Joined: 03 Jun 2005
|Posted: Sat Dec 10, 2011 9:39 am Post subject: APOCALYPSE? NOT FOR US, THEY ARE SINKING FAST, WITHOUT US
|Apocalypse Not: Death of the euro need not be the disaster that doomsayers are predicting
By Dominic Sandbrook
Last updated at 11:46 PM on 9th December 2011
CAMERLOON HAD NO CHOICE BUT TO REJECT THE NEW TREATY, HE DID NOT WANT TO GIVE US A REFERENDUM WHICH WOULD HAVE TAKEN US OUT OF THIS SHAMBLES, SO HE RETURNS A HERO, MY AUNT FANNY!!!!
A few weeks from now, it will be 40 years since Edward Heath signed the Treaty of Accession that sealed Britain’s membership of the European Community, the ancestor of today’s European Union.
When Sailor Ted was scrawling his signature that day in January 1972, Europe seemed the future. It represented international brotherhood, peaceful idealism and the triumph of the free market. Centuries of splendid aloofness were over, and Britain was part of one big happy family.
Four decades on, the position could hardly be more different. After using Britain’s veto to block a European treaty that would have marked the triumph of Franco-German plans for greater financial convergence, David Cameron flew home yesterday virtually isolated in Europe.
Enlarge I know you're all tired but smile. Cameron looks into the distance (4th from left, back row). EU leaders stand with Croatia's Prime Minister Jadranka Kosor (4th left), President Ivo Josipovic (5th left) and European Council President Herman Van Rompuy (6th left) after the country signed the European Union accession treaty. Croatia is set to become the bloc's 28th member on July 1, 2013
Perhaps never before has the gulf between European ambitions and British interests yawned wider. And never before has the fundamental question of Britain’s European identity been more up for grabs.
To the pro-European idealists who applauded the Treaty of Accession all those years ago, our current situation would have been almost unimaginable. They could never have dreamed that one day, as the European elite hurled more and more money onto the bonfire of the single currency, a British Prime Minister would turn his back and walk away.
In the long run, Mr Cameron’s decision may have incalculable consequences. For the first time since the early Seventies, Britain’s position in the EU gravy train is in genuine doubt.
More from Dominic Sandbrook... The last post: The shameful betrayal of the Royal Mail 02/12/11 As Merkel says euro meltdown could endanger peace, a historian's imagination runs riot... 28/10/11 The end of the twentieth-century tyrants, and the dawn of the multinational giants 21/10/11 DOMINIC SANDBROOK: Ed Miliband's cosseted life leaves him clueless 25/09/11 DOMINIC SANDBROOK: In decade after 9/11 our inadequate leaders plunged us into disastrous wars while ignoring the great economic challenges of our time 09/09/11 Capitalism in crisis, a warning from history: Eighty years ago, a banking collapse devastated Europe, triggering war. Today, faith in the free markets is faltering again 05/08/11 DOMINIC SANDBROOK: Could this be the end of America's economic supremacy? 01/08/11 DOMINIC SANDROOK: Why we should be proud of being Little Englanders... With the EU in disarray and pride in our imperial past finally returning are we seeing the rebirth of a confident English identity? 30/07/11 VIEW FULL ARCHIVE And, on the surface, the debacle of the Brussels summit seems to bear out everything that Eurosceptics have been saying for decades.
Even in the days of Edward Heath, critics insisted that a proud island nation, the land of Drake, Nelson, Wellington and Churchill, had no place in a continental federalist club.
The reality is a little more complicated. The great blunder of modern British history was not in entering the European project in the Seventies. It was in staying out 20 years earlier, when we were still Europe’s richest, most powerful and most influential state.
If we had taken the lead in shaping Europe in the Fifties, we could have moulded it in a way fitting our parliamentary traditions and democratic instincts. Instead we preferred to stand aloof. And so, under French and German leadership, the EU has swollen to become a grotesque, bureaucratic leviathan.
The idealism that drove its founders has long since sunk beneath a foaming sea of flagrant corruption, political self-interest and financial anarchy. And, most tragically, a union claiming to embody democratic values now seems indifferent to the basic demands of democratic accountability.
This sclerotic incoherence is summed up by the staggering fact that, once a month, the 736 members of the European Parliament, as well as thousands of officials, have to travel from Brussels to Strasbourg, followed by a fleet of lorries carrying documents — merely because the French insist that they must have sessions in both cities.
As for the utopian values that drove the founders of the European enterprise, who believed that only by coming together could they banish the conflicts and hatreds that had fuelled the world wars, they now lie in ruins.
David Cameron leaving the summit in Brussels yesterday afternoon. His refusal to sign up to a treaty to save the single currency sparked a furious debate over Britain's future in the European Union
The supreme symbol of the EU today is, of course, the euro — perhaps the greatest triumph of naive idealism over economic prudence in modern history.
It yoked together national economies as diverse as Germany, Portugal and Ireland, denying them the freedom to manage their own currencies and set their own interest rates.
With rates held artificially low, the poorer countries borrowed and spent as though there would be no tomorrow. Now the reckoning has come — and European taxpayers are paying the price.
Ironically, the greatest threat to the continent’s economic survival may be those who are shrilly proclaiming in apocalyptic terms that the breakdown of the euro will lead to some kind of financial armageddon.
In fact, there is a strong case to let the euro die a quiet and unlamented death, allowing poorer countries to go back to their old currencies, devalue, set their own interest rates and try to build their economies back up.
A few weeks from now, it will be 40 years since Edward Heath signed the Treaty of Accession that sealed Britain's membership of the European Community, the ancestor of today's European Union
It would be difficult and painful, certainly. It could well see banks collapse, businesses go under and inflation head through the roof.
Yet the unpalatable truth is that this might actually be the least of the evils open to Europe’s leaders. And despite their doomsday rhetoric, saving the euro may be the worst possible outcome for the continent’s beleaguered people.
Indeed, the extraordinary thing about Thursday night’s summit was that even after the implosion of the Greek, Irish, Italian, Spanish and Portuguese economies, France’s Nicolas Sarkozy and Germany’s Angela Merkel still refuse to contemplate a gradual, orderly break-up of the eurozone.
‘Never has Europe been so necessary. Never has it been in so much danger,’ declared Mr Sarkozy, cutting an increasingly melodramatic figure. ‘We must confront those who doubt the stability of the euro and speculate on its break-up with total solidarity.'
The message was clear. For France’s pound-shop Bonaparte, even to talk about the possibility of dismantling the euro is a kind of treason, a betrayal of the European ideal.
The truth is that the single currency has become a kind of fetish, an idol to which European politicians must pay obeisance. Infatuated with their grand project and indifferent to the suffering they are inflicting on people from Dublin to Athens, they are prepared to do whatever it takes to keep it alive.
Indeed, the words this week of the European Commission chief Jose Manuel Barroso leave no room for doubt. ‘The entire world is watching. We must do everything [to save the euro],’ he said. ‘It is extremely important that we all together, all the EU, show that the euro is irreversible.’
It is worth contemplating exactly what this entails.
Divided: A survey has suggested that only a third of French people and 41 per cent of Germans support staying in the single currency long-term
What Mr Barroso’s words imply is that there is no price the European elite will not pay — no hardship they will shrink from imposing on their people — to save the euro.
You merely need to look across the Irish Sea to see what this means. In five austerity budgets since 2008, the Irish people have suffered tax hikes and spending cuts costing the average family a whopping €613 each, while VAT has just hit a record 23 per cent.
And even democracy itself has paid the price, with the elected prime ministers of Italy and Greece kicked out to make way for technocrats approved by Paris and Berlin.
Yet we in Britain know better than anyone that when the political elite insist such-and-such is ‘unthinkable’ — and that disaster is the only alternative — then the reverse is usually true.
For those with long memories, the grim irony in all this is that it is so reminiscent of financial crises throughout history.
Many Tory MPs, not to mention millions of ordinary homeowners, will recall the shameful debacle of Black Wednesday in 1992, when Britain was forced out of the European Exchange Rate Mechanism, a precursor to the euro in which sterling’s value was pegged to other European currencies.
Norman Lamont was chancellor on the dreadful Black Wednesday in 1992
Then, as now, politicians were attached like limpets to an indefensible status quo, insisting that they must ride out the storm because the alternative would be catastrophe — only for events to leave them utterly humiliated.
Like the euro, the ERM was ultimately a political device, a step towards European convergence. From the outset, sterling’s value was set far too high, and it soon came under relentless market pressure. Yet the political classes insisted that leaving the ERM was utterly unthinkable.
Mr Cameron knows better than anyone what happened next, because on September 16, 1992 — Black Wednesday — he was the special adviser to John Major’s Chancellor, Norman Lamont.
On that terrible day, he watched as the Treasury wasted billions trying to defend sterling’s value and even raised base rates to a staggering 15 per cent.
It was all in vain, of course. Eating his words, Major was forced to pull Britain out of the ERM. So did the economy collapse in ruins? Not at all.
Liberated from the ERM and free to slash interest rates and cut taxes, the Major government presided over one of the biggest booms in recent history. By 1997, Britain’s budget deficit was just £15 billion — compared with £122 billion today.
Perhaps the most compelling parallel, though, is the fiasco of the gold standard — the system by which the value of the pound was pegged to gold — in the Twenties and Thirties.
The gold standard, like the euro, seemed untouchable. All ‘educated and reasonable men,’ declared the governor of the Bank of England, Sir Montagu Norman, believed in the gold standard — and any Chancellor who ditched it would be ‘abused by the instructed and by posterity’.
So it was that the pound’s value was fixed at a ludicrously high of $4.86, which meant the government needed to impose high interest rates to defend it, inflicting years of austerity, spending cuts and high unemployment on the British people.
But they were merely putting off the inevitable. By the late summer of 1931, the pressure of the markets had become irresistible, and even the Bank of England had to see reason.
Snubbed: Sarkozy walks by British Prime Minister David Cameron in an apparent snub at the EU summit
Despite the dire warnings of financial meltdown, leaving the gold standard was entirely beneficial to Britain. With the pound’s value free to fall from $4.86 to $3.40, the government was able to relax its austerity policy. And with interest rates falling to just 2 per cent, Britain was soon on the road to recovery.
Indeed, as the rest of Europe shivered in the Great Depression, British national production was actually higher by the end of 1933 than it had been in 1929. Wages remained high and, for those people still in work, life was better than ever.
And a year later, while our European neighbours were suffering the worst throes of the Depression, Britain was in recovery.
Little wonder, then, that Britain was largely spared the horrific street fighting, political extremism and tyrannical brutality that scarred almost every other European country in the Thirties.
Unfortunately, though, the current situation in Europe is even worse than the one confronting Britain in 1931.
If, say, Greece, Ireland and Portugal left the euro tomorrow, it probably would send shockwaves across the European banking system, unleash a second devastating recession and send prices soaring across the continent.
The words this week of the European Commission chief Jose Manuel Barroso leave no room for doubt. 'The entire world is watching. We must do everything [to save the euro]'
Yet the really frightening thing is that this might actually be the least worst option. For the longer that the European elite grind their people’s faces into the gutter in the name of the euro, the more resentment and hostility will build.
Once again, the ‘educated and reasonable men’ refuse to recognise that there might be another way. Indeed, Mrs Merkel even raised the spectre of war, insisting that only by keeping the euro can we guarantee ‘another half century of peace in Europe’.
The Germans are understandably traumatised by the fear of inflation. But as the Financial Times’s distinguished commentator Martin Wolf has pointed out, what brought Hitler to power in 1933 was not inflation but mass unemployment.
And if keeping the euro means sentencing the Greeks, the Irish, the Spanish, the Portuguese and even the Italians to years of humiliating, jobless penury, then the EU elite will merely be storing up trouble for the future.
You do not need a crystal ball to see that, before long, voters are bound to rebel. And with the mainstream parties discredited by their Euro-affiliations, the terrible danger is that people might turn to the extremist thugs of the far-Left and far-Right.
If that happened — and if, after years of austerity, the euro fell apart anyway, as seems likely — then the ensuing chaos would easily eclipse anything accompanying an orderly dissolution.
The choice, therefore, may not be between saving the euro and destroying it.
Instead, it may well be between a calm, orderly dismantling of the eurozone, allowing the so-called periphery to resuscitate their old currencies — which would be painful but just about bearable — and an anarchic, bitter and highly dangerous collapse in several years’ time.
The truth is that the euro is like an unhappy marriage, conceived in haste and now much lamented. It would be better for the partners to say farewell as friends than to let the relationship fester for years until an explosion becomes inevitable.
Since Britain remains one of the continent's largest economies, our position may be stronger than it seems
As for Britain, thanks to Mr Cameron’s decision to veto sweeping EU-wide treaty changes, we will watch all this from outside. Yet it is hard to resist the feeling that in the past few weeks, something fundamental has changed.
Polls show that two out of three voters blame the EU for the gigantic sovereign debt crisis. And if the British people were given the choice, they would vote by 50 to 33 per cent to abandon Brussels for good — a stunning slap in the face for the metropolitan Euro-elites.
To my mind, leaving the EU entirely, despite all its flagrant faults, would be a dreadfully dangerous gamble. Instead, the Prime Minister’s priority must be to fight for our interests within the system, while simultaneously building alliances to overhaul its sclerotic structure.
Since Britain remains one of the continent’s largest economies, our position may be stronger than it seems. And Mr Cameron should have no compunction about flexing our muscles in the council chambers of Brussels, as Margaret Thatcher famously did in the Eighties.
Mr Cameron must now flex his muscles against the Euro powers
His goal must be to build bridges with other European nations — such as Sweden, Denmark, Poland and Hungary — to slash European bureaucracy, tame the overweening European Commission and hand back powers to national parliaments.
In place of the current rotten, bloated monolith, we need an EU fit for global competition — leaner, meaner and more hard-nosed. A Europe that would allow for a resurgent Britain.
Still, even I can see why many would prefer to give up on the European enterprise entirely.
Whatever the dwindling and bedraggled coterie of Euro-enthusiasts might think, most British people have never felt fully European, and very few of us can now explain precisely what the European Union is for.
The truth is that from the battlefield of Waterloo to the committee rooms of Brussels, Britain’s attitude to Europe has always been strained. For the past 40 years we have been locked in an uneasy relationship, marked more by bitter squabbling than by romantic assignations.
Yesterday’s events marked a watershed in the history of that relationship.
And in the months to come, the gap between our island nation and our federalist neighbours seems likely to grow.
Unless Europe’s masters can bring themselves to countenance serious reform, then the demands for British withdrawal will become too great to ignore. Such an outcome is not yet inevitable, but it is looking ever more likely.
Our affair with our continental neighbours has not been a happy one, and the differences are becoming irreconcilable.
The divorce lawyers may not be circling just yet. But unless there is a radical and unexpected transformation in our partners’ attitude, then one day, I suspect, historians will look back on December 2011 as the beginning of the end