Why it’s wrong to go to the trenches to defend the €uro

Dan Hannan just wrote an interesting piece with his predictions for the EU .  He believes that the Euro-Corporatists of the “centre-right” are realising that they can’t make austerity stick in the face of popular unrest and the revolt at the ballot-box.  So they will revert to type: more spending, more stimulus projects, more integration, common taxes and budgets and a common Finance Minister.

He could be right.  Never mind that excessive government spending got us into this mess.  The Eurocrats will do the one thing they know how to do — more of the same.  And the effect will be to accelerate Europe’s decline, and facilitate the triumph of the East.

I was thinking similar thoughts, but from another starting point.  I am sick to death of being told by Osborne and Cable and others that “Even though we’re not in the €uro, it will be a disaster for Britain of it goes down (or breaks up).  So we must strain every sinew to support it”.  And not just strain every sinew, but spend the money we don’t have to prop it up.

Let’s get back to basics.  The €uro is the problem, not the solution.  If we keep pursuing palliative measures (and betting the ranch) to keep the wretched €uro on life-support long after its sell-by date, we just make matters worse.

Of course there will be horrible consequences when the currency goes down.  But that’s already baked into the pie.  If on the other hand we keep the €uro in place, we also keep the appalling imbalances between North and South which are at the heart of the problem.  We keep the political tensions, where the Greeks hate the Germans, and the Germans resent the Greeks.  The whole European project was designed to eliminate the historical nightmare of national hostility in Europe, yet perversely it is having the opposite effect.

The choice is quite simple: either short-term pain and chaos while we dismantle the single currency, or permanent pain and chaos and political unrest if we fail to do so.  Enough is enough.  Time to call a halt.  There will be a realistic prospect of recovery in a post-€uro world.

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6 Responses to Why it’s wrong to go to the trenches to defend the €uro

  1. I totally agree with this diagnosis.
    What I cannot believe is the constantly repeated refrain that somehow the break up of Europe has anything to do with me here in UK. Maybe it has, maybe it hasn’t, but will some kind person please explain how much we are actually involved in Europe/ I want to know which banks are in for it, I would also like to know what effect the break up of the Euro would have on our trade (if anything.
    I have never actually heard these two vital questions raised on the Beeb, you know.
    It is like being in a Hindu temple – constantly repeated phrases without any meaning.

  2. Gary Rickard says:

    Surely, in their heart of hearts, even the most faithful €uro fundamentalist zealot must know that the problem is not with the €uro but the problem IS the €uro.

    How much simpler life would be if we woke up tomorrow and the EU and its ruinous currency had simply gone away.

  3. Derek says:

    Every day we hear “experts” telling us that the Greeks must be kept in the Euro as their exit will lead to chaos and disaster for them and for us, the whole of the EU. This brings so much fear that many are convinced that it must be prevented at all costs. Fear is a powerful emotion and it would be used to prevent us voting to leave the EU if we ever had a referendum. As Dan Hannan reminded us at a meeting in Southampton this evening we had the same fears about leaving the ERM back in 1992, and yet when it happened it was the start of our economic recovery. It could be the same for the Greeks.

    • You are without doubt perfectly right: when the Greeks do leave the Euro and renounce all their debts as if they had never been on a spending spree, they will soon recover as their New Drachma slides down into its usual position of near worthlessness and the tourists start pouring in again.

      Robert Peston was, however, talking to a serious lot of bankers on the Beeb last night. It is us – yes your savings – that are going to have to “take a haircut”. In simple terms, Barclays could go bust and, if you have your life savings with them (or Lloyds, or RBS or Nationwide or Abbey or whatever) you might end up at the end of the week with a closed bank and no bail out and no life savings.

      Even worse, you might end up with a bankrupt country (we are £1,000,000,000 in debt and counting) like Iceland.

      • I rather think that the risks are being over-hyped. British (and other European) banks have been limiting their exposure to Greek debt — and have anyway already taken the hit on substantial hair-cuts. And the case of Iceland is instructive. It appeared to be an absolute disaster — but since they took the hit, and the devaluation, things have started looking up. They’ve priced themselves back into markets — as Greece must do eventually.

  4. Phil Richmond says:

    Completely agree but then Cable & Osborne as well as being completely clueless are both committed Europhile’s.

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