Ten myths about the European Union

Labour Party

These 10 myths about the European Union were posted on Progress Online by Denis MacShane MP in August this year. Since Denis’ excellent piece didn’t get much coverage at the time, I think it’s worth giving it another airing.

Debunking the myths is, of course, becoming increasingly important as Tory anti-EU mania reaches worrying proportions.

Home Secretary Theresa May is seeking to opt out of 130 Justice and Home Affairs measures only, apparently, to then try and opt back into some of them.

Meanwhile Michael Gove and, seemingly, nine members of the Cabinet want a referendum on the EU.

As someone once said, we live in interesting times. Chaotic may be a better word.

Myth 1

The euro causes mass unemployment So how come unemployment is much lower in Germany, or the Netherlands than in Britain? Spanish unemployment was around 25 per cent well into the 1990s. In fact, the only time unemployment in Spain came below 10 per cent was when the euro replaced the peseta. It is government policy that determines economic success not the EU or the single currency per se.

Myth 2

Youth unemployment has surged under the euro Can anyone in Britain, with one in four 16-24-year-olds without work, make this claim with a straight face? Corrupt, clientalist politics in Spain and Greece have refused reform of the youth labour market to give young people a job but if the euro is responsible should we blame the pound for Britain’s lost generation of school and university leavers?

Myth 3

The EU makes all our laws. Sorry, but the House of Commons researches this every year and can never find more than about seven per cent of UK primary legislation which stems from Brussels. Just think of the rows over legislation in the Commons since 2010 – student fees, tax cuts for millionaires, NHS ‘reform’. Gove’s free schools, attacks on disabled people, five-year parliaments, cuts in local government provision – all these are made-in-Britain laws and have nothing to do with Europe.

Myth 4

The euro was badly designed and Greece should not have entered Agreed. But if Greece is forced out there will be a massive run on banks. It is not the single currency that allowed such lax regulation of banking in recent years. That began in America with Robert Rubin and Alan Greenspan who removed all the rules in place since the 1930s to make banks behave responsibly. Britain (I would rather not mention which government) awarded an honorary knighthood to ‘Sir’ Alan Greenspan and his bust still stands in the Treasury. If we worship false gods of greed first we should not be surprised when they destroy us. The dollar is no more responsible for the Greenspan-Rubin tragedy of errors than the euro is for bad policy in the EU.

Myth 5

Devaluation is the way forward. So how come the British economy has been belly-up since the major devaluation of the pound four years ago. The pound lost about 25 per cent of its value against the euro. Did this lead to an export boom? UK balance of trade has never been worse. Belgium exports more to India than Britain. One day perhaps China will allow British exports to get a foothold – maybe when the Chinese have stopped killing British businessmen like Neil Heywood – but all the Commonwealth countries have various forms of protectionism in place – just ask anyone who tries to trade with India.

Myth 6

The EU is run by technocrats with no democratic oversight. Actually all the decisions taken in Europe are approved by democratically elected ministers responsible and accountable to their parliaments and public opinions. Decisions are slow and tortuous and are often so late in becoming policy they may be no longer relevant. The number of EU commissioners should come down from 27 to 10 but will the UK give up having a commissioner? Ask Nick Clegg.

Myth 7

The euro has caused riots and the rise of extremist parties That’s for Nick Griffin and the other BNP MEP to answer. Europe has always had extremist politics hovering at its fringe. The French communist party was xenophobic and supported one of the world’s great tyrannies for decades. Long before the euro existed there were ultra-nationalist and racist politicians elected under PR systems to different national and regional parliaments. Jean-Marie Le Pen’s glory days were when France used the franc. The biggest riots in Europe since the world capitalist crisis began in 2008 happened in London last year. Unlike the riots of Athens which were largely confined to its main square, the London riots spreads across the nation, turned into mass arson and looting with five deaths and huge damage caused. Last time anyone checked, Britain was not using the euro so is the pound to blame for the August 2011 riots? No and it is just as silly to blame the euro for social unrest and extremist political parties.

Myth 8

The EU imposes terrible burdens on British business This whine from the right has been a constant ever since the concept of social Europe was promoted. Tory MPs want to repatriate all rules from Europe that give some modest protection to workers and unions. For the left to act as bag carriers for this attack on social justice is bizarre. In fact, if you look at the nations that are best surviving the current crisis from Finland to Austria they are all based on EU social partnership systems which are anathema to Conservatives. And they all use the euro.

Myth 9

Housing bubbles were caused by the euro Again, it is national governments (including Labour) which did not put in clear rules insisting on minimum deposits and have a solid programme of social house building. Labour allowed 500,000 social housing units to be sold under Thatcher’s right-to-buy legislation. Ireland, Spain and Greece allowed unlimited credit well beyond the repayment capabilities for borrowers. That has nothing to do with the single currency but with bad government policy.

Myth 10

The euro is creating a European super-state. Please. Ten years ago the EU budget was roughly 1.2 per cent of Europe’s collection GDP. It is now down to one per cent. Of that one per cent, 85 per cent is returned to governments to pay for agricultural subsidies and regional investment. A BAP (British Agricultural Policy and payments system) would be more costly than the CAP. The EU gets many things wrong just as all governments do. But with an income of just one per cent of Europe’s total annual income the idea this is a new super-state is just silly propaganda.

Our political leaders must take note of the people of Europe

Labour Party

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.

L’Exception Francaise and Lessons for Labour

Labour Party

Francois Hollande will more than likely make it. He will, at the same time, make history. Not only is Hollande the first Socialist since Francois Mitterand, elected President in 1981, to come within reach of the French Presidency, his agenda is diametrically opposed to the current European orthodoxy.

As analysed earlier on this blog, Hollande is putting forward a credible plan for resolving the current economic crisis which relies on growth as well as austerity. The 60 proposals out forward by Hollande represent a radical departure from 10 years of conservative government in France. Hollande is also keen to renegotiate the Euro “fiscal pact”. His policies put forward a much needed alternative to the stagnation and lack of vision currently gripping the European Union and beyond.

While Hollande’s success is probably only confined to France, we should not underrate its significance. This is a major change, a defining moment for the centre-left in Europe and therefore the Labour Party in the UK. Even though no two countries or political systems are directly comparable and the French presidential arrangement is a million miles away from our parliamentary process, what happens in France will obviously have an effect in Britain. When one centre left leader comes within reach of the highest office, this obviously has a knock-on effect in other countries. Hollande reaching the top can only be good news for Ed Miliband and the Labour Party.  

We are, I believe, beginning to see a revival in support for the centre left. It is true, of course, that Hollande has been helped by Nicolas Sarkozy’s manic flamboyance. However, that could never be the full story. Unpopular leaders only allow the opposition to go so far. The French Socialist success is much more than that. When the votes cast for the fiery left-wing radical Melenchon are taken into account, it becomes very clear that the French electorate has voted in favour of the left.

It is, of course, true that this particular election for a President of France has not generated a high level of enthusiasm. It may indeed be the case that this is the 21st century way in elected politics; people vote out of duty rather than conviction. Yet they do still vote and show their preferences, which are moving again in a leftwards direction in France at least.

While this may be true for the majority, it would be folly to ignore the high vote for Marine le Pen. The Front National may be on an even bigger roll that the French Socialists. Gaining nearly 20 per cent of the vote is tantamount to almost winning a place at the top table. Le Pen may not be in the final run off as her father was in 2002 but the Front National is now a settled force in French politics.

This is, of course, the downside to the French presidential elections. For those of us in the mainstream Labour movement, the strong support for the Front National from blue collar workers is a huge cause for concern. The same phenomenon of ultra-right support coming from white manual workers is taking place in the UK. The real worry is that these voters used to form Labour’s core and they are turning away. The centre left across Europe ignores this at its peril. We must find a way of appealing across the board to white and black, those in work as well as the unemployed and, of course, the better off in addition to those who have less.

So it’s a mixed bag. Centre left success coupled with ultra-right wins. While we await the outcome of the second round on Sunday, I can only hope that we see and hear more analysis of this historic French presidential election than we have so far. We have in the UK been fed far too much about the United States contest with interminable excrescences about the whackiest of Republican hopefuls and very little about what has been happening on our own doorstep. And it’s the French result which will affect us the most.

Inept Cameron sails Britain merrily down the river

Labour Party

The result of last night’s Eurozone summit is a disaster for Britain.

David Cameron has vetoed the proposed treaty on the euro involving all 27 member states because he is so incapable. He failed to adequately negotiate a situation which would ensure Britain is kept in the process.

If the treaty of all 27 member states had gone ahead British sovereignty would not have been anymore affected because British sovereignty was never at threat, the new treaty clause was solely about the euro.

The real consequence of Cameron’s actions for Britain is that our influence will now be severely limited. There is a real danger that we will not be able to protect important British interests especially in the EU single market which is very important for British trade and jobs.

Just one example of our monthly trade with the EU shows how important it is financially to the UK to have such good relations. An example can be found in just one month in the UK’s EU exports which increased by £1.6 billion (13.4%) in a single month from August-September 2011, to £13.6 billion. And compared to September 2010, exports have increased by £1.7 billion (14.8 %).

It’s becoming increasingly apparent that Cameron is despised in the EU, by Merkel and Sarkosy especially. The problems began in 2009 when Cameron pulled Conservative MEPs out of the European People’s Party (EPP), the centre-right political grouping in the European Parliament.  He then formed his own grouping with various fringe parties from across Europe, leaving Merkel and Sarkosy incandescent.

Such a loss of power is not helpful for the UK and it is imperative that we continue to be part of future negotiations with the euro zone. A two tier Europe, which may well result from this, would be disastrous for the UK and as a result we will not be able to fully protect British interests, as Sarkosy has already pointed out.

Domestically there are going to be fallouts. Nick Clegg, is as we know, very pro-European and yet the Deputy Prime Minister is also part of a government which has loosened ties with the EU and lost the respect of European heads of state. This will undoubtedly have implications for the survival of the coalition. And globally there are massive implications; markets have fallen and during this uncertain time it will continue to hit the already fragile global economy.

Cameron starts to count the cost of exclusion

Labour Party

David Cameron seems at last to be starting to understand that it is not at all in Britain’s national interest to be excluded from EU decision making.

It now appears that the 10 EU countries that are not in the single currency fear that the Euro 17 could decide on issues affecting the 27 such as banking, resource allocation, the EU budget.”

Cameron has, quite rightly in my view, expressed similar concerns. According to the BBC, one senior EU official said Mr Cameron wanted a safeguard clause at the summit but “didn’t get it since firstly, it would accelerate the split, and secondly, only two countries will eventually not be in, the UK and Denmark.”

Cameron, until very recently a proud Eurosceptic who was elected Conservative Party Leader on just such a ticket, is finally beginning to see the light. Britain will be damaged if we languish in the EU second tier. Banking, resource allocation and the EU budget are all major policy areas where Britain needs to be heard. Now Cameron has to face the hard realities of government, he has belatedly realized that the world is not as simple as his little-Englander back benchers and the Tory backwoodsmen in the shires would have us believe.

Maybe this feeling of being cornered is why Cameron is attacking EU regulation saying it will harm the City of London. I find it interesting that this is coming from the Prime Minister with little comment from the City itself.

Cameron also seems to be beginning to understand that repatriation of powers will not just happen because the Tory part of the British government wants it. We are now hearing that whatever treaty changes may be put on the table to take account of the Euro changes will only be small ones. This means no deal on taking back powers will be possible. I wonder how many such excuses we will hear in future.

As I have said many times on this blog, repatriation of powers is a difficult, if not impossible, goal. Why should Euro saviour Angela Merkel or French President Nicolas Sarkozy go along with the demands made by David Cameron and George Osborne, two Europhobes who have gone out of their way to be insulting about the EU? There are many ways to treat a treaty and most will probably not involve making any concession to UK demands which are generally regarded as slightly potty pie in the sky by the rest of the EU. 

It’s a long time since the Labour Party in opposition in the UK during the 1980s advocated unilateral nuclear disarmament, generally viewed as a policy totally lacking in credibility. Yet there are similarities between the Tory aim to repatriate social protection legislation from the EU back to the UK and Labour’s disastrous unilateral nuclear disarmament. Both are impossible and both fuelled by dogmatic members of the respective political parties. The one real consolation is that when it formed a government Labour had realized its dream was impossible: the Tories are yet to get there.

If the Euro sinks, the UK will be pulled down with it

Labour Party

Sadly there are still those in Britain who feel it necessary to gloat over the deep and difficult problems facing the Euro. “Thank goodness we’re not in the Euro” is their rallying cry as they watch from what they consider to be the sidelines as Eurozone leaders search for a durable solution.

Yet in this age of globalisation and inter-woven economies being outside the Euro does not mean we can blissfully ignore what is happening in the Eurozone. Britain is affected and, because we are outside the single currency, we have no meaningful say in deciding what needs to be done. It would appear from his recent comments that David Cameron feels this frustration as deeply as anyone.

As Cameron has said, according to the  “Times”, the interminable and often ill-tempered Euro discussions are having a “chilling effect” on Britain’s economy. Indeed, if the tensions caused by the Euro do not ease soon and if the key players Angela Merkel and Nicolas Sarkozy do not come up with something credible, the UK banks are warning that they may have to raise interest rates. That means you and I will pay more for our mortgages and loans – not necessarily, I imagine, what most of us would want.

There could hardly be a clearer demonstration of how deeply integrated Britain’s fortunes are with the Euro area. It is actually quite straightforward: if the single currency sinks, the UK will be pulled down with it.

It goes even wider than that. If Italy, and potentially Spain, are thought to push the Euro to the point where the only rescue option is a life line from the International Monetary Fund, we will be into a truly international scenario. Money from India,China and Brazil may well form part of any such deal, such are the profound shifts in economic and political power currently happening around us.

In truth, the world is becoming ever smaller. There is no way Britain can go it alone, and it’s about time we as a nation fully accepted this fact of life.

I’m Proud to be a Europhile

Labour Party

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 European Parliament debates a Mechanism for Euro Stability

Labour Party

As the European Parliament in Strasbourg finishes a debate about establishing a permanent crisis mechanism to safeguard the financial stability of the euro area, I am minded of the last time I blogged on the euro.

The first thing to say is that the recent problems in some of the euro-countries is that their economic problems were caused to a large extent by factors unconnected to the single currency.  For example, Ireland’s difficulties were mainly brought about by an overheated property market, a bubble not unlike that experience in the United Kingdom.  Greece, a country I have visited on many occasions, was beset by historic problems, some of which were explained to me when I met various politicians and journalists in Athens shortly after Greece joined the euro.

The current economic problems in Europe are therefore not all about the euro per se. The situation is rather more complicated than that. In addition, the British economy is closely linked to the euro and the eurozone. It is simply no good pretending otherwise and taking a little England, ostrich head in the sand view of complicated economic and financial issues. We in Britain are linked directly by trade, finance and interest rates, to name but a few, to the European currency.

The interest rates question is informative.  Interest rates as set by the Bank of England were 3% on 25th Nov 2008, and dropped steadily to reach 0.5% in March 2009, since when they have been unchanged. Interest rates set by the European Central Bank (ECB) were 3.25% on 25th Nov, and dropped steadily to reach 1% in May 2009, since which they have been unchanged. It can therefore be assumed that in the last two years interest rates in the UK would not have been very different had we been part of euro.

Given that Bank of England and ECB interest rates are virtually identical, and have been for the last 18 months, it is, I believe, fairly safe to say that UK interest rates would not vary greatly one way or the other in relation to the euro, though this does, of course, depend on unknowns such as demand led-inflation resulting from any economic recovery, spikes in commodity prices etc as against decreases in wage inflation caused by austerity measures etc.

I must also point out the obvious but often ignored fact that the euro is now 10 years old (not to mention the fact that Britain has been in the EU since 1973). The euro is still in one piece and measures such as the one debated in the European Parliament this morning are fully intended to keep it that way. All those concerned know that that if the euro were allowed to fail it would lead to massive economic problems in Europe, including millions more unemployed and rising inflation.

I firmly believe the euro will emerge from the current crisis stronger rather than weaker. It most certainly will not fall apart. The new measures will enforce greater fiscal prudence as it is now clear that those currently used are not sufficient and will allow in future for those eurozone countries with severe economic to be bailed out without the kind of crisis we are now seeing.

So does UK really profit from being outside the single currency? We in reality are so heavily linked to the euro and the eurozone that we have very little room for manoeuvre. Our interest rates are almost identical to those set by the European Central Bank and, to cap it all, we contributed very significant sums to the Irish bail out. Ultimately any currency is only as good as the economic conditions of the country or countries concerned. The pound fell through the floor on Black Wednesday 1993 when speculators traded pounds for dollars for the simple reason that the UK economy was in bad shape. The eurozone, it is true, is not so good at present, but neither is Britain. We are in for a penny and in for a pound and a pound is not so far removed from a euro.

The Euro is bigger than Party Politics and the British Government has done the Right Thing

Labour Party

So our Con-Dem government – more Con than Lib-Dem it has to be said – have been part of the Irish bail out. While I think this was absolutely the right thing to do, the Eurosceptics are spitting blood.

The fact that Britain is taking part in the three way bail-out – through the IMF, the European Union and by providing a unilateral loan is obviously significant.  The UK’s Conservative (and Liberal-Democrat) government has admitted that a euro zone country in difficulties should receive assistance and that euro-free Britain should make a substantial contribution. (For the record, the UK contribution to Ireland is estimated at somewhere near £10 billion

We also now hear that the special euro stabilisation mechanism, worth €13 billion may be activated against Britain’s wishes if Portugal and Spain need rescue packages – a very real fear as the financial markets get ever more jittery.

Although in one sense the UK may congratulate itself in not being part of the euro as it goes through this difficult crisis, we are also justified in asking ourselves what we have gained from being outside the single currency. £10 billion spent on propping up one of the euro zone countries strikes me as high a price as any Britain would have had to pay were it in the euro.

On a narrower point, this bail out of Ireland has surely spelt the death throes of the Eurosceptics.  There cannot possibly be any credibility left for any political credo which maintains that Britain is not part of Europe and should withdraw from the EU.

The crisis of the euro has shown in very graphic terms that the UK is in Europe and cannot ignore what happens in other EU member states when it comes to their economies.  Britain has ended up paying out a very considerable sum of money. I doubt if it would have been any more if Britain had been a fully signed up member of the euro zone.

The last Labour government, it is true, refused to take Britain into the Euro.  I have always been in favour of joining the single currency and, I must say, am once again beginning to feel vindicated that my point of view is the best one for our country.