Wednesday, June 22, 2011

Eurosceptics were dead right about the euro

Back in 2000 the subject of hot debate was should Britain join the euro. This debate was held far and wide, from newspaper columns, to talking heads on the news, to parliament and even in the Conservative association in Basildon, where we had a debate on the matter.

The basic positions were on the one hand that the euro could not work without very large monetary transfers, which were specifically ruled out in the treaty, and on the other hand that if Britain stayed out that we would be sidelined economically and our prosperity would suffer. Actually the latter does not really represent the supposed Götterdämmerung that many pro-euro commentators stated as absolute fact would befall our country if we stayed out. There was also the truly stupid argument that wouldn't it be nice not have change holiday money when travelling to the continent. As if that was more important that the potential to wreck our economy with a failed euro experiment.

In general what was particularly noticable was how the euro-sceptic view on the euro was ridiculed by the BBC and their pro-euro fellow-travellers. It was conflated with a supposed hatred of foreigners by 'little Englanders' and treated with amused contempt. Well, who was right and who was wrong?

The key problem with the euro was, and is, that in the event that European economies diverged, and one or more nations went in recession while others did not, then the currency could not move to match the new economic conditions. It would either be at the wrong value for some nations or others. So, the euro is now at the wrong value for Ireland, Greece, Spain and Portugal while being right for Germany and France. Without the ability of their currency to devalue, then the smaller nations in trouble have to make cuts to wages and public services instead. They even risk getting into a situation that the cuts make their growth levels so low that they never get out of debt and so face generations of poverty. Meanwhile in Britain, Sterling has devalued by about 20% over the last few years, boosting exports at exactly the right time for our economy.

It has come to a situation where very serious people in the UK Parliament and abroad are discussing, or advocated, some nations leaving the euro. Frankly, in the case of Greece and Ireland that is exactly what they should do. However, expect a rearguard action by, well, the old guard who see the European project as more important than reality.

No apologies by the BCC and various pro-euro commentariat though.

Hell would freeze over first.