrats + BNP combined would ever win a majority share of the English vote?

            The only two matters that stirred the English people to demonstrate en masse in recent times were foxhunting (four million) and the invasion of Iraq (two million). So if leaving the EU falls into your class of “issues on which [the English people] are currently denied a real choice” then their indifference to the matter as evinced by the lack of mass demos and the election results so far this century suggest there is no demand.

  5. Mike Stallard
    Posted August 31, 2012 at 6:33 am | Permalink

    At Cambridge (yes we were both there) Mr Joslin, my outstanding tutor, told me my history essay was complete rubbish.
    Gently, he explained with a donnish smile that economics and politics depend on the government knowing what needs to be done and that demands information. If that information, as in a democracy, comes from outside, that is fine.
    But, he said, in an absolute monarchy, the information comes from the King’s wife, from her hairdresser, from the monarch’s children, from his servants, and, very rarely from his closest friends.
    The result, he said, is a government which is blind. The action which it takes will, therefore, be wrong like a blind man stumbling around. It will end, he said, in disaster.

    Luckily that is in no case the way with the EU and with the noble and expertly led Mr Draghi.

    • oldtimer
      Posted August 31, 2012 at 8:37 am | Permalink

      Your tutor had a touching faith in the capacity of democracies to know what needs to be done and that they can be relied on to go about things in a rational way. I do agree that it is better than the alternatives because it provides the option to remove those that get things horribly wrong. Unfortunately, in the UK right now, all three political parties appear to be mired in the same group think.

    • lifelogic
      Posted August 31, 2012 at 8:43 am | Permalink

      The problem with a democracy is that politician and civil servants exploit the position to even enlarge, empower and enrich themselves and their friends. Utilising the politics and envy, unfairness, false promises and the rest at every turn as needed to retain the vote.

      A benevolent King, not making any large tax demands of his subjects has very many advantages but only until he ceases to be competent and benevolent alas.

      The Government alas also gets it information mainly from the state sector, the “experts”, civil servants, charities, pressure groups, the BBC, the envious public and other “BBC think” organisations. This to0 has huge dangers. The hair dresser might not be too bad.

      Look at the EURO, the ERM, the pointless counter productive, wars and the tax borrow and waste in every direction.

      • uanime5
        Posted August 31, 2012 at 4:10 pm | Permalink

        Your forgot companies and the wealthy which lobby the Government for tax exemptions, policies that benefit only them, and Government contracts. These groups are far more damaging to the UK than any of the groups you mentioned.

        • A different Simon
          Posted August 31, 2012 at 6:10 pm | Permalink

          The EU IS the political wing of big business .

          When you finally see this you will realise they are not on your side – but it will be too late by then .

        • lifelogic
          Posted August 31, 2012 at 7:49 pm | Permalink

          I did not forget – these come under lobby groups.

        • Single Acts
          Posted September 1, 2012 at 4:54 am | Permalink

          We don’t often agree, but lobbying like this is indeed destructive.

    • Disaffected
      Posted August 31, 2012 at 3:34 pm | Permalink

      Unfortunately your tutor missed out other points, we need an intelligent politician to see through the smog and have the courage based on sound ethics and values to act. We do not have either. On paper we have educated people who ought to be able to mix their intelligence with emotional intelligence to have sound judgement and decision making based on morals and values. These qualities will not be found in House of Corruption.

      Move along. The EU is a good earner for politicians, ask those politicians who were opposed to the EU but were found highly paid jobs with pensions that our EU contribution pays for and is unjustifiably increased each year- Cameron has not stopped the gravy train or increases to the gravy train. He seemed to think he was successful by the contribution increase!! £50 million a day and rising not including the red tape, regulation and welfare through lost jobs. Reports claim unemployment up to 18 million in the EU today. What does any EU fanatic, like Cameron or Clegg, think a disaster looks like?

  6. colliemum
    Posted August 31, 2012 at 6:39 am | Permalink

    Mr Draghi’s ‘differentiated’ words to Spaniards and Germans exemplify why more and more people, not just here in this country, are losing faith in both the probity of the EU (no audited budget for over a dozen years, don’ forget!), the ECB and the ‘politicians’ who run the whole show.

    One wonders if people like Mr Draghi have been living for too long in the rarefied upper levels of world finance, to grasp that people are far better informed than ever before.
    Why would Germans acquiesce into paying even more taxes to ‘help’ the ‘poor’countries like Spain, when they see that the Spanish (and Greek, btw) wealthy are buying up the top properties in Germany?
    Why would all of us acquiesce in the power grab of the EU, through the ESM?
    I urge people to look up how this entity is supposed to work, and don’t think that this will only affect those within the €-zone.

    I can’t help but suspect that Mr Draghi was trying to soothe the Germans, prior to the decision of the Supreme Court on the ESM, expected to be announced on Sept. 12th.

  7. Faustiesblog
    Posted August 31, 2012 at 6:41 am | Permalink

    “Which is it to be?”

    I think you know the answer to that one: the Germans pay and the UK pays – indirectly, surreptitiously.

    Draghi’s ‘reassurance’ is merely a reworking of the existing smoke and mirrors propaganda – not the reworking of the actual agenda which, as we all know, is “ever closer union”.

    I would suggest that we don’t play their games but instead, call out their propaganda for what it is and let everyone see, once again, that the emperor has no clothes.

    Allowing them to get away with re-hypothecated propaganda is simply prolonging the economic agony for us all.

    • alan jutson
      Posted August 31, 2012 at 7:42 am | Permalink


      Exactly, they are trying to convince themselves that the present situation is workable.

      Its been unworkable for years, but certainly ever since the euro was introduced, it was a disaster just waiting to happen.

      If you have a common currency then you simply have to have common laws, common taxes, common regulations, common budgets, common retirement programmes, common welfare systems, common employment laws.
      In other words you will have to lose complete independence of your own government and simply become a region of Europe.

      The sooner we are honest with them, tell them its all pie in the sky, that we want no part of it, and get out the better.

    • sjb
      Posted August 31, 2012 at 4:18 pm | Permalink

      Faustiesblog wrote: I would suggest that we don’t play their games but instead, call out their propaganda for what it is and let everyone see, once again, that the emperor has no clothes.

      Eurosceptic cyber warriors have been doing this for years, yet come election time the people return a pro-EU parliament. Have you ever wondered why?

  8. Alan
    Posted August 31, 2012 at 6:48 am | Permalink

    I am confused at the assertion made by many that a complete fiscal union is necessary in order for a common currency to ‘work’, and I am coming to suspect that the difference lies in interpretation of the word ‘work’.

    I would have thought it quite possible for countries to use the same currency without any political or fiscal union, but clearly at least some of these countries would have little control over the creation (printing) of the currency and the base interest rate paid by the central bank, and may have no access to the central bank in its lender of last resort role. In short they have to use the currency almost as countries had to use the gold standard.

    But that doesn’t mean that it won’t ‘work’, it means that the currency cannot be used to manipulate the economy in the ways to which we have become accustomed. I am not sure that is a disadvantage. It means countries have to be careful how they run their economies. They must be careful not to overspend, since they cannot print the currency, and they must carefully limit private lending if it starts to distort the whole economy, for example by putting too much investment into houses. This makes the job of government (already a difficult one) a bit more difficult, but I am not sure it makes it impossible. It means growth will be less than it could be, but boom and bust should be less common if the governments are successful.

    If the governments are unsuccessful, or deceitful, there will eventually be a collapse in the economy, one that cannot be hidden from the citizens by devaluation. The market will deal harshly with those who have over-borrowed and their lenders will suffer bankruptcy. In the longer term people will learn to fear these consequences and cause their governments to act responsibly.

    One interpretation of the current euro crisis is that we are seeing the consequences of irresponsible economic policies. It wasn’t that these economies were being well run before, it was that the fact they were badly run was concealed by allowing the currencies to change in value. The euro has made that concealment impossible. I worry that here in the UK the poor state of our economy is being concealed from us not, I hasten to add, by any deliberate deceit by the government, but by the way our currency loses value over time, lowering the value of our salaries and savings. I worry that if we don’t learn to run a balanced budget but continue to rely on deficits, borrowing, and devaluation to pay for public services we will eventually run into a catastrophic failure of our currency if trust in it is finally lost.

    Does that mean the euro is not ‘working’, or that it is ‘working’ and in doing so has revealed the true state of affairs? Is sterling ‘working’?

    • Denis Cooper
      Posted August 31, 2012 at 9:13 am | Permalink

      That might be correct in theory, if the euro was very strictly just a mutually beneficial economic arrangement between the participating countries.

      But it isn’t, the EU single currency has always been a central element of a primarily political, in fact geopolitical, project to create a pan-European federation by stealth.

      Therefore political considerations will always come a long way before economic considerations, and inevitably the rules underpinning the arrangement will be broken.

    • GJ Wyatt
      Posted August 31, 2012 at 9:57 am | Permalink

      Quite. A common currency requires fiscal coordination between participant countries, but this was simply not recognized in the disparate treasuries of the Eurozone, nor in Brussels which should have had a firmer grip. So the apparent absence of constraints allowed fiscal anarchy – autonomy(!) – but reality has now impinged on the fools’ paradise.
      For the dreamers “not working” means interrupting their dream. But the creators of the single currency saw it as a vehicle for an “ever closer union”. For them fiscal integration is a goal, and preservation of the Euro is the means to achieve it, so for them it is working.
      I’m not normally a conspiracy theorist, but on this I do wonder.

  9. zorro
    Posted August 31, 2012 at 6:50 am | Permalink

    Ever more desperate clutching at straws in an increasingly and economically illiterate way to avoid the reality of the gravy train being derailed…..They will have to mega QE….they are just worried about what the Germans will do as a result….


  10. Peter van Leeuwen
    Posted August 31, 2012 at 7:15 am | Permalink

    Some transfer from rich to poor is in principle not unacceptable in the EU, see the cohesion funds. A better functioning Spanish or Italian economy is not just interesting for China or Britain, but even more for exporting eurozone countries like Germany or the Netherlands. It is good that Mr. Draghi, in his English language article on the ECB website, steers towards the minimum requirements for stable euro, rather than rushing ahead towards a Unites states of Europe, because at least 17 EU members (25 would be better) must find a common course.

    • Denis Cooper
      Posted August 31, 2012 at 8:46 am | Permalink

      What makes you think that the cohesion funds are “acceptable”?

      In any case what has been done has gone miles beyond anything envisaged when it was agreed that there should be limited EU – EU, not eurozone – cohesion funds and on any plain reading of the EU treaties is totally illegal under those treaties.

      As Lagarde openly sdmitted in her WSJ interview on December 17th 2010:

      “We violated all the rules because we wanted to close ranks and really rescue the euro zone.”

      “The Greek and Irish rescues – €110 billion and €67.5 billion, respectively – and the creation of the bailout fund were, Ms. Lagarde said, “major transgressions” of the Lisbon Treaty that is the European Union’s governing document. “The Treaty of Lisbon,” she says, “was very straightforward. No bailing out.””

      That was always the stated intention of putting the “no bailout” provisions into the Maastricht Treaty, and they are still in the present treaties, and they have been broken; and by breaking the treaties the EU governments also broke the national law of each of their countries, unless the national parliament legislated to allow the government to break the treaties it had previously approved.

      That includes the UK government, which became a party to an illegal agreement when Darling connived at the first Greek bailout in May 2010.

      • Peter van Leeuwen
        Posted August 31, 2012 at 10:37 am | Permalink

        Re: What makes you think that the cohesion funds are “acceptable”?

        Denis, how about it that the democratic mother of all parliaments approved this principle when it ratified the Maastricht Treaty, after its equally democratic (Tory) government signed that treaty, I believe in 1992. One man’s opinion doesn’t carry the same weight as that of a full-fledged powerful democracy. The discussion about bail-outs and Mrs Lagarde we’ve had before. It may be more interesting to look into the legality of what Mr. Draghi writes as “exceptional measures” which still fall within the ECB’s mandate. I recommend his article.

        • Denis Cooper
          Posted August 31, 2012 at 4:23 pm | Permalink

          We’re not talking about whether the cohesion funds are “legal” – clearly they are legal under British law, as the British Parliament approved the treaty – but whether they are “acceptable” – and just as clearly they are not “acceptable” to the great majority of the British people, who’re fed up with their taxes being siphoned off into the EU budget to be wasted/stolen whether through cohesion funds or any other route.

          On the other hand the eurozone bailouts are clearly illegal, and Lagarde was not the first to say that in one way or another.

          Her colleague Pierre Lellouche, the French Europe minister, said it very soon after the Greek bailout:

          ” “It is an enormous change,” Mr Lellouche said. “It explains some of the reticence. It is expressly forbidden in the treaties by the famous no bail-out clause. De facto, we have changed the treaty,” he added.” ”

          But of course the problem here is that EU national political leaders had no lawful authority to make any such changes to the treaties as approved by the national parliaments.

          And nor was Lellouche the first: he followed a long line of other EU luminaries who’d said beforehand that a bailout would be illegal under the treaties, including Merkel.

          • Peter van Leeuwen
            Posted August 31, 2012 at 9:55 pm | Permalink

            You’re represented by your parliament and government, period. In the eurozone, these also approve the tranches of the various exceptional rescue measures. That you hold a personal opinion about the legality and imagine this confirmed in media reports is hardly relevant.

  11. Brian Tomkinson
    Posted August 31, 2012 at 7:31 am | Permalink

    Reading this, one would imagine that Mr Draghi is a politician rather than head of the European Central Bank. No real surprise as those directly associated with the anti-democratic EU are determined to reach their goal of a country called Europe. Duplicity and mendacity are requisite qualifications for members of the club. However, the politicisation of the ECB is causing concern in Germany. Let us hope that at last the Germans are beginning to take the blinkers from their eyes.

  12. oldtimer
    Posted August 31, 2012 at 8:32 am | Permalink

    Yet more smoke and mirrors – the staple political ingredient down the ages. I agree with others that it is surprising that this comes from Mr Draghi, as head of the ECB. Much will depend on the battle now being waged in Germany – my guess is that it might finish up there with a decision being put to a referendum of the German electorate – and the growing opposition to more bail outs from countries like Holland and Finland.

  13. Vanessa
    Posted August 31, 2012 at 9:05 am | Permalink

    If you read you will know that this crisis is not financial but political. They will tinker around the edges buying a few hours or weeks but ultimately, as Richard North says, they want a new Treaty to “ever closer bind”. Cameron will bleat a bit about renegotiating the odd “power” back to Britain and then hold a referendum crowing about how successful he has been with taking back powers. He is so transparent in his stupidity and childishness. The ignorant in our society will vote “Yes” thinking he has been embraced into the european fold. God help this country.

  14. Denis Cooper
    Posted August 31, 2012 at 9:39 am | Permalink

    The UK government should be thinking about what is in our long term national interests, and that cannot include helping the present eurozone to survive intact so that it will later expand and eventually, inevitably, engulf us as well.

    As a well-known eurofederalist wrote in a letter printed in the Telegraph in July 2011:

    “By 2020, there will be fewer currencies in Europe than now, because more countries will sign up to the euro. It is unlikely that the pound will disappear soon, but it may do eventually, when the pound and the euro remain the only currencies within the EU.”

    Because out of the present 27 EU member states there are now 17 countries in the eurozone, while 8 other countries are under a legal obligation to join the euro at the earliest opportunity, and that legal obligaton is imposed on every new EU member state under its terms of accession to the EU – in December Cameron agreed to that requirement being imposed on Croatia – and apart from the UK only Denmark is free from that legal obligation through a treaty “opt-out”, and as the treaties stand a country can never leave the eurozone once it has joined.

    On Monday MPs will be asked to give a second reading to this Bill to approve a radical EU treaty change agreed by EU leaders on March 25th 2011:

    The immediate and ostensible purpose is to grant the eurozone states the legal right to set up the ESM, but potentially it could allow them do much more besides as the scope is their new licence is explored and interpreted.

    No MP who has our long term national interests at heart should vote for that Bill.

    Reply: I will not be voting for it.

    • Denis Cooper
      Posted August 31, 2012 at 5:14 pm | Permalink

      Thanks for confirming that, JR, and I hope that more MPs will resist on this Bill than the few including yourself who voted against the motion to pre-authorise Cameron to agree to the Decision.

      That was in the deferred division on March 23rd 2011, which was Budget Day, at Column 1063 here:

      “That this House takes note of draft European Council decision EUCO 33/10 (to amend Article 136 of the Treaty on the Functioning of the European Union with regard to a stability mechanism for Member States whose currency is the euro) and, in accordance with section 6 of the European Union (Amendment) Act 2008, approves Her Majesty’s Government’s intention to support the adoption of draft European Council decision EUCO 33/10.”

      “The House divided: Ayes 310, Noes 29.”

      My comment at the time was:

      “Whether or not they understand this, in effect almost all of the Tory MPs have just voted in favour of the UK being forced to join the euro – not immediately, but eventually.”

      I still believe that to be case, and I still see no reason whatsoever why we should oblige Angela Merkel on this matter without getting any other EU treaty changes which would be in our long term national interests.

    • Denis Cooper
      Posted August 31, 2012 at 5:51 pm | Permalink

      For those who are interested the House of Commons Library has produced a briefing paper on that Bill and the background, which should be accessible through this link:

      Alternatively it will come up if “Research Paper 12/47” is put into google.

      It says:

      “This Bill enables the UK to ratify an amendment to Article 136 of the Treaty on the Functioning of the European Union. The amendment will give legal basis to the creation of a permanent European Stability Mechanism (ESM).”

      Because there is no legal basis at all for the present bailout fund, the EFSF, and moreover it has been structured in a way which is blatantly illegal under the the EU treaties.

  15. waramess
    Posted August 31, 2012 at 9:59 am | Permalink

    I can’t see why, in order to work, there has to be a transfer of wealth from one country to another nor do I see why countries need to print their own currency.

    The Euro can be treated in the same way as gold with each country setting its own interest rate and allowing the markets to do the rest.

    There will be rich countries and poor countries but that is the way of the world however, there is no reason why it could not work successfully, and more successfully than a domestic currrency that is constantly subjected to its government constantly expanding the supply, or a transfer of wealth that would distort and supress the activity of each economic zone.

  16. Acorn
    Posted August 31, 2012 at 10:13 am | Permalink

    BTW. A conversation yesterday with some of our young and bright future taxpayers, put me onto this site. It is basically MMT but makes a good job of explaining it, even if some are dismissive of it as over simplified. If you know some KS5 kids doing economics; might be useful for a class argument. .

  17. Atlas
    Posted August 31, 2012 at 10:13 am | Permalink

    Like many an EU type Mr. Draghi wants to have his cake, eat it, yet still have his cake.

  18. Neil Craig
    Posted August 31, 2012 at 10:44 am | Permalink

    In the 19thC a number of US states defaulted on their international debts (mailnly to British financiers). This did not entail them having to give up morer powers (the Federal government already had a monopoly on printing money) though it did mean they had to pay higher interest rates to attract lending for rest of the century.

    Permanent wealth transfers from tich to poor states are only required where government costs (civil servants, regulation & welfare etc) are substantial roughly the same per capita in poor as in rich countries. In effect the poor EU countries are still required to pay for all the bureaucracy. No wonder they are in trouble.

  19. Gary
    Posted August 31, 2012 at 11:35 am | Permalink

    You don’t need fiscal and govt unity when you have a common currency. That is a myth used as a stick by both the pro and anti euro camps. Bretton Woods was a currency union based on the single currency called gold. Nations had no ability to rig their own exxchange rates, but they still retained their fiscal(and in every other way) sovereignty

  20. Glenn Vaughan
    Posted August 31, 2012 at 11:43 am | Permalink


    Who and where is the equivalent of Paul Ryan in the current Conservative party? Such an individual is needed to lead this country out of our economic mess and out of our EU membership.

    • alan jutson
      Posted August 31, 2012 at 4:32 pm | Permalink


      I think your probably looking at our host.

      Never know Mr Ryan may have read some of JR’s Books.

      Certainly very interesting listening to some of the Republican Convention speaches yesterday, I came across them by accident when TV channel searching.
      Both Ryan and Chris Christie not afraid to talk about levels of debt, the State of the economy, and Welfare lifers, also interesting that a couple of speakers who are also Governors of States, have turned around State financial deficits to a surplus, without raising Taxes.
      All were on the attack about the cost of government, all of them had, had business experience before getting involved with Politics.

      Perhaps they learned a very good lesson from the Conservative Party here, who at the last election failed to get a mandate by going soft on the real facts about the economy, and the truth about what you need to do about it.

      Quite refreshing viewing and listening.

      • oldtimer
        Posted August 31, 2012 at 5:49 pm | Permalink

        Clint Eastwood`s speech to the Convention is worth watching too.

  21. forthurst
    Posted August 31, 2012 at 11:44 am | Permalink

    There is a story in the FT today under the title, “Brussels pushes for wide ECB powers” in which a massive Brussels power grab over banking is being reported. Under this plan, the ECB would grab authority over independent national banking supervision whilst a new ‘supervisory board’ consisting of twenty-three national member representatives and six ‘independent’ members would grab authority over the ECB including its governing council. So, when it comes to ‘democracy’ in Europe the ‘old’ nation states, including the prodigal and puny, are to be deployed to create a supplicant block capable of outvoting the powerhouse and its satellites.

    • forthurst
      Posted August 31, 2012 at 1:22 pm | Permalink

      Slightly wrong: only Euro member countries to be represented on the proposed supervisory board with 23 members in toto.

  22. David Langley
    Posted August 31, 2012 at 12:09 pm | Permalink

    Would a simple fix be an issue of a Greek Euro vastly different in colour and style but a Euro pegged at the value it obtains against the German Euro. All countries could have their Euros based on the same idea. Currencies can be bought and sold as they used to be. Speculators can have their usual fun and games which you might like John as there will be money to be made.
    Naturally the Greek Euro will be only worth a fraction of the German Euro, but as eventually they might pull themselves out of the mess it could be worth more, like the bad old days of the drachma.
    The Euro is an idea not a sound currency as we all know but the fig leaf of keeping within the Euro group could then be maintained.
    The Germans would be proud of the fact that one of their Euros is worth a hundred of Greek ones. I know its a daft idea but I like it.

    • uanime5
      Posted August 31, 2012 at 4:20 pm | Permalink

      Given that what you’re proposing is the same as having several different currencies in the EU, rather than one currency don’t expect the eurozone to support it.

    • Denis Cooper
      Posted August 31, 2012 at 5:18 pm | Permalink

      To avoid confusion, why not call the Greek Euro the (New) Drachma?

  23. MajorFrustration
    Posted August 31, 2012 at 12:28 pm | Permalink

    All very interesting but why on earth waste time moving the deck chairs in Euroland. I would sooner hear from MPs as to how they are dealing with the problems in the UK.
    Could it be that Euroland is a soft target? Cut it loose and use the time to deal with real issues that effect the people of this country,

    Reply: We need to understand the crisis in Euroland, as the UK will have to avoid being dragged into the costs and problems.

  24. Lindsay McDougall
    Posted August 31, 2012 at 12:31 pm | Permalink

    Everyone is entitled to their opinion. However, if I were a German I wouldn’t want to pay taxes to support Club Med, nor would I want to belong to a weak currency. More to the point, the German electorate and the Bundesbank don’t want to, and I don’t see Angela Merkel daring to disappoint them, unless she can bring off political union.

    Which means that the PIIGS can accept political union and join a German Empire, or leave the Euro zone.

  25. English Pensioner
    Posted August 31, 2012 at 4:21 pm | Permalink

    Why do things always seem possible to politicians which seem totally impossible to ordinary people with a modicum of education?
    Common sense says that countries can’t have a common currency without a common financial policy. This has been shown in the past by various currencies which had links with the major currencies, but where they have eventually collapsed because the government was not prepared to accept the necessary constraints. or the markets were not prepared to trade at that rate.
    How long do you think that the UK would hold together if, say the Scots parliament and the Welsh assembly refused to pay their share of money to the central funds, indeed failed to collect any taxation as in Greece? The English may be reasonably placid and accept all kinds of insults, but I don’t think even they would tolerate such a situation. The German public are beginning to appreciate the situation and I believe they will force a change in the not too distant future.
    My view is that the best solution for the Euro would be for Germany, not Greece, to withdraw, perhaps with a few northern European countries, thus leaving the rest to manage the Euro based on a low tax high spend economy. In a few years there would be 10 Euros to the pound, then a thousand and possibly even a million as with the Turkish Lire. Just like the good old days with the French Franc and Italian lire!

  26. uanime5
    Posted August 31, 2012 at 4:24 pm | Permalink

    Perhaps the third way is that EU countries that aren’t failing have to bail out EU countries that are but the more successful countries get to write the terms of these bailouts. This is what’s happening at the moment.

    In other news £2.3 million has been wasted on free schools:

    Also Universal Credit will leave those who work for low income worse off than at present, so expect unemployment to increase as even more people can no longer afford to work in low paid jobs:

    • Denis Cooper
      Posted August 31, 2012 at 5:25 pm | Permalink

      At the time of the Maastricht Treaty all the countries then in the EC/EU wrote the terms of the bailouts, which were that there would be no bailouts.

      That is still what the present treaties say, and that clear and absolute prohibition has just been brushed aside; so what faith should we have in any new terms which may be solemnly agreed and duly approved by national parliaments?

    • Bazman
      Posted August 31, 2012 at 6:48 pm | Permalink

      This is the end of a very big wedge called ‘workfare’ Under the new Coalition plan, announced while Parliament is in recess, all adults between 18 and 23 will be forced into unpaid work if they cannot find a job. If they don’t, they can go hungry. Or homeless. Or both. The system will be trailed in London and they can get away with it for adults up to the age of 23, you can bet they will gradually extend it to al those on job seeker’s allowance, to massage the unemployment figures. In addition to eight million people on part-time, agency and casual work, there’ll be an army of work conscripts, directed into shops, offices and other businessesAnd what ­incentive is there for employers to take on young adults if the Government is sending them compulsory free labour?

      • uanime5
        Posted September 1, 2012 at 3:43 pm | Permalink

        I know I posted an article about it on this blog a few days ago. Expect all minimum wage jobs to be replaced with forced labour by next year.

        • Nash Point
          Posted September 1, 2012 at 8:03 pm | Permalink

          Don’t take the derogatory comments about workfare too seriously from the resident house trolls Bazman and uanime5.
          This is more balanced view of it:

          Maybe, the aim is genuinly to get people into a work environment, to get them used to the routine of work. It won’t be a complete success, but it may help avoid welfare dependency in some cases.
          Forced labour? Ram it!

          • Bazman
            Posted September 2, 2012 at 2:53 pm | Permalink

            Trolling? This piece in the Telegraph. Balanced view in the telegraph? Shows how you think. Points out that many of the jobs are being taken by EU nationals, but does not say why and if it did would blow the case wide open. Why do you think East Europeans do these jobs Nash? Their work ethic? Do get back to us. When it dawns on you. I have pointed out why many times. If there is work to do then the employee needs to be paid as being paid is part of the work experience. Internships in the City and the BBC are worlds away from working in some local shop for free. Interestingly how do you propose to make them work and not just turn up and cause trouble? Another can of worms for you and your Telegraph fantasy.
            Laughably the job centre said that I could trail for local employers by working in my trade for a period of time for free. Simple Simon economics. Ram it.

  27. Jon
    Posted August 31, 2012 at 6:35 pm | Permalink

    Its an old tactic of the EU come Eurozone, hide the truth to get bit by bit through. Nation creep.

    As long as we are kept out of it then let them do it. Italy will turn to making Trabants and Tada’s, France will have bread queues and we will have boom selling nice quality products to the rest of the booming world that takes their economic place.

    • Bazman
      Posted September 1, 2012 at 2:21 pm | Permalink

      Like India and China?

  28. Electro-Kevin
    Posted August 31, 2012 at 10:30 pm | Permalink

    Andrew Strauss.

    His record of man management, media management and his degree in economics…

    Worth a mention, Mr Redwood ?

  29. Derek Emery
    Posted September 2, 2012 at 1:42 pm | Permalink

    It’s hard to see how a political union can work when voters in the countries with money (Holland and Germany) are dead against the essential part of any full – transferring money in perpetuity to the poor regions. In Holland the socialists who could win the September election are Eurosceptic and want to be independent not a slave of Brussels. That can’t help the survival of the euro.

    Let’s assume full EU union is obtained regardless of the democratic deficit this requires. The extra efficiencies from this are 1-2% or so. Today the world has a global economy where it has never been easier to move money and jobs around the globe. The extra EU efficiencies will make little of no difference. Wages in the rest of the world are way less than half those in the EU for exactly the same skill levels and many have a strong work ethic. Even including transport costs EU costs are still far too high.

    The reality is that more jobs will leave the EU to help the company bottom line and be sited where all the future market growth will be. The EU has aging demographics which will make it increasingly more difficult to find skilled staff. Companies will move for this reason as well. In China there are millions of new graduates now being produced each year.

    You are left with the impression that there is nobody at the top in the EU who understands market forces or cares about the EU private sector and the jobs dependent on it.

  • 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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