Blog 2023 Malcolm Blair-Robinson

Even this Blog cannot answer that question. The classic symptom of a situation out of control is that nobody can tell what is coming next.

We can be sure that this is the end of the euro zone Mark I, which sought to run its currency with loose undertakings, declarations and conflicting, but powerless, institutions. We can also be sure that the changes necessary for the survival of the project sufficiently to become Mark II, will fundamentally change the European Union. There are two very broad future structures in prospect.

The first is that there simply is no way significant treaty changes will be capable of getting the necessary democratic mandate and that the existing institutions will have to muddle on. In this event the paymaster is Germany, the German parliament will have to approve the money and this will only be available on terms and conditions acceptable to the German electorate. This will represent the ceding of financial sovereignty to one power within the euro zone and it, Germany, will provide the leadership, discipline and resources to keep the show on the road. This will include the imposition of new taxes which all will have to pay. Some will be happy, many will not. Those who cannot stomach such a thing will drop out of the euro and join the non-euro members of the EU, which grouping will become more like the old EEC. All of this will work perfectly well.

The alternative is that those countries willing to go the full mile, which would be likely to include France, Germany and the northern and eastern countries able to run sound economies, will pool their sovereignty on economic matters. They will need a Parliament, a Finance Ministry, a full blown Central Bank and possibly an elected President. France is reported to be working on just such a plan. The rest will drop out into the EEC type group with their own currencies.

With either style of outcome the UK and other non-euro EU members should find no difficulty in establishing a more arms length arrangement connected to free trade which will be just as economically worthwhile as the present arrangements at the time when the whole thing appeared to work. What is imperative is that the euro zone has to decide, very soon, what it is going to do, or face the certainty of collapse.

The Prime Minister of the UK, David Cameron, has indicated that full scale preparations are in hand in case the euro zone goes over the cliff. It would be wise to include the thought of a free trade area consisting of the U.S., the U.K. and Ireland. This would be the largest single market in the world, bigger than the EU inclusive of the UK and a lot bigger without. There are very close business links between the UK and US and culturally and temperamentally it would be a far better fit. Moreover it would be anathema now for the UK to use the Euro, ever. The dollar could be a different matter.

This entry was posted on Friday, November 11th, 2011 at 2:41 pm and is filed under Malcolm Blair Robinson. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.