Guy Verhofstadt is a former Prime Minister of Belgium, and now leader of the Liberals in the European parliament. He is also the most splendidly unreconstructed €uro-zealot you could hope to meet.
With the European House crashing about his ears, his cry in the plenary on Wednesday was “More federalism! More political integration! €uro-bonds! Debt mutualisation! More Europe!”. And yet elsewhere in his speech he reminded us that we faced not a world crisis or a world recession, but a European crisis. He seemed oblivious to the obvious flaw in his logic.
I wrote to him afterwards in the following terms:
Along with other colleagues, I enjoyed your Europe Day speech in the plenary this afternoon, and rather surprisingly, I found that I agreed with part of it. You said, as near as I can recall: “We must remember that this is not a global recession, or a global financial crisis. It is a European recession, and a European crisis”. I agree. I raised my Blue Card, seeking to put a question to you, but this was disallowed by the President. So I put it to you now.
Has it occurred to you to ask why this recession is unique to Europe (or at least largely so — though the USA also has some problems)? Ask any economist, and the answer is clear. The EU is over-taxed, over-regulated, and over-borrowed. The €uro experiment is failing before our eyes — it is clearly not possible for Germany to share a currency and a monetary policy with the Club Med countries. The trade imbalances between North and South cannot be resolved in a single currency zone. Greece will not start to recover until it breaks free, defaults and devalues.
In this context, your call for “More Europe” seems bizarre, if not perverse.
Best regards. ROGER HELMER MEP
In one sense, of course, he is right. As the MacDougall report noted as early as 1977, a successful monetary union in Europe is possible — but it would require some 6 to 8% of EU GDP to be available as fiscal transfers from winners to losers. In those days we used to call it fiscal transfers: now we call it bail-outs. If Germany were prepared to subsidise the Club Med countries on that scale, forever, in a sort of EU-wide Barnett Formula, then the €uro could work. But of course it’s politically impossible: German voters wouldn’t stand for it.
The euro-fanatics are like the obsessive gambler who plays double-or-quits. Every time he loses, he doubles the stakes. Theoretically, he must always end up ahead, except for one small snag. The theory assumes he has an infinite amount of money. The reason punters lose and the house wins is because punters don’t have infinitely deep pockets. Sooner or later, they’re broke, and go home with a hangover. Just like the €urozone.
In the text-book definition of lunacy, people keep repeating the same action — More Europe! — expecting a different result next time. The rest of us can see the catastrophe unfolding, but Verhofstadt and his chums are like those earlier Europeans, the Bourbons. They have learned nothing, and forgotten nothing.