The euro crisis was widely predicted. What were the motives of those who shut their eyes to it?
No one should have been surprised at the crisis of the euro. Not only could it have been foreseen, but it was foreseen. And no, it was not just those of us hostile to the whole concept of the monetary union who foresaw it, but its leading advocates who openly said that it would fail unless there were a single tax and economic policy throughout the eurozone.
I recently refreshed my memory of those days to satisfy myself that my memory had not deceived me and found that it had not. Writing in the Financial Times of January 4th, 1993 Chancellor Kohl was perfectly clear. Having described the Maastricht Treaty as ‘an interim step, albeit an important one on the road to European Union,’ he continued, ‘The parts of the treaty dealing with a political union are just as important as those concerning economic and monetary union. Everyone in Europe must realise that we can preserve all our economic achievements only if we also secure them politically. An economic union will survive only if it is based on a political union.’
At the press conference following Central Bank Council Session of the Bundesbank on 20th April, 1995, the Bundesbank’s president, Dr. Hans Tietmeyer, observed that ‘a currency union is in the long term an irrevocable community of solidarity. Every experience shows that it needs a continuing commitment in the form of a comprehensive political union for its survival. By 1999 Chancellor Schroder was even clearer when he spoke at The Hague on 19th January: ‘The introduction of the euro is probably the most important integrating step since the beginning of the unification process. It is certain that the times of individual national efforts regarding employment policies, social and tax policies are definitely over.’ ‘The internal market and the common currency demand joint co-ordinating action. This will require to bury finally some erroneous ideas of national sovereignty.’
Nor did independent observers miss the point. In an interview with Der Speigel fifteen years ago, Ralf Dahrendorf declared, ‘monetary union is a great mistake, an adventurous, daring and misguided goal which divides Europe rather than uniting it … (convergence) is impossible because the economic cultures are too diverse. It is impossible because the cultures are too diverse.’
If it was so obvious that without enforced convergence by the establishment of political union and a single euro treasury with tax powers it would be in danger of failure, why did the creation of the euro go ahead? The answer, I fear, is that the elite of Brussels saw it as a way of enforcing economic and political union. They knew the crisis would come and they intended to use it to grab power from the member states. Instead of resisting such a plan, our political leaders here (and some elsewhere) put their fingers in their ears, closed their eyes and buried their heads in the sand. They must have, or ought to have, known that the leaders of the euro project saw it as a way of enforcing fiscal and political union, that is the creation of the European Republic. They must have, or ought to have, known that a crisis would arise for the euro which would lead either to its collapse or to the ceding to Brussels of economic and tax powers.
Of course no-one could have foreseen the way in which the world banking problems emanating from Bill Clinton’s reckless policies would precipitate the euro crisis, but it was always clear that such a crisis would arise. As I tried to explain to the then Chancellor, Kenneth Clarke, at the time, ‘No currency can have more than one Chancellor to its name, and no Chancellor without a currency to his name sits in an independent government.’ The Irish predicament is not solely the fault of the euro. But it could not have reached this level of crisis had Ireland been outside the euro zone and it is its membership of the euro which threatens to make recovery impossible.
Of course the IMF, the European Union and the United Kingdom have thrown the Irish a lifebelt, but it is a concrete lifebelt. What Ireland needs is not a concrete lifebelt but to be free to sink or swim by its own efforts. Neither the Government, nor the people of Ireland could do more to resolve their problems. I would like to think that we here in the United Kingdom could behave with such common sense, unity and dignity in such terrible circumstances, but all the sacrifices will be in vain unless Ireland is freed from the euro.
We were lucky to escape a similar fate. I am glad that so many advocates of British entry to the euro are now admitting that they were wrong. What worries me is that far too many of those guilty of such stupidity remain in high places in our politics. Perhaps we need some form of Truth and Responsibility Commission. Let them recant in public and seek rehabilitation into mainstream political and economic thinking.