A Reminder

by Andrew Stuttaford

The pressure is mounting on Germany to do more to help out the euro zone to which it has already committed billions.

Writing in the Daily Telegraph, Liam Halligan points out a few home truths (my emphasis added):

There is and always was, of course, a fundamental contradiction at the heart of the single currency project. While the ECB controls interest rates and the money supply, each country’s fiscal surplus or deficit is driven by the tax and spending decisions of its own sovereign government.

So, it’s simply impossible to enforce collective fiscal discipline in a currency union of individual states, each answerable to its own electorate. The only alternative is to subjugate domestic voters and create a federal government across the eurozone, with a common fiscal policy allowing cross-border transfers. But that’s almost political union, and is now further away than ever.

Right across Europe, much of the public has been deeply suspicious of the euro ever since the idea was conceived. The French only voted “oui” to joining by the narrowest of margins, after their government cobbled together votes from former colonies. The German public, like citizens in so many other member states, was never granted a referendum.

Since the single currency’s 1999 launch, in fact, there hasn’t been a single independent opinion poll in Germany in favour of euro membership. No wonder the hard-working German public is seething about the prospect of yet more Greek bail-outs – and who can blame them?

Halligan is not quite right about one thing, however. He describes the governments of these states as being answerable to their electorates, but that’s only true up to a certain point. In country after country after country, a large majority of the political class has united behind the European project to a degree that should impress psychiatrists and cynics alike, leaving the voters with little in the way of a real choice on these matters. And that may be creating an opening that extremists like Greece’s Syriza — or Golden Dawn — will be only too pleased to fill.