Tag Archives: eurozone

My piece for Total Politics: Do EU policies serve our economic interests?

The latest issue of Total Politics magazine has an article wrote about whether or not the European Union still serves our economic interests. I have pasted my argument here in the blog, and it is available in the latest issue (February) Total Politics.

Do EU policies still serve our economic interests?

by Mary Honeyball MEP and Michael Fabricant MP / 17 Jan 2013

Mary Honeyball MEP warns against the dangers of ‘single market-lite’, but Michael Fabricant MP believes our economy is too different from those of other member states

This article is from the February 2013 issue of Total Politics

Yes, says Mary Honeyball

Certain elements of the British political class have for too long treated the European Union as a scapegoat for our economic woes. Always a simplistic view, this attitude to the EU is becoming increasingly untenable.

As far as the broad economic argument is concerned, the essential point is that much of the western world is in recession. We are, inevitably, all in this together. Britain’s economy and that of the eurozone are inextricably linked.

The eurozone is the UK’s biggest trading partner, and the decline in the bloc’s fortunes – the 17-nation eurozone contracted by 0.1 per cent between July and September 2012, following a 0.2 per cent decline during the previous three months – contributed to our falling back into recession earlier in 2012.

It is the eurozone, and by extension the EU single market, that really matters to the UK. The majority of our exports go to the single market, and as a result any dip in the eurozone economies will have an adverse effect on Britain.

Given the single market’s importance, it seems extraordinary that anyone in government would think about upsetting the balance so necessary for the UK’s prosperity, yet this balance would be utterly undone if our much-vaunted repatriation of powers were to be applied to the single market. The government, along with London mayor Boris Johnson and assorted eurosceptics, think they can negotiate a “single market-lite”. What they mean is bringing EU employment law, health and safety regulations and anything else to do with working conditions back to the UK, presumably with a view to reducing these social provisions once they are safely restored. And it’s not only employment legislation. Trying to negotiate this single market-lite would have serious implications for London’s financial services. More euros are traded in London than Paris and Frankfurt combined, but would this still be the case after a ‘Brixit’?

EU leaders have made it clear they don’t see an attempt by Britain to repatriate powers as a plausible action. French President François Hollande has already insisted EU member states must comply with the terms of EU treaties they have signed and ratified, saying: “Europe is not a Europe where you can take back competencies. It is not Europe à la carte.”

The single market agreements and treaties serve a very real purpose and are not simply a means for the EU to impose its will on recalcitrant member states. For the single market to function, there needs to be a level playing field. This is the reason employment law and other work-related matters need to be broadly the same across the EU. If one country were able to have an easier time than the others, it would have an unfair advantage and undermine the power of the single market and its ability to function.

Given that the EU single market, which Britain entered under the premiership of the eurosceptic Margaret Thatcher, is so important for our exports, attempts to repatriate powers from this economically beneficial part of the EU seem like a prime example of cutting off our nose to spite our face. Britain’s economy needs a fully functioning single market – it is the most crucial reason Britain needs the EU.

What is more, any proposals for repatriation of powers would need the agreement of the 26 other EU member states, an unlikely scenario if the French president is anything to go by. The fact that there is little likelihood of any new treaty negotiations happening before the European Parliament elections in 2014 just adds another layer to a misguided fantasy.

The UK is one of the big players in the EU. German chancellor Angela Merkel does not want a ‘Brixit’. A source close to her recently said: ”The chancellor and her closest advisers are trying very hard to make it easy for Britain to keep the EU door open. The chancellor does not belong to the school that is fed up with Britain; she believes it is essential Britain remains at the heart of Europe.”

Given that there is still such goodwill towards Britain, it would be sheer folly to throw this away in a desperate bid to attempt to repatriate powers from the single market and thereby undermine Britain’s economy. We should, instead, take stock of where our economic interests lie in relation to the European Union before it is too late.

Mary Honeyball is Labour MEP for London

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Eurozone banking union could challenge the City of London

Monday’s extract from the latest tranche of Alastair Campbell’s diaries, The Burden of Power: Countdown to Iraq, published in the “Guardian” is very telling on the Euro question.

According to Campbell, Blair was well and truly thwarted by Brown. What is more, Tony Blair feared “we were making the wrong decision for the wrong reasons”.

While the bickering, not to say in-fighting, between Blair and Brown as told by Alastair Campbell makes depressing reading, there is no doubt in my mind that Tony Blair’s instincts on the Euro were right, even in the light of the current crisis in the Eurozone.

When British commentators talk about the Euro they all, almost without exception, take a congratulatory, not to say patronising, tone. The UK is deemed to have done the right thing by staying outside the Euro. We are not, after all, embroiled in the current economic problems.

Except of course, we are. The recession is deeper here than elsewhere in the EU. Britain’s double dip recession matches the economic problems of almost any save the most deficient Eurozone country. Unemployment in the UK stands at 8.4%. This is higher than Germany at 5.4% and Holland and Luxembourg (5.2%). True, there are also very high unemployment in the Eurozone, especially in the member states facing huge problems such as Greece and Spain where the rates are in the low twenties. Overall, the Eurozone total in 11.2%, more than Britain, but not much more given that the peripheral countries are in such difficulties.

As readers of this blog know, I very much support what was the Tony Blair position on the Euro in 2003, the year Campbell features. In a world where economies are intertwined, it would have made a lot of political sense for the UK to join the Euro at that time.

The UK has once again failed to join the European project at the right time. Former Permanent Representative to the EU Sir Stephen Wall is quite clear in his excellent book “A Stranger in Europe” that Britain would have not faced many of the issues it found itself dealing with regarding the European Union if we had been there at the beginning rather than leaving it until 1973 to join.

The same, I fear, will happen in relation to the Euro. If a country is not there at the start they stand to miss out on crucial decisions, finding that the architecture has been put in place without their input. This is, of course, why the UK is uncomfortable with some aspects of the European Union, especially when it comes to agriculture.

The Eurozone seems to be going in the direction of some kind of banking union. This will obviously have an effect on the City of London. Being outside whatever kind of union emerges may well prove problematic for our financial services industry. We in Britain should ask ourselves whether we really want a powerful neighbour with a unified banking system which will be able to challenge, not to say get the better of, our most important industry.

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The world economy needs growth not austerity

Throughout sovereign debt crisis in the Eurozone, British commentators and, unfortunately, politicians as well, have failed to understand the nature of the beast. Unless and until the British accept that the Euro is a political as much as an economic project we will continue to talk in terms of Euro failure and eventual break-up.

Much though the feral Tory Eurosceptics who sit on the right-wing of their already right-wing party would love to see the Euro collapse, the more sensible among us should get real, knowing that this will quite simply not happen. The Euro is here to stay. David Cameron, hectoring the Eurozone countries to put their house in order while the UK flounders in a double-dip recession, admits as much.

Both the political nature of the Euro as a unifying force and its ultimate durability were demonstrated in the result of Sunday’s election in Greece. The Greek people voted, albeit narrowly, for stability, choosing in New Democracy a party that, while demanding some let-up, will broadly follow the Eurozone’s demands. The Euro, despite the crippling demands for austerity, is popular in Greece. In fact, the idea of a single currency is generally hailed across the EU as the way forward and a force for good. It is Britain, Sweden and Denmark who are out on a limb, not the other way round.

The new Greek Leader, Antonis Samaras, meanwhile, does not want to go down the harsh austerity route outlined again by German Chancellor Angela Merkel. Samaras is right to seek some slack for Greece. While there is much Greece needs to do to put its own house in order by way of fighting corruption and making the population pay their taxes, further austerity will only make things worse.

In a welcome development, the French people have well and truly understood the ant-austerity message. Francois Hollande now has a clear majority in the National Assembly, ensuring that his growth plans will be approved. It is not only the French socialists who believe in action to stimulate economic growth and employment. President Obama is saying the very same things. At the start of the crucial G20 summit in Mexico there are two clear blocs – the right-wing pedlars of austerity and those who are more enlightened demanding an agenda for growth.

Labour Shadow Chancellor Ed Balls argued in yesterday’s London Evening Standard that we need a global growth plan and that every national leader should support Presidents Obama and Hollande as they seek to get the world economy moving. Given that the India’s massive economy is slowing down, such action is more urgent than ever.

If there is one overriding conclusion to come out of the Los Cabos G20 summit it is surely that “we are all in it together” as separate nation states linked by an ever more global economy. This is exactly the reason why the Euro will survive. We are increasingly living in a world where large power blocs hold sway – the United States of America, India, China. The European Union is on its way to achieving power bloc status.

Where, you may ask, is Britain? My answer is that the United Kingdom is at present moored precariously in no man’s land. I would also contend that although no-man’s land is not an ideal place to be, going it alone outside a power bloc would be disastrous. In today’s world, nation states are always stronger together than apart.

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The Conservative Party remains deeply divided on Europe

The Conservatives are all over the place on Europe. Yesterday’s Guardian was a veritable treasure trove of Tory tangle.

Writing about the views expressed over the weekend by Prime Minister David Cameron and Chancellor George Osborne, the excellent Jackie Ashley saw through their carefully crafted comments. Cameron has said on a number of occasions that the Eurozone needs a deeper structure with further political integration. Meanwhile Osborne pointed out in the Sunday Telegraph that Britain is heavily dependent on what goes on in the Eurozone.

This much is true. However, every time David Cameron has demanded, in his very own imperious style, that the Eurozone sorts itself out, he has also made it abundantly clear that the UK could not be part of the arrangements he espouses for others. Jackie Ashley is absolutely right when she says that David Cameron is effectively advocating a super-state which leaves Britain in grave danger of being overshadowed with little control over our political, as well as our economic, affairs.

Meanwhile the über-Eurosceptic think tank Open Europe has just come out saying that Britain’s exit from the European Union would pose “unpredictable political and economic risks”. This is certainly a turn up for the books and will, I hope, be taken seriously by those who support Open Europe’s general point of view.

So we have the Prime Minister and the Chancellor advocating a European super-state without Britain which, by virtue of its size and clout, will inevitably overshadow its much smaller neighbour, the UK. At the same time an influential strand of anti-EU thought is warning that Britain would be better not leaving the Union.

As if this weren’t enough, in the same edition of the Guardian George Eustice, Conservative MP for Camborne, Redruth and Hayle and former press secretary to David Cameron, is still fighting the repatriation of powers corner. He maintains. “We can do better that just leave the EU. With the right approach, we could change it.”

Although superficially appealing, I find the Eustice line deeply hypocritical. As I have said many times on this blog, changing the EU, in other words repatriating powers from Brussels to London, is not a runner. Such a change would need the agreement of all 26 other member states – a huge task. The scale of what Eustice thinks possible can be seen if the question is put the other way; why indeed should the rest of the EU allow Britain to cherry pick?

Eustice’s plan is quite simply not feasible. If it were tried in any serious fashion, it would surely lead to Britain leaving the EU, probably slowly and probably without a referendum. The Eustice idea that powers can be repatriated is really the worst of all worlds presented as reasonable and desirable.

Cameron, Osborne, Open Europe and George Eustice do not, of course, represent the views hard-line Tories who want nothing less that immediate withdrawal from the EU. Daniel Hannan MEP has recently repeated his mad idea that Britain should transform itself into Norway or Switzerland, while Douglas Carswell and Bill Cash rarely let up on their hatred of all things EU.

All in all, there are at least four Conservative positions on the EU represented in this short blog post. The Tories are well and truly divided on what is fast becoming one of the current defining issues. It is becoming ever clearer that the Conservative Party has not resolved its internal divisions, and there has always been general agreement that a split party is not good for the health of the government.

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The “immediate plan” for the Euro from David Cameron and President Obama is an illusion

As David Cameron met German Chancellor Angela Merkel, on one level it is reassuring to know that the Prime Minister thinks decisive action needs to be taken in order to underpin the Eurozone, as reported in the Guardian yesterday. The quote from the Prime Minister’s spokeswomen goes on to say that confidence in the markets is essential, and in order to regain that confidence decisive action needs to be taken.

The unfortunate aspect of the story is that Messrs Cameron and Osborne are in no position to take any kind of decisive action. By waltzing out of the last December’s European summit which established the fiscal pact, David Cameron threw away any hope the UK may have had of a voice in the future of the single currency. Although this may not be a bad thing at the present time since another voice supporting austerity would not be helpful for the Eurozone, it leaves the UK powerless when it comes to the Euro. If Cameron leaves any lasting legacy, he will go almost certainly go down in history as the Prime Minister who sold Britain down the river.

Mr Cameron’s is now following a long tradition of British Prime Ministers turning to the United States of America. Apparently in a telephone conversation the night before last reported in the Daily Telegraph, Cameron agreed with President Obama that there is a need for “an immediate plan” to resolve the Eurozone crisis. Mr Cameron seems to view this weasely statement as significant, strong enough to make sure the British media knew about it.

Of course the problems in the Eurozone need resolving; no-one would disagree with that. The UK’s economic woes also need sorting out. Even the United States itself could do with a bit of economic firepower. There are two points to be considered. One is that the world is now a very small place and economic difficulties can never be confined to one country or region.

The second point is more specific. Neither President Barack Obama nor Prime Minister David Cameron has competence to deal with the Eurozone’s affairs. The G20 summit in Mexico later this month will discuss the Euro and many other economic issues and will more than likely seek to find an acceptable way forward.

However, the power to make decisions on the future of the Euro, how the Eurozone is governed and what will be done to improve the current situation, such as introducing Eurobonds, will be for the members of the fiscal pact to decide. Britain is not there. Lecturing Eurozone leaders about what they should or should not do makes no difference as the power has already been conceded. Cameron’s hectoring only further alienates other EU leaders and is therefore not a wise long-term policy.

President Obama has, of course, been much too sensible and rational to lecture the Europeans. He no doubt views talking to the British Prime Minister as a courtesy and probably keeps close to Britain as much for old time’s sake as anything else.

That really sums up the UK’s current standing with the United States. We are, of course, still strong allies, share a common language and go back a long way. Nevertheless, the relationship these days is all one way, the way of the USA. Britain has little real power in relation to its transatlantic ally, and now very little power in the Eurozone which is bound to lead to an erosion of influence in the European Union.

David Cameron could not have done better if he had wilfully set out to reduce Britain’s standing. Much of his anti-EU shenanigans has been to placate his feral Eurosceptic backbenchers. On Wednesday’s Newsnight Tory MEP Daniel Hannan sang the praises of Norway and Switzerland telling us how they thrived outside the European Union. With the greatest respect to both of these countries, they are happy to be isolated and have never sought any position on the world stage. Britain, I believe, still wants to be a leading international power. The only way to do this is to play a full and leading role in the European Union.

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Marginalised Britain will one day count the cost of the lost Euro opportunity

First things first, amongst all those many others may I wish Prince Philip a speedy recovery. He has been a tower of strength over the last 60 years and has made a contribution beyond compare to the Queen herself and the monarchy as an institution.

Nevertheless, the Diamond Jubilee celebrations can only distance the rest of the world to a limited extent. While we have been enjoying our good fortune, the Eurozone leaders have been slowly forming a reaction to the sovereign debt crisis, specifically the banking crisis in Spain.

According to the Guardian today, the recently elected French socialist government represented in this instance by Finance Minister Pierre Moscovici and the European Commission led by President Jose Manuel Barroso have just given strong backing for a new Eurozone “banking union”. Crucially, the plan could see vast national debt and banking liabilities pooled and then backed by the financial strength of Germany in return for Eurozone governments surrendering sovereignty over their budgets and fiscal policies to a central Eurozone authority.

This is heady stuff indeed, and good news for the European single currency. Finding a way through the crisis in the Eurozone countries is also good news for the UK. Probably the only thing on which I agree with David Cameron is that it is in Britain’s interests to have a stable Euro.

However, it is also very bad news for Britain. Yet again we are outside major European developments. This may not be harmful in the short-term, but will be damaging for the UK in the longer term. 

The European Council president, the President of the European Commission, the President of the European Central Bank and the head of the Eurogroup of 17 finance ministers have apparently been charged with drafting the proposals for a deeper Eurozone fiscal union, to be presented to an EU summit at the end of the month.

The European Commission and France are piling pressure on Germany to line up behind the proposal. Angela Merkel would need to take it to the German parliament for agreement.

The international financier George Soros is on record as saying: “The likelihood is that the euro will survive because a breakup would be devastating not only for the periphery but also forGermany.Germanyis likely to do what is necessary to preserve the Euro…”

Soros continued with these prophetic words, “”That would result in a Eurozone dominated by Germany in which the divergence between the creditor and debtor countries would continue to widen and the periphery would turn into permanently depressed areas in need of constant transfer of payments.”

Everything appears to be coming together -France and the European Commission working together, plus tentative but seemingly real acceptance of their proposals by the European Council, the European Central Bank and the Eurozone countries. Although it’s by no means all set to go, it does look as if the 17 Eurozone countries are coming closer together and accepting the need for a central Eurozone authority look at budgets and fiscal policies.

Britain as ever is not part of what promises to be the most important European project since the formation of the Common Market. Unfortunately 50 years or so later, we still don’t get it. Europe is where the future lies. If Britain has any hope of being more than a bit player outside our own shores, we have to be a leader in the European Union. Today that means being up there with France and Germany in the Euro. Very unfortunately we did not join, and this blog post explains just how serious a missed opportunity this will turn out to be.

To add salt to the wounds, if Britain had joined the Euro, there is little doubt we would have been at the top table with France and Germany. Yes, we would have suffered from the current crisis in the Eurozone countries, but thanks to dogmatic Tory Chancellor George Osborne and Prime Minister Cameron we are suffering a double dip recession anyway, even outside the single currency. The Euro was always a political as well as an economic project and the UK has comprehensively failed to grasp the political opportunity.

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Our political leaders must take note of the people of Europe

France’s new President Francois Hollande is meeting Germany’s tried and tested Angela Merkel probably at this very minute.

The Euro, which will no doubt form the centre-piece of their deliberations, was, and remains, a brave venture, a departure from the politics of nation states and superpowers, globalisation and international money markets. For the first time ever a monetary project sought to bring together 17 different countries – a bold vision indeed. In this sense the Euro is the logical conclusion of setting up the European Union. Once the EU had established a political agreement, the Euro began the process of economic co-operation.

In this sense it is right to call the Euro a political project. And this is the very reason why Europe’s leaders from Angela Merkel to the European Commission do not want the Euro to fail. While I do not agree that if Greece were to leave the Euro this would mean the disintegration of the EU, its departure would seriously undermine the bold vision for Europe.

Mrs Merkel and the European Commission see this clearly, maybe even thinking that if Greece goes the whole Euro project will fail. Their response – severe austerity – is, however, beginning to look as if it will not work in the longer term.

Austerity should not continue for the simple reason that the people of Europe who have been to the polls recently have not supported Mrs Merkel’s point of view. Sunday’s elections in North Rhine Westphalia, Germany’s largest Land, saw Merkel’s CDU vote slump by eight per cent to an all-time low of 26%. The centre-left SDP social democrats did well boosting its share of the vote by five per cent to 39%. The liberal FDP also gained support.

While there may have been local factors at play in this internal German election, the result comes on top of Francois Hollande’s victory on a platform which included growth as well as austerity. We should also not lose sight of the result of the election in Greece. The Greek people have suffered more than any others in the EU and they are clearly saying no to austerity. The fact that the Greek election results have not delivered a government should not blind us to what the results are saying, which is a clear no to austerity.

The European Commission, Angela Merkel and the rest of Europe’s political leaders would do well to take on board that the many people in three EU member states have made their voices heard against strict austerity.

EU leaders are often quite rightly accused of being out of touch. The people have actually spoken over the past few months. The European Union – composed as it is of the world’s leading democracies – must take these voices on board. If they do not, the bold vision will flounder even further off course.

Meanwhile Shadow Chancellor Ed Balls hit the nail on the head regarding Britain’s role in the EU. According to today’s Guardian he told a Centre for European Reform seminar, “I don’t remember a time when British economic and political leaders in our country were less influential in debates which had more profound significance for jobs and growth in our economy.” Under the Tory-led coalition David Cameron and George Osborne are nowhere. The final irony is, if Greece were to leave the Euro, they would probably receive IMF money to which the UK had made a contribution. Standing aloof from the Euro does not let us off the hook in today’s integrated world.

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