In yesterday’s Independent their columnist Mary-Ann Sieghart asked ‘Where have all the Europhiles gone?’ I have always been a Europhile, it is why I enjoy being a MEP so much. Here’s my response which the Independent published today:
‘Ms Sieghart asserts that the crisis in the UK would have been worse had we joined the euro but offers no evidence to support this. The UK had to contribute significant amounts to bail out Ireland and will certainly be contributing more in the future through the IMF and other channels for Greece.
If we look at the course of our economy over the past couple of years, it is difficult to see that there would have been significant difference for us had we been a part of the eurozone; our economies are too integrated and dependent to be anything but deeply affected by events in the eurozone.
Since 2008 the interest rates set by the Bank of England and the ECB have been very similar. As is naturally the case in economies that are so mutually dependent, not only have we suffered the same problems over the past few years, we have also come to broadly similar solutions. Any notion that refusal to join the euro somehow made the nature of our economy different from that of Europe is misguided; it simply made interaction that bit more complicated.
Ms Seighart also mentions that in 2003 the UK was still considered the third most influential country in the EU. I wonder if that still stands today. Due to our own disinterested stance, it often feels we are not leading, but being led. Perhaps we would have had more say in the negotiations over bailouts, which will directly affect us, if we had joined the euro 10 years ago when we had the chance. Instead we’re paying the bill while Germany and France are managing the project.’
The central problem with the euro is that it is unsustainable. The successive attempts to shore it up by imposing loans coupled with austerity are merely postponing the inevitable – Greece is actually insolvent and there is precious little growth in Ireland, Portugal. The only way that these peripheral countries are going to get back their competiveness is to devalue – a tremendously difficult process (and probably not sufficient on its own in the case of Greece).
The only viable future for the Euro is greater political integration within Europe so that multiple fiscal strategies are replaced with one .Germany Austria and the Netherlands, rather than berating their southern neighbours, should undergo some fiscal expansion and be prepared to participate in an exchange union. But this is politically unacceptable. Europe must either be more integrated (coupled with substantial and democratically supported changes ) or fall back to a series of currency unions so that basic macroeconomic policy options become available. The status quo is not an option.
The problem with the Euro is fundamentally political Europe is partly in a mess because all of you so-called europhiles seem unable to grasp or certainly to articulate what an integrated Europe might mean – where is your vision ??
..a short post script if I may, what I think Mary-Ann Sieghart is implying (i haven’t read her piece) is that the UK has been better off outside the euro over the last three years has been that it has been able to protect its competitiveness by devaluing – which has been an important factor in the rebalancing of the economy – the second point is own own demonstrable ability to manage our economy directly, one of the reasons we continue to enjoy market confidence.
Others, including my compatriot Bryan Gould, say they are proud to be [Keynesian] eurosceptic:
http://www.guardian.co.uk/commentisfree/2010/feb/26/keynes-greece-eurozone-policy
Proud to be a Keynesian eurosceptic
The situation in Greece and the rest of the eurozone shows I was right to oppose ceding control of macroeconomic policy …
I for one, believe Greece should follow the Argentinian path…
http://www.guardian.co.uk/business/2011/jul/10/european-debt-crisis-argentina-imf
Defaulting rescued Argentina. It could work for Athens tooStruggling under an impossible burden after its IMF bailouts, Buenos Aires knew its one hope was to stop paying its debts and become a pariah – and so it proved
Note in particular…
“It [the IMF recipe] didn’t work. In fact, drastic public spending cuts made the downturn worse, while the dollar peg prevented the devaluation that eventually helped Argentina to get back its competitiveness.”
I have long said that severe cuts are counterproductive, and Mary has also made this point as well – perhaps more articulately than myself – and the more savage cuts outside the UK have demonstrated this.