We should not allow the very real problems of Greece and the Euro to dampen enthusiasm for the ideal of a united Europe. For centuries the various nation states, which make up the European family, have been at war with each other from time to time and much of the time, at huge human and cultural cost, culminating in WWI and WWII.
Now, every five years, over 500 million people go to the polls to elect members of the European Parliament. Such a concept would have seemed unreal in 1943, yet generations now live with the prospect of secure peace, rather than the certainty of coming war. This is the greatest tribute to the sacrifices of the fallen, buried in their millions across the continent. The European Union enshrines the suffering of those terrible conflagrations and gives them meaning.
The EU is one of the greatest accords of human history; it is a success and its success will continue. As with any great undertaking there are some issues unresolved, for which resolution calls. The first is the simple issue of monetary union, which now exists in the euro zone, when economic union does not. The present crisis illustrates, to those who did not know, that you cannot have the one without the other. The second is the same issue that traumatised the original model of the United States and to some extent still does; whether independent states should be bound together by a federal union or a looser confederation.
The second of these questions will resolve itself by evolution over time. The first must be resolved quickly. Given that there is a determination to protect the euro and sustain monetary union among the euro zone members, there must now be constructed an economic governance to which all members submit. Those who do not wish to, or cannot, will have either to leave the euro or allow their local euro to float. There are lots of dollars across the world floating against the value of other currencies and the US dollar. There is no reason why there cannot be a central euro for Germany, France and other financially disciplined countries willing to cede economic union, with floating euros for the others. Whatever happens, something must. It would be better to organise it pro-actively now, than salvage it from wreckage later.
Meanwhile the UK must prepare for a Greek default. The new FPC’s call for an audit of the exposure of UK banks to Greek debt and its entrails, is timely. The exhortation for them to use profits to shore up their balance sheets, still full of dodgy assets, instead of paying themselves and their shareholders, though overdue, is a game changer for the banking industry. This is a very good start for the Financial Policy Committee.