Cameron’s Big Bazooka

David Cameron and George Osborne are calling for “A Big Bazooka” to sort out the euro-zone’s problems.   They want massive new intervention and integration in the euro-zone.
 
The conventional wisdom in the Party seems to be that a euro melt-down would be so awful, for Britain and indeed for the world economy, that anything at all is worth doing to save it.
 
For years, we Conservatives have been pointing out the fundamental flaws of the Single Currency project, and recent events have overwhelmingly vindicated our position (a case made cogently by Peter Oborne in his paper “Guilty Men”).   So can it be right that we have now done a 180 degree about-turn, and are there really grounds for urging more centralisation on our long-suffering neighbours?
 
There are several key questions:  The Big Bazooka might work in the short term, but would it deliver a sustainable solution in the long term?  Is it good for Britain?  And (less selfishly) is it good for euro-zone members?  Or are we urging them to abandon forever any pretence of freedom and democracy merely to shield ourselves from the economic storms for a few more months?
 
Certainly a fiscal union, a common debt pool and deeper euro-zone integration would calm the markets, and in simple economic terms, it looks workable (though the eurozone would need a massive increase in labour mobility if it wanted to be more like that successful single-currency area, the USA).  But I very much doubt that it’s democratically sustainable.  We in England hear constant complaints about the extent to which we subsidise the Celtic fringes, but that murmuring would be as nothing to the anger of the German voter when she realises that she will be subsidising Greece — and Ireland, and Portugal, and Italy, and Spain — forever.
 
That, indeed is Merkel’s dilemma.  She wants to save the euro, and she wants to get re-elected.  But the two objectives are incompatible.  If she donates enough German taxpayers’ money to save the euro, she will be punished (and is already being punished) at the ballot box.
 
Exactly the problems which we foresaw for the Single Currency from the beginning will remain in place.  Unit labour costs will continue to diverge.  Subsidies from north to south will have to grow and grow.  I don’t believe it can last more than a few years, and exactly the same crisis will hit us again.
 
In their recommendation, Cameron and Osborne are seeking to create an intensified supranational authority which takes decision-making ever further from the people.  They end up, in effect, with “taxation without representation”.  Already Greece has lost the ability to decide for itself, and must await the diktat of those two new Czars of the euro-zone, Sarkozy and Merkel.  It’s just plain anti-democratic, and as such it cannot survive in the long term.  It is also, in a fundamental sense, just not right.
 
While the Big Bazooka might offer Britain some temporary respite, it cannot solve the problem.
 
What Conservatives should be urging is an orderly, though perhaps partial, dismantling of the euro-zone.  I’m sure that Germany and Austria can support a sustainable currency union.  But Germany and Greece cannot.

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3 Responses to Cameron’s Big Bazooka

  1. I totally support you in this.
    In the 1990s when Norman Lamont had to face the end of the Euro dream, things went back to normal very quickly after Mr Soros pulled the plug. The same would happen in Europe, actually.
    The trouble is that the Euro fanatics have been spreading the rumour that disaster lies outside the eurozone.

  2. Malcolm Edward says:

    I despair at the increasing unreality and short-sightedness that Cameron and Osborne are displaying with regard to the Euro-mess – plus an obvious disdain for national economies, freedom and democracy.

    Whilst in terms of balancing the accounts, it is theoretically possible for Germany to permanently subsidise Greece, the populations in both countries will not like it for the reasons you have given – and it can be no answer forcing Greece to become a permanent welfare state dependent on German largesse.

    In my view an orderly (as possible) break-up of the Euro is the least-bad solution for everyone.

  3. Peter Hulme Cross says:

    “What Conservatives should be urging is an orderly, though perhaps partial, dismantling of the euro-zone. I’m sure that Germany and Austria can support a sustainable currency union. But Germany and Greece cannot”

    Absolutely right!

    The sensible solution would be for ‘stronger’ states like Germany, Austria, Netherlands, Finland to exit the Eurozone and form their own currency union and leave the Euro to the ‘weaker’ states like Greece, Italy, Spain, Portugal and France.
    I think this will eventually happen, although I suspect France will want to be in the same block with Germany.

    There is already serious civil unrest in Greece and who can blame them. Sooner or later the Government there will fall. It wasn’t that long ago that Greece was ruled by a Junta of Colonels.

    The Germans are certainly not happy with Merkel’s coalition. In the recent Berlin elections, The Pirate Party got 8.9% of the vote and a seat in the Bundestag. When the Germans elect Pirates to the Parliament, you know that their mood is turning against the current leadership.

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