Old €urophiles never learn


June 6th found me reading the Financial Times (sigh of relief from readers tired of me quoting the Telegraph!).  I was on a plane, and it was the only English-language paper they had, apart from the New York Times.

The lead story on Page One was “Brussels bid to strip London of its Libor rôle” (although the paper failed to include the circumflex accent).  OK.  So the City screwed up seriously on the Libor rate fixing scandal.  But then, hands up anyone who thinks that Brussels would do it better.  The truth is that the EU harbours extreme prejudice against the City of London, and a series of measures including the Financial Transaction Tax, and the regulation of bankers’ bonuses, and now the Libor proposal, have a clear objective of cutting the City down to size — despite the damage that this would do to the whole of Europe, never mind the UK.

But I was struck by an article on page 9 from the pen of former German Chancellor Gerhard Schröder (they got the trema right this time), entitled France should copy Germany’s reform efforts to thrive.  I think that Mr. Schröder may be right, but you also have to admire his wonderfully patronising approach.  “You’ve got problems, chaps?  Never mind.  Just copy us, and you’ll be fine”.

He makes another point which bears consideration.  He points out that some EU countries are keen on further and full integration, whilst others (he has the UK in mind) favour a looser model.  “Europe must choose between these two positions”, he asserts.  Yes indeed.  Though it is quite conceivable that both models might co-exist.  We could see a United States of Europe based essentially on today’s €urozone, with other countries in something close to a Free Trade Area

(And an aside to my €urophile friends: No.  Countries in that zone would not need to be subject to “regulation by fax”, as Norway is said to be.  The USA, and Canada, and China, and Japan can export to the EU without being subject to EU regulation, and so will we.  Korea has a Free Trade deal with the EU — is Korea subject to regulation by fax from Brussels?).

Then he says: “To solve the problems of the €uro, we must change the structures of the European institutions.  The fundamental mistake of monetary union is that there is no coordination of economic and financial policy”.  He just hasn’t got it, has he?  The fundamental problem of the €uro is that it attempts to apply the same monetary policy and interest rates to widely divergent economies.  In a full fiscal union, you could overcome that problem by massive, permanent fiscal transfers from North to South (in a sort of mirror image of the Barnett Formula).  But surely Schröder must realise that such payments would be wholly unacceptable to German tax-payers.

More fundamentally, the €uro was supposed to benefit the EU.  Clearly it has had exactly the reverse effect.  So just why is it important to save it?  If Schröder is making any case at all, it is surely that the EU should abandon its rash monetary experiment — not re-design it from the ground up simply to accommodate the cuckoo in the nest?

The flight of fancy continues.  “Only a united Europe can stand a chance in a globalised political and economic world”.  Stand a chance of what, Gerhard?  Of freedom and prosperity?  So Switzerland stands no chance?  And Singapore stands no chance?  In that case, how come those small, independent countries are doing so much better than the EU?

Then it’s back to the same hubris we saw in the title.  Preposterously, he says “Our model can be a beacon and a blessing for the world”.  Oh my yes!  Zero growth.  High unemployment (youth unemployment at 60% in Spain and Greece).  Grinding poverty and misery in large parts of Europe, and a growing sense that our governing institutions have entirely lost any sense of legitimacy and accountability.  Some beacon.  Some blessing.  But then you can’t teach an old €urophile new tricks.  Ask Ken Clarke.

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4 Responses to Old €urophiles never learn

  1. Wilfred Aspinall. Former Member European Economic and Social Committeel says:

    Its not just the desire of Brussels to strip the Libor from London as I notice from the Open Europe Blog that during the negotiations by officials over the revision of the Markets in Financial Investments Directive (MiFID), agreement was reached with the following insertion,
    “No action taken by any regulator or the European Securities and Markets Authority (ESMA) should discriminate against a member state as a venue for the provision of investment services and activities in any currency”

    A major insertion to enable the UK to retain its dominant position as the financial centre of Europe.

    I would just mention that this could affect all energy trading transactions undertaken in euro.

    This is a long standing issue with some member states wanting to break the City of London right to undertake these services and activities. This has been backed up by a legal option from the ECB – Euopean Central Bank – that all transactions in euro should be cleared within the eurozone.

    This legal opinion by the independent ECB challenges the City of London.

    It is reported that the UK has launched a case against the eurozone and the ECB at the European Court of Justice.

    The above inserted wording is a success but this has to be approved by the European Parliament and Council. Fat chance that will happen.

    We must recall that the City of London generates some £60Bn in tax revenue for the Treasury so this is a major attack on our sovereign right to provide a service.

    We have to resist this as this might be the first challenge to be initiated.

  2. Andrew Shakespeare says:

    I couldn’t do your job, Roger. I doubt there’s enough brick walls in the European Parliament for me to bash my head against.

  3. Jane Davies says:

    None so blind as those that do not see!

  4. All this about the Euro being a disaster and Europe being a cause of poverty makes a lot of sense as soon as you travel outside the European community. Yesterday I met a Dutchman on the beach in Queensland. In no way did we seem to be fellow citizens. It was only when he started to tell me that he was married to an Australian that I felt any sort of compatibility with him.
    My son takes me on Christmas breaks round snowy places. In Switzerland, Norway, Iceland (even), we are very much the poor relation. In Norway, I couldn’t even afford a cup of coffee in a restaurant!
    In Singapore, Australia even Saudi Arabia, I notice that the standard of living of my own children is way higher than what people are used to in UK. For instance, they think nothing of taking everyone out to a restaurant or buying petrol.
    As soon as we get back to the same position in the world, the better, I reckon!

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