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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