Snooty Europhiles should eat dirt

The Bank of England
The continent is a collection of different languages and labour-market traditions and individual approaches to deficits and inflation. ... Angela Merkel is plainly facing significant unrest from a growing constituency who see no reason to pay ever more in their taxes to finance ... the periphery of Europe.

I think we deserve an apology.  By “we” I mean all the Euro-sceptics, Euro-pragmatists, Euro-realists and Euro-hysterics who were alarmed by some of the optimism that surrounded the birth of the single currency.  Do you remember the disdain with which we were treated?  We were told that we were boss-eyed Little Englanders.  They used to say we were a bunch of xenophobic, garlic-hating defenders of the pint and the yard and the good old bread-filled British banger.

Whenever we protested about any detail of the plan for monetary union, we were told that we were in danger of stopping the great European train, boat, bus, bicycle or whatever it was.  We were a blimpish embarrassment to our country, a bunch of idiot children who had to be shooshed while the grown-ups got on with their magnificent plans.

So it gives me a tingling pleasure to report that everywhere you look on the map of Europe we have been proved resoundingly and crushingly right.

In the late Eighties and early Nineties, I was writing for this paper from Brussels, and the big topic of the day was what was then known as the Delors Plan for Economic and Monetary Union.  I had one major reservation about the proposals.  The problem wasn’t so much that EMU involved scrapping time-hallowed currencies such as the Franc, the Deutschmark and the Lira.  As far as I was concerned, we could all use the Rice Krispie, provided Europe could be turned into an optimal single-currency zone.

But Europe was nowhere near ready for the Euro, the Rice Krispie or anything else.  The continent was — and still is – a collection of different languages, diverging labour-market traditions and individual approaches to deficits and inflation.  It was very risky, we warned, to try to impose a one-size-fits-all monetary policy over the whole lot.  What was right for Germany might turn out to be wrong for, say, Italy or Ireland.

Countries might exploit the low interest rate to spend more than they should, in the knowledge that they could still keep inflation low and avoid any penalty from the markets.  Their relative profligacy would be masked;  they could trade on German thrift, and free-ride like egrets perched on the shoulder of a hippopotamus, until disaster struck; and that is exactly what happened.

There was a boom, and during the boom years the governments of the PIGS (Portugal, Ireland, Greece and Spain), and to some extent Italy, went on a spending spree.  Public sector wages soared.  Low interest rates simultaneously helped to inflate the speculative bubble, especially in property.  When the Irish bubble burst, the government was obliged to step in to rescue the banks that had lent to the speculators — and then found itself in a dreadful position.  Irish government debt is now more than 100 per cent of GDP, and the difference between this debt crisis and previous crises is stark.

The Irish are locked in to the Euro, and cannot devalue, and so their government and people are facing a protracted humiliation at the hands of Brussels and, at one remove, at the hands of the German government.  They have been forced to cut wages and benefits and to lay off public sector workers, so provoking serious social unrest — and still they may not have done enough.  Their credit rating has just been downgraded by Fitch to BBB plus — the same as Libya.  They simply may not be able to find enough takers on the bond markets to finance their debts.  What then?  Who will bail them out? 

Back in the early Nineties we warned that a single currency zone must mean large fiscal transfers between the poor and the rich areas, between the productive and the less productive regions.  That involves what we then called a sense of “political union”, a feeling of shared purpose and common destiny between the peoples of Europe.  That feeling, we suggested, does not exist — and certainly not in the way that it exists in a long-standing unitary state like Britain.

London contributes massively in net tax revenues to the rest of the UK;  by and large Londoners accept that this is part of belonging to a single political entity.  But Germany, which already contributes significantly to EU budgets, shows no sign of wanting endlessly to bail out the poorer and more fiscally reckless parts of the currency zone.  The Germans have already stumped up for rescue packages for Greece and Ireland, and Angela Merkel is plainly facing significant unrest from a growing constituency who see no reason why they should pay ever more in their taxes to finance a load of bludgers on the periphery of Europe.

punt-coinSo what next?  All the options now look bad.  If the Irish do the unthinkable, ditch the Euro and reclaim the Punt, they will certainly achieve a competitive advantage currently denied them.  Since this would logically involve a default, there would be huge collateral damage to banks in the UK and Germany that are exposed to Irish debt, and the Irish would find it hard to raise money on the markets for a long time to come.

Any break-up of the Euro would also be viewed as a tragedy for the European “project”, and though that assumption bears closer examination, it is a fair bet that the EU’s political classes will stop at virtually nothing to keep the single currency alive and intact.  Most sensible people seem to think that they will succeed, and that the contagion will not overwhelm Spain as well — but then huge numbers of apparently sensible people managed to shut their eyes to the glaring flaws in the Euro.

Politics made the Euro, and politics can destroy it, especially if electorates start to feel it is a machine for German domination and the destruction of benefits and wages; or if the German electorate feels that it is a machine for fleecing Germany.

In the meantime, all those snooty Europhile politicians and journalists who sneered at us for our doubts should be forced to crawl in penitence to Dublin Castle, scourging themselves with copies of the Maastricht Treaty.  We have been vindicated;  the least they can do is admit it.  They know who they are.

~ · ~

Boris writes for The Daily Telegraph on Mondays.

8 thoughts on “Snooty Europhiles should eat dirt”

  1. Mmm…this we know. We said the same thing about the Lisbon treaty, too. If I recall, the leader of the Conservative Party promised a referendum on Lisbon.
    Is David Cameron a cast-iron Eurocrat, already?

  2. “If I recall, the leader of the Conservative Party promised a referendum on Lisbon.”

    He did. And then Labour passed it before he could do anything about it.

  3. I recall the words of a great lady, “you can’t buck the market”.

    It will be the market which decides whether the Euro survives, not politicians, because the market has much more money than the politicians.

  4. London Statto: I thought that if one govenment passed something, another one could un-pass it. Otherwise we’d
    still have the closed shop legislation that caused so much grief in the seventies. But then that was removed by a leader of the Conservative Party who had the courage of her convictions. Something that is now unfashionable in Tory circles. Go check the happiness index….

  5. The Chancellor should ask himself how it looks to the people of this country when he cuts budgets left, right and center then gives Ireland billions of pounds in relief fundind.

    Remember: the Irish joined the euro, so why can’t Brussels bail them out?

    Remember: Ireland once bragged how much better and more successful than us they were after they had joined the euro. So why do we have to bail them out of the mess they are in now?

    Next, Britain is going to have to bail Belgium out, too. And the EU HQ is right in Brussels, Belgium’s capitol. How absurd is that?

  6. Latest news: WIKI BOSS – PLEASE DON’T LEAK MY ADDRESS! BUT JUDGE REFUSES WHISTLEBLOWER’S PRIVACY BID!

    The SUN 15/12/2010: Julian Assange failed in a cheeky bid to keep his bail address secret (!) His lawyer argued that to reveal its location would infringe his right to PRIVACY (!) and a breech of his human rights (!)

    But the judge said not to disclose it would fly in the face of 39 year old Assange’s own philosophy of open justice, freedom of information and freedom of speech.

    It goes to show Assange is only a coward, a vulnerable human being like us. And I was about to send him a Batman custume!

    His bail address is: 10 bedroom stately home Ellingham Hall, 20 miles from Lowestoft in Suffolk.
    http://www.thesun.co.uk/sol/homepage/news/3277344/WikiLeaks-boss-Julian-Assange-Dont-leak-my-address.html
    ——————————

    On the same day, reporting of the very same case, but the left-winged newspaper Daily Mirror deliberately did not mention to its readers that Assange’s lawyer begged the judge not to reveal his bail address (! ). Left-wings, socialists, communists and tyrants are just the same – experts at hiding the truth.

    DAILY MIRROR 15/12/2010 http://www.mirror.co.uk/news/top-stories/2010/12/15/wikileaks-founder-julian-assange-gets-bail-but-remains-in-custody-following-swedish-appeal-115875-22784715/

    * now Bianca Jagger has jumped on the bandwagon to rally around Assange (!). How embarassing!

    I hear that Jemima has got herself a UNICEF title (!) working for charities. You don’t need a grand title in order to do charity work. Look at frail Mother Theresa who worked for charities around the world for all her life – she did not have any titles at all.

    I dare say Jemima saw Angelina Jolie have a UNITED NATIONS title working for charities and she wanted the same thing. Jemima wants to be famous for doing charity work (!) Can’t she do her charity work quietly?

    Jemima once wanted to be First Lady of Pakistan. She moved to Pakistan, started to wear Islamic veils, Islamic dresses ( even when she was in London! ), chanted Islamic prayers etc. That dream never came (!) so she chucked her veils and saries away, upped sticks and moved back to London. And became a socialite. Which suited her.

    Then she asked for a UNICEF title to work for charities. And she got it.

    Now she has her eyes on, to her, man-of-the-moment Julian Assange, and she wants to hang out with him in order to be famous!

    Jemima is a flaky person who doesn’t really know what she wants.

  7. As far as I remember a condition for entering the Eurozone was National debt being below a certain percentage of GNP. This means that the UK could not have and will never be able to enter. Living in Germany I have seen the value of my investments in the UK slashed by more than 40% as a result of the pound being devalued. Face it, if the UK had been in the Eurozone it would have been in a worse situation that Greece or Ireland. The UK does not have what it takes to survive in the Euro.

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