Friday, July 22, 2011

Is it time to say 'au revoir' to the Euro?

During the election campaign last year, a lady angrily approached and accused me of wanting to ditch the pound. I calmly explained that, while it is Liberal Democrat policy to join the Euro, this would only be when the economic circumstances were correct and after approval in a referendum. The lady considered my words and then decided the best option was to hit me with her umbrella.

Being a major trading nation, we in the UK cannot ignore events elsewhere in the world – but I sometimes feel our xenophobia prevents us from rational discussion. Depending on which paper you read, the EU is a German plot to succeed where the war failed, a French scheme to cover up for their inefficient farmers, a Spanish intention to grab the UK fishing grounds, or a combined European ideal to keep those British in their place. No-one actually wants to discuss how to make the EU work, let alone refer to the benefits of our membership. That lady obviously felt that even the thought of joining the Euro made you some kind of traitor.

While all our attention has followed the hacking scandals, the Euro is heading for yet another crisis. At the time of typing, Greece are set to receive a huge rescue package, Ireland and Portugal have had their problems, Italy and Spain are on the brink of joining the queue, and Bulgaria have decided to delay their entry.

Many in the UK , especially the media, look on, with barely concealed joy, at the troubles our EU partners are facing, smug at the fact we stayed out of the scheme, and, in a few cases, even praying and willing for one or two states to go bankrupt to confirm our feelings of superiority.

As I said, this kind of attitude makes discussion difficult. It is certainly not in our interests to see Europe go under – the knock on effects could result in destroying our already frail economy leading to business collapses and massive unemployment – not to mention having unsavoury elements on the rise throughout Europe. Having the southern states becoming virtual colonies while the northern states fund them will cause resentment amongst all peoples.

Despite its many faults, I have always favoured membership of the European Union. It is however a huge bureaucratic mess and we should be more involved with a positive approach, using our weight to reform and streamline and turn the EU into the powerful internal trading bloc we know it can be.
However I have been a bit unsure about the Euro as I was never sure how you can have one common currency and one common bank across national borders. When troubles strike in the past, a government has the option of devaluing its currency to make its exports more attractive. But how can you devalue your currency if it is not yours to do so?

I cannot claim to be an economic expert, so am not qualified to offer a detailed solution, but it seems to me that the problems hitting various European countries are because their currency was locked in to a certain rate and not able to float to find its natural level. Therefore would one solution be to temporarily break-off membership of the Euro for various states, introduce a ‘Greece Euro’, ‘Portuguese Euro’ etc, and then in the future, once things have calmed down a bit, put it all back together again?

I don’t think a two-speed Europe is the answer – (i.e. those in the zone speed up their integration) – as this would virtually permanently lock out those who are not currently a member. We have to think long term. If and when it will be to our advantage to join the Euro, as with other states currently outside the zone, then it must be made feasible to do so.

Whatever the solution it is clear that Europe, ALL of Europe, is in crisis. If we are to move towards a cross-European currency, there should be in place measures to allow such temporary suspensions to address specific problems – and this is an area where the UK could come forward with ideas and reforms.

If it is time to say au revoir to the Euro, however temporarily, let us put that case forward and get back on track to the Europe we want to see.

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