€uro fanatics play double or quits

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:

Dear Guy,  

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.

This entry was posted in Uncategorized. Bookmark the permalink.

10 Responses to €uro fanatics play double or quits

  1. Well done! These people need a little feed back before the soar back into cloud cuckoo land.

    Roger, please may I ask you a little favour about Europe?
    Unlike many of your commentators, I have a way of getting your (and my!) thoughts into the classroom without going through the usual channels or without getting anyone into trouble.
    I would very much like to deconstruct the procedures of the European Parliament for a school project.
    If you go onto any European site, you just get endless drivel and propaganda and, thanks to far too much money sploshing round, there is a lot of verbiage.
    Could you please point me in the right direction so that I can actually find out what the day to day attendance, the day to day business and the rules for debate are? Who, for instance, initiates legislation? How is the President chosen and for how long? Who is allowed to speak and for how long? How many different types of session are there?
    The European parliament is simply not reported in the press. I wonder if you could perhaps recommend a book or two about this? Or, even better, a decent website.

    • I could sit down & tell you about it. Depending on location, I could visit your school & talk about it. I’ll see if we can find a suitable book or web-site.

      • Roger,
        I am not in a school: I write lesson plans for the TES. If you did happen to come across the rules for the parliament, though I would be really pleased if you could help. Otherwise, keep up the good work uninterrupted.

  2. Gary Rickard says:

    The only hope for the €uro is that it splits in two but I suspect the zealots would rather drive the continent into the ground than do anything that proves they were wrong.

    Europe is a faith, and with faith, who needs evidence?

    • I had a talk with a Swiss Hedge Fund Manager over Christmas. To my surprise, this very successful man thought that the Euro was permanent. Germany, he said, actually wanted it to continue in its present form, but that it might allow some inflation. In that way German exports to USA and China would become cheaper and they would be even more prosperous.
      There are some signs that he is right too.

      • Gary Rickard says:

        Thanks Mike. So that means that it is in Germany’s acknowledged interest to have a row of bankrupt basket cases around the Med to hold down the value of the Euro.
        Hardship for half a continent is good for Germany so Germany doesn’t want to fix it. They might as well revert to slave labour.

  3. Mike Spilligan says:

    Mr. H: Is Verhofstadt obliged to answer your question? – if so I hope you will let us see the reply, if it’s possible to translate it into coherent English.

  4. David W. says:

    Great perspective.

    America still needs a lot of correction but, in the spirit of Mr. V, leadership keeps pushing more crises, more regulation, more money printing, more market manipulation. They refuse to accept the most effective action would be getting the government out of the way. Sooner or later, the failure will come, and we can move on with the good actions that should have transpired in the beginning.

  5. Tony says:

    Sorry to be somewhat off topic but I noticed the following on the BBC’s coverage of the Queen’s speech:
    http://www.bbc.co.uk/news/uk-politics-17988236

    “European Union (Approval of Treaty Amendment Decision) Bill

    Approves the creation of the European Stability Mechanism, a permanent means to support Eurozone countries in trouble. Exempts the UK from a new European bailout agreement between eurozone countries.”

    I was wondering what UKIP’s position on this was and didn’t know who to ask. The reason for my question is this highly disturbing video. I hope it is some sort of hoax otherwise we’re all in deep trouble:

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s