The Corner

The Euro: A Threat to Political Stability

Writing in the Sunday Telegraph, here’s an obvious maniac with crazy talk about the euro:

With different political histories and traditions, a move to political union is unlikely to be achieved quickly through popular support. Put bluntly, monetary union has created a conflict between a centralised elite on the one hand, and the forces of democracy at the national level on the other. This is extraordinarily dangerous. In 2015, the Presidents of the European Commission, the Euro Summit, the Eurogroup, the European Central Bank and the European Parliament (the existence of five presidents is testimony to the bureaucratic skills of the elite) published a report arguing for fiscal union in which “decisions will increasingly need to be made collectively” and implicitly supporting the idea of a single finance minister for the euro area. This approach of creeping transfer of sovereignty to an unelected centre is deeply flawed and will meet popular resistance.

To interrupt for a moment, many of those pushing back against euroskeptic arguments now like to claim that the project of “ever closer union” has been safely consigned to the past. The Economist has a classic of the genre in its latest issue. Well, that is not true and it has never been true, as the author of the Sunday Telegraph article reminds us (and there are innumerable other examples to choose from).

But back to the Sunday Telegraph:

The elites in Europe, the United States and international organisations such as the IMF, have, by pushing bailouts and a move to a transfer union as the solu­tion to crises, simply sowed the seeds of divisions in Europe and created sup­port for what were previously seen as extreme political parties and candidates.

Parties, I would add, that sometimes have “interesting” connections to the Kremlin: Mr. Putin is one of the few beneficiaries from the destabilization that the EU has caused and is causing. Amid claims that Putin would benefit from Brexit, that’s worth remembering. In a sense, Brussels is the most significant (if accidental) European ally that the Kremlin now has.

Back to our mysterious author:

In 2012, when concern about sovereign debt in several periphery countries was at its height, it would have been possible to divide the euro area into two divisions, some members being temporarily relegated to a second division with the clear expectation that after a period — perhaps 10 or 15 years — of real convergence, those members would be promoted back to the first division.

That would have been a variant of our old friend, the Northern Euro, but the author feels the time has probably passed for that. The easiest way out now, he argues, would be for Germany to quit the euro (something discussed on this very Corner back in 2010):

Germany faces a terrible choice. Should it support the weaker brethren in the euro area at great and unending cost to its taxpayers, or should it call a halt to the project of monetary union across the whole of Europe? The attempt to find a middle course is not working. One day, German voters may rebel against the losses imposed on them by the need to support their weaker brethren, and undoubtedly the easiest way to divide the euro area would be for Germany itself to exit.

But the more likely cause of a break-up of the euro area is that voters in the south will tire of the grinding and relentless burden of mass unemployment and the emigration of talented young people. The counter-argument — that exit from the euro area would lead to chaos, falls in living standards and continuing uncertainty about the survival of the currency union — has real weight.

But if the alternative is crushing austerity, continuing mass unemployment, and no end in sight to the burden of debt, then leaving the euro area may be the only way to plot a route back to economic growth and full employment. The long-term benefits outweigh the short-term costs. Outsiders cannot make that choice, but they can encourage Germany, and the rest of the euro area, to face up to it.

If the members of the euro decide to hang together, the burden of servicing external debts may become too great to remain consistent with political stability . . . 

And who was the wild-eyed writer of this lunatic screed? Mervyn King, governor of the Bank of England until 2013, that’s who.



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