Monday, 22 December 2008

Euro behind Greek riots

by Marc Glendening, DM Campaign Director

The credit crunch has, of course, resulted in the usual group of EU-obsessives calling for Britain to join the euro.

Interestingly, they never name the specific rate at which they think we should join, or would be allowed to join at - a rather critical piece of information around which all arguments about the economic implications of such a move would rotate.

Nor do they explain how, exactly, we would be economically better off by joining - putting to one side the enormous constitutional/anti-democratic implications of taking this extreme course of action.

Presumably, the euro-obsessives are not seriously suggesting that it would be to our advantage to lose the capacity to set our own interest rates, or allow the pound to fluctuate according to the specific requirements and features of the UK ecomomy?

Floating exchange rates and adjustable interest rates are safety valves that Britain would be crazy to abandon.

One eurozone country that is providing a real-world example of what can happen when your government passes all key macro financial control to the European Central Bank is Greece.

The continuing riots in Athens and elsewhere - while they may have been originally instigated by anarchist groups in response to the shooting by police of a fifteen year old youth - have grown in size because of the poor state of the economy and rising unemployment.

The Greek government is virtually powerless to tackle these underlying economic problems. The only option left to them to try and stimulate domestic economic activity has been to drive down real wage levels at a time when the lower paid - those still in jobs that is - have already seen their living standards reduced. In part, of course, because of the significant price rises that have accompanied the transition to the euro.

In properly constructed, national currency unions central government has the means to redistribute money to those regions that are particularly suffering during a recession. But because the EU currency has been established without a massive treasury behind it, Greece will not be in receipt of fiscal transfers from the taxpayers of other euro member countries.

German chancellor, Angela Merkel has made it very clear that she has no intention of using her taxpayers' money to bail out debt-ridden countries like Greece, Italy and Spain.

So, the Greek government is in a real bind with no room for manoeuvre, have been turning down the lid on the economic pressure cooker, and now we are seeing the public response.

Similar unrest is predicted soon for Spain, where the economic situation is also highly precarious. Ireland is also in an increasingly bad way.

What the electorates of these and other crisis-ridden euro economies will soon realise is that kicking the incumbent 'government' out of office and replacing them with the 'opposition' will make very little difference, as the main levers of economic control have left the country for good.

The incredible political and economic implications of the euro have not yet sunk in among the peoples and the media classes of the Eurozone members. They soon will and then things will get very interesting. And potentially very nasty.

~ written by Marc Glendening, DM Campaign Director

Monday, 1 December 2008

Eurospin: new moves to push Britain into the euro

by Marc Glendening, DM Campaign Director

If so much as a flea catches a cold in outer Mongolia, the European Commission, the president of France and the British Liberal Democrats insist that this proves the need for a greater centralisation of power in Brussels in order to achieve
'co-ordinated action'.

Rarely is it explained how exactly the transfer of yet more powers to the EU will help rectify the particular problem being addressed.

Of course, the real motivation of the EU-extremists is not to actually solve particular problems per se, but primarily to continue building a new state - a centralised system of government in Brussels.

And so, predictably, the international credit crunch crisis - just as with the recent events in Georgia, concerns over energy supplies and terrorism - has resulted in advocates of euro membership, such as Lib Dem home affairs spokesman Chris Huhne, urging those EU member countries outside the eurozone to sign up.

Huhne was recently joined by Roland Rudd of Business for New Europe (formerly the pro-euro campaign Britain in Europe) writing in the Evening Standard and perpetual EU-fanatic Will Hutton writing in the Observer that Britain should again consider scrapping the pound.

Only yesterday, speaking to the French media, European Commission president Jose Manuel Barroso tried to build the growing euro spin by claiming that entry to the eurozone of some EU member states who had previously strongly opposed the move is "now closer than ever before."

According to EUobserver, Barroso said "I'm not going to break the confidentiality of certain conversations, but some British politicians have already told me, 'If we had the euro, we would have been better off'."

"I know that the majority in Britain are still opposed, but there is a period of consideration under way and the people who matter in Britain are currently thinking about it," he continued.

Yet no concrete reasons are ever provided as to how joining the euro and handing economic control to the European Central Bank would actually improve the situation for Britain, Denmark and Sweden.

Higher mortgages

For a start, the eurozone currently has higher interest rates than Britain, which we would be forced to adopt if we joined. The idea of Huhne, Rudd and Hutton that what British homeowners need right now is a rise in their mortgage bills is economic madness.

It's not as if, in return for such costs, countries inside the currency zone are immune in some magical way from the crisis - Spain and Ireland being good examples. In any case, as we are so often told, the crisis is "global" and extends way beyond the borders of the EU.

If advocates of the euro really believe that only a transnational currency and economic decision-making structure can prevent, or at least ameliorate, the consequences of international economic recessions they should have the courage to argue for a single, World currency (plus, supporting system of government and taxation, possibly based in New York, Calcutta or Johannesbourg).

It would be interesting to see the likes of Federal Union and the European Movement try to sell this proposition to the peoples of Britain, France and the rest of Europe.

Job cuts

In fact, as even the Brussels-supported Centre for European Reform admits, membership of the euro can make things even worse for struggling economies because they no longer have the option of a floating exchange rate making their exports more attractive to external markets. Nor can they alter interest rates.

If Britain had joined the euro some years back, on the advice of the same band of euro desperados who are popping up again now, the recent fall in the value of sterling that has made the products of Britain's exporters cheaper to eurozone buyers would not have been possible.

The only solution would have been for exporters to cut costs by other means, perhaps by cutting jobs or by depressing the real wages of workers.

Regional instability

As Simon Telford and Phillip Whyte further point out, one of the key problems facing the single currency is that it is not yet backed up by a Treasury and the institutions and resources of a fully integrated state.

So, the European Central Bank does not have the means to redistribute billions of euros between the different parts of the currency zone, in the same way Britain or America have the capacity to use fiscal stabilisers to try and shore up the worst affected parts of their own single currency areas.

When president Sarkozy suggested at the recent EU summit that a central fund of 300billion euros be established for the ECB to be able to bail out banks within the EU, the German chancellor, Angela Merkel, was quick off the mark to quash this idea.

Unsurprisingly, she is not prepared to see her taxpayers have to contribute even more money to the EU - money that might be used to rescue banks in Spain, Italy, Greece and other nations.

This is why the authors rightly remind us: ' monetary union has yet survived outside a political union'.

Real objective

The ultimate aim of the EU political class is to transform, incrementally, their system into a single state. The Lisbon/Constitution Treaty will take several steps towards this objective. However, the increasingly remote elite want to achieve this goal in as politically painless a manner as possible.

This means not alerting their own national electorates to the real objective or its implications and this is why the likes of Merkel are, at this stage, reluctant to transfer huge additional sums to Brussels or agree to a EU federal level of taxation.

Nothing would be more likely to awaken the peoples of Europe to what is happening than for the EU to move in this dramatic direction.

Challenge ahead

So, the EU project is now facing a major challenge and its leaders must be praying that a quick economic recovery results in the single currency not being tested seriously in terms of its current inner - political - contradictions.

If it is, EU politicians will have to choose whether to, on the one hand, confront public opinion and rescue their beloved euro with full blown political/fiscal integration.

Or, on the other, let the whole project unravel because at this stage the respective peoples in most of the key member states are not prepared to pay the full price.

~ written by Marc Glendening, DM Campaign Director