Blog 2023 Malcolm Blair-Robinson

The fallout form the Veto continues. Of much greater importance is the outcome of the summit itself. This may turn out to be the last summit at which there was any prospect for the survival of the Euro.

Looking back since the crash and especially over the last two years there has been meeting after meeting at which everything is said to be put right, yet nothing is. Action is not taken when agreed, funds without money are created, threats are issued and so on. The latest is clearly not enough to do any good.  It does not empower the ECB to function as a normal central bank at the heart of a normal currency and no mechanism exists for the zone to issue universal bonds to finance itself.  It cannot do this because there is no coherent political structure from which the ECB can draw its authority. There is just a collection of treaties and protocols. These restrict, they do not empower. Moreover the proposal that the the European Commission shall have oversight of all Eurozone budgets, perhaps to include non Euro volunteers, is counter democratic. Under pressure from angry voters in countries whose plans are thwarted, such an arrangement cannot stand.

The EU now faces a crisis on several fronts. The first is that it is attempting to fill the absence of proper democratic institutions for fiscal governance with those which are profoundly undemocratic. This requires of  member countries not only a surrender of sovereignty, but to surrender it to an unelected authority. This is untenable. Next many of its members are so over borrowed they are about to go bust, the markets will not lend them any more money and without rescue they are headed for disorderly default. On top of that the financial institutions which the euro represents as a currency are now seen to be utterly dysfunctional. Finally the resolve to re-organise to put things right is beyond the capacity of the politicians now leading the various member countries.

On the scale of this gathering calamity, Cameron’s veto is nether here nor there. Save for this. None of the countries have any experience of running a reserve currency. Britain has. None of the countries have old established democracies evolved over centuries. Britain has. None of the countries has a financial sector of world class. Britain has. Put simply, the only country with the skills to solve the crisis is Britain. If we had joined the Euro it would have been set up differently, that would have been our price. This crisis would never have arrived. It is, this blog now believes, difficult to see a solution which will save the Euro, without British expertise. The tragedy of the veto is that, not for the first time, Europe needs Britain as much as  Britain needs Europe.

What Britain now has to assess and this includes the Eurosceptics, is whether our economy can stand the disintegration of the euro. Plans are being prepared. A 10% shrinkage in economic activity is projected. Is that what the Tory party wants? It may not prove popular, especially among the professional classes whose standard of living would be shattered and assets decimated. That may not prove a good election platform.

It is certainly true that we became so beguiled by our financial services that we allowed our industrial capacity to shrink below survival level and that this decline has taken place in the period since we joined the Common Market in 1972. If we came out of the EU we would be forced to regenerate our manufacturing sector to at least three times its present capacity and to find innovative in ways to do this. We would also need the capacity to raise the capital to finance it and to continue to attract inward investment. This may not be impossible, but it is a very big call and not one we could have a hope of answering with our economy in its present state of over borrowed and deficit crisis. The option for Britain to vote in a referendum to leave the EU is only realistic, if the EU is first restored to health and the world economy can offer the opportunities to Britain it would need to prosper on its own. At present the West is so weighed down by debt that growth will be impossible. It may not be the clever moment to stand alone.

This entry was posted on Wednesday, December 14th, 2011 at 1:46 pm and is filed under Malcolm Blair Robinson. You can follow any responses to this entry through the RSS 2.0 feed. You can skip to the end and leave a response. Pinging is currently not allowed.