The Corner

The Return of Politics (Again)

The Daily Telegraph’s Ambrose Evans-Pritchard reports on two stories underlining how the return of national politics to Europe is complicating the technocratic attempt to shore up the one-size-fits-all currency.  

From Holland, there’s this:

The Dutch Freedom Party has called for a return to the Guilder, becoming the first political movement in the eurozone with a large popular base to opt for withdrawal from the single currency.

“The euro is not in the interests of the Dutch people,” said Geert Wilders, the leader of the right-wing populist party with a sixth of the seats in the Dutch parliament. “We want to be the master of our own house and our own country, so we say yes to the guilder. Bring it on.”

Mr Wilders made his decision after receiving a report by London-based Lombard Street Research concluding that the Netherlands is badly handicapped by euro membership, and that it could cost EMU’s creditor core more than €2.4 trillion to hold monetary union together over the next four years. “If the politicians in The Hague disagree with our report, let them show the guts to hold a referendum. Let the Dutch people decide,” he said.

 Mr Wilders is not part of the coalition. However, the minority government of Mark Rutte relies on the Freedom Party to pass legislation. The two men were in talks on Monday on €16bn of fresh austerity cuts needed stop the budget deficit jumping to 4.5pc of GDP.

 The study said the eurozone cannot survive in its current form. The longer Europe’s politicians dither, the more costly it will become. “The euro can only survive if it becomes a fiscal transfer union with national sovereign debt subsumed in eurozone bonds,” said co-author Charles Dumas…

And then Evans-Pritchard turns his bleak gaze back to Spain, highlighting how the country’s (Conservative) prime minister chose an interesting time to announce the fact that his country would ignore the EU’s deficit target—the immediate aftermath of a summit where everything was, once again, meant to have been put back on track. Ooops.

With condign symbolism, Mr Rajoy dropped his bombshell in Brussels after the EU summit, without first notifying the commission or fellow EU leaders. Indeed, he seemed to relish the fact that he was tearing up the rule book and disavowing the whole EU machinery of budgetary control.

 He is surely right to seize the initiative. Spain’s economy will contract by 1.7pc this year under his modified plans and unemployment will reach 24pc (or 29pc under the 1990s method of counting). To compound this with manic fiscal tightening – and no offsetting devaluation – is intellectually indefensible.

Evans-Pritchard believes that Spain’s move means that Angela Merkel’s “fiscal compact” is now a dead letter. Not necessarily, I reckon, but Evans-Pritchard is surely right to point to France—and the possible election of the Jurassic François Hollande in the upcoming presidential elections—as the place where the compact could finally become compost.

And what then will Germany do?


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