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To Brexit or not to Brexit?

The Europe which we put our signature to almost two generations ago is not the Europe we are being asked to vote on in a few weeks’ time. Then it was all about trade, except that is wasn’t.

The European Common Market began its life as something of a confidence trick. The political classes knew from the very beginning that it was a political project designed to relegate the nation states of Europe to a subservient role. They had concluded that they were nothing but trouble and were the biggest single cause of its terrible wars.

Just the same they knew that the peoples of Europe were, almost without exception, lovers of the lands which bore them and felt a deep attachment to the cultures which had developed within their borders. Talk at that stage of a European Union might have frightened the horses and run the risk of it being still-born. So they had to tread carefully. A mighty trading bloc though? Well, who could object to that? We all want to improve our standard of living.

Thus was born the Common Market. Europe had always been strong on markets and the use of that word was perfectly designed to allay suspicions. They were content to play the long game. Stage one was to lock the lot in lucrative trade arrangements, recognising that nations doing the bulk of their business with each other could not, thereafter, easily break free.

Actually, the whole business had begun even before the Treaty of Rome with the creation of the Iron and Steel Community of France, Germany and the Benelux countries. The idea there was that you couldn’t go charging off with a secret re-armament programme, as Hitlerite Germany had done, if all your iron and steel came from a common source.

Europe had had enough of war and a system, so they reasoned, had to be created whereby future outbreaks would be next to impossible. Although there was nothing wrong about that, hadn’t the setting up of NATO nine years earlier achieved that? As Europe grew richer – helped in no small part by the generosity of Uncle Sam with his Marshall Aid programme – it became safe to move on to stage two of the project and chuck overboard that boring old, and grudgingly conceded title, Common Market. Now it became the European Community.

Still no feathers were ruffled, but the more discerning of us could see where the project was headed. Not long afterwards came the great European Union and all was plain to see. With that came the burgundy coloured passports that let us all know – in case naively, a few of us nursed any continuing illusions of national independence – that we were now part of a burgeoning superstate. The Euro was meant to be the final brick in the wall.

The reason all the member states, with the exception of Britain, had been so accepting of the project was that they believed that the nation state, through its inability to protect them from the ravages of war, had been discredited. Only Britain’s island status had saved it from occupation. It therefore had no reason to lose faith in the nation. It stood proud of its institutions and the fact that its Industrial Revolution had changed the face of humanity. Also its exalted former position as the world’s greatest empire made it harder for it to become just another brick in the wall.

But now we must decide: do we cut loose and regain that independence which has been lost, or do we stick with it and with the confidence of a major player work within the system to bring it to the democratic accountability which we Anglo Saxons insist on? We are far from being alone in wishing this.

The world is increasingly moving in favour of what may be called the Anglosphere with our language and business models reigning supreme. I do not doubt that Britain PLC  could cut a swathe in the world, but do we want a mighty power on our doorstep which we are unable to influence?

Nevertheless, worries abound concerning immigration, which apart from putting all our public services under strain, has the power to change the character of our country forever. Much of the fury and distrust of the political class which drives the Trump presidential campaign in America is at work here in Britain. They never asked us, say the doubters, about immigration and they never asked us if we were willing to cede sovereignty. They seem only interested in looking after themselves. And as to what Europe was really all about that, well that too, was founded on a lie.

Although the EU was a work of the utmost deceit, we are where we are and we should not necessarily quit because of that. Perhaps the best reason to stay is a geopolitical one. Out of the EU, however brilliantly we handle our affairs, with a population of 64 million ours might end up being a forlorn voice crying in the wilderness.

It is not an easy choice to make. But then who ever said life was easy?

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The Germany-UK axis and the long-awaited rescue of Europe

The long awaited rescue of Europe, along with its badly put together single currency, gets under way now that the German chancellor no longer has the distraction of an election to worry about.

Camerkel

Angela Merkel aspires to a business-minded Europe

Angela Merkel, the pastor’s daughter from the former Communist east, will get down to a lot of serious business. Her mission, no less, is to save the continent from imploding. In doing this she will seek help from her new best friend, David Cameron. Many of us here at home have gone off him, particularly the women, but he makes a good impression abroad. Even neo socialist Barack Obama gets on well with the ‘posh boy’ from Chipping Norton. He is mannerly, brimming with self-confidence and knows how to talk the talk. What else would one expect from an Old Etonian, that breed of Brits who once believed that they were born to rule. Incredibly, it seems that even in 21st century Britain they still have grounds to believe this.

Angela Merkel aspires to a business-minded Europe: caring but frugal; hard working, but at ease with itself. The last thing she wants is a Europe in tatters. Whether or not it was wise to create the euro in the form they did, we have to accept it is a fact of life. It certainly has benefitted German exporters, whose massive sales to the rest of Europe is part of the reason they are in such debt. If Germany were to go back to the deutschmark its exports would be so incredibly expensive that their export dependent economy would be in danger of crashing. So save the euro they must. But they must also save it for another reason: if it collapses, or even fragments, the whole European Project will as likely as not come off the rails and Germany will take the blame. For the third time in a century, people will say Germany has left Europe in ruins.

The simple truth is that the political and financial establishment have too much at stake to allow their dream project to collapse. The consequences would be seismic and coming at this time, when recovery seems underway, it would be unthinkable. Only Germany has the financial clout to save the Euro.

But Fritz does not want to open up his coffers – especially to what he perceives as lazy and corrupt southerners – but neither does he want to become Europe’s baddy all over again. He will drive a hard bargain which will involve some pretty nasty medicine when he takes responsibility for all that toxic debt and he will seek a powerful, respectable ally to share the howls of protest with. France is no longer willing to be that ally. She seems not to understand the scale of the problem. Perhaps that’s because she is herself part of the problem. That leaves only one ally available to Germany and it is not even in the euro. That ally is us.

Germany views Britain as a business-minded country, like herself, and it makes sense, in her view, to get Britain onside in her chancellor’s drive for reform because Cameron wants reform too. But his reform is not just in monetary matters. As it happens, Germany, as well as others, doesn’t much like a lot of what is coming out of Brussels so he could find himself pushing at an open door.

I am convinced Germany will do all that it can, within reason, to give Cameron what he needs from Europe rather than lose a necessary and valued ally. Merkel is said to be ready to discuss anything, so long as Cameron does not ask her to chose between Britain and Europe. She knows that if he cannot repatriate powers then Britain is a goner from the EU. That would be a body blow to the whole European Project and it would set a most unwelcome precedent. It would send shock waves throughout Europe and indeed the world.

Even before her re-election, when she had to be careful, she began her courtship of David Cameron. That weekend soiree to her country home in which Samantha and the kids were invited, was in my view, extraordinary. It spoke volumes. She has never asked any other political leader to visit her at home, never mind bringing the whole family. So even if the women on Dave’s home patch have abandoned him in droves, Angela most certainly has not. She thinks he’s lovely – ‘My naughty nephew’, she calls him, and can’t wait to team up with him in sorting out Europe. In all the photo shoots of recent times she makes a point of standing next to him, and the body language is very telling.

All in all, it causes me to think that we are in the early stages of seeing a new, powerful axis being formed…  a resurgent Britain alongside its fellow Teutonic  power Germany. That axis will be an outward-looking one keen to harness the enormous potential of half a billion Europeans, but moving to direct their energies to the world beyond Europe. Britain, for its part, is already travelling very successfully down that road and with its vast connections worldwide, its goodwill from its former empire and its universal language, it is peculiarly well placed to profit from it all.

Uncle Sam worries about the threat posed by the emergent Eastern economies – we all do – but he does not worry about Europe. Rather he wants to team up with it in a North Atlantic trade partnership. Such a partnership is a very real prospect; it will hugely benefit all of us and give the whole world a tremendous fillip.

I do not subscribe to the view that this century will necessarily be the Asian century. Yes, it will do well, but all the countries concerned have tremendous structural and political problems which the West overcame long ago. Endemic corruption and a lack of trustworthy institutions will also act as a break. Human Rights issues will plague them because justice, as we know it, does not exist. They have got a lot of work to do and are not in a position to give their undivided attention to coining a buck, as the West is. For a start, they are going to have to take better care of their people and that means creating something of a welfare state – and we know how ruinously expensive that will be.

As for Cameron, he has a great opportunity, but if he does not put forward some female friendly policies and quickly, he won’t be there after the election to take advantage.

A train crash in slow motion

The euro crisis rolls on like a train crash in slow motion.

The fact is, you cannot bend economics to your will. The forces which say you cannot do this are almost as immutable as the laws of gravity. Yet that is what the founding fathers of the euro set out to do.

They sought to bind nations with wildly disparate national traits, and equally disparate levels of competitiveness, into one whole. But they did it for political reasons not economic.

It might have worked if all involved had applied the original, sensible rules of entry and submitted their annual budgets to a Brussels power of veto, but they did not.

A monetary union not backed by a fiscal one is actually a no brainer. It cannot work. Even those American founding fathers of nearly 250 years ago understood this.

The success of the American union had a lot to do with the template drawn from a single gene pool with a single historical experience, put in place by the original thirteen colonies who decreed a single language for all.

Now ‘cruel necessity’ – as Cromwell is said to have described the decision to cut off the king’s head – is pushing Europe to cut off the head of the errant Greek state and force it back to the Drachma, Europe’s oldest currency. It is also going to force those who remain within the single currency to give up forever sole control of their countries’ spending policies.

Having done that, then you might at last have a system which actually worked. Within that system would undoubtedly develop a super strong currency with the potential to displace the dollar as the world’s reserve currency.

It all hangs on what the Greeks vote for at the forthcoming election. Despite all the serious pain they are going through a surprising number of them (over 70%) still want to stay in the euro. But, being the hot-headed Greeks that they are, they cannot help but wear their pain on their sleeves.

If this shows itself by a massive protest vote for the party which promises to bucket a lot of austerity promises – as seems likely – then Greece’s days as a euro member are numbered.

The young and inexperienced party leader in question has convinced himself that the Germans, right now, need Greece more than the Greeks need the Germans. The logic of his argument is that the loss of Greece will begin the unravelling of the euro and quite possibly the whole ‘European Project’. He will simply refuse to implement austerity and defy the Germans and north Europeans to do their worst. He’s convinced they will blink first. I fear he and his nation are in for a terrible shock.

It has to be said that no one has benefited more from the euro than the Germans.

If they have huge reserves of savings that is because for a decade they have been marketing their products in a hugely (for them) undervalued currency. Their former chancellor, Helmut Kohl, has admitted – albeit belatedly – that at the time the political elite dared not ask the German people if they would surrender their beloved deutschmark in favour of the new currency because they knew that they would get a big fat nein.

Yet if the euro were to break up, their deutschmark would be back again – only this time with a vengeance; it would become so expensive that few could afford to buy their products. Exports would plummet.

So yes, the Germans are terrified that a Greek exit will set off an unstoppable chain reaction causing the weaker southern economies to drop out, threatening to destroy the whole single currency. But the Germans are equally terrified at seeing their hard earned savings and pensions going down a bottomless ‘Club Med’ plughole and an endless future of propping up lame duck economies.

So now the previously unthinkable is being touted in Berlin and the other chancelleries of Europe: Greece can go if it will not comply with its undertakings. It will serve as a salutary lesson to other possible backsliders, say some. Provided they do not show similar defiance as Greece, then I believe that Fritz will give the European Central Bank the powers it needs to act as the lender of last resort like the American Federal Reserve or the Bank of England.

Both for narrow self-interest and deep psychological reasons Germany does not wish the European Project to fail, much less be blamed for its failure. It wants desperately to be seen as a good European and lay forever the ghosts of its troubled past. So my own belief is that Germany will do all in it power to hold the eurozone together.

IIf the markets go on to attack the other weaker economies once Greece has gone, who knows where it will all end. Even German savings may not be enough to save the euro, so big are the debts of Italy and Spain, the 7th and 9th largest economies in the world.

George Soros, the man who bet against Britain staying in the ERM in 1992 and won a billion pounds in the process, says the euro train has three months before it hits the buffers. While he is not always right, we should worry. He is 60% of the time.

It is my firm belief, however, that the euro, in one form or another, will survive. And as strange – even weird – as it may seem, given present circumstances, there are still many countries waiting in the wings to join such as Poland, the Baltic states, Czech, Slovakia, Slovenia and even perhaps Sweden and Denmark.

Had the original rules of entry been adhered to then none of the present PIIGS would have qualified to join in the first place and this nightmare would never have happened. For that, Germany must take its share of the blame; it does no good for it to get on its high horse over-much.

But a reformed euro, even if it has shed a whole swath of weaker members, may yet be something to behold. It’s been a long time in Europe since anyone has been able to boast of sound money. If it did not entail so great a loss of sovereignty, it might be a door that we ourselves might one day find ourselves greatly tempted to knock on.

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