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From the archives: The doomed euro

16 September 2011

6:44 PM

16 September 2011

6:44 PM

It was doomed from the start; that’s the prognosis of those who think that the
single currency’s crisis is near terminal, such are its structural and political weaknesses. People warned that it could be thus when the Euro was first launched. Bruce Anderson was among
them: 

Had Mr Blair been braver, he could have been in on this week’s euro euphoria, Bruce Anderson, The Spectator, 9 January 1999

The combined political will of 11 nations – or at least of their political elites – assured an easy birth for the euro. But the euphoria should not deceive us. Most thoughtful politicians and
commentators throughout Euroland will acknowledge that the present position of the euro is inherently unstable, and that this can only be corrected by the most radical economic and political
reform. On the Continent, such an agenda is rapidly evolving; there, those who are most enthusiastic about the euro will acknowledge that the New Year launch was only the beginning of a process of
fundamental change.

For all its potential strengths, the euro will probably behave like the dollar, the yen or sterling, not like the deutschmark or the Swiss franc. There are bound to be market challenges and periods
of fluctuation, but the real challenge to the euro will be political, not economic – just as its real purpose is political, not economic.

Three related problems remain unsolved. How can one monetary policy possibly work for 11 different economies? How will the peoples of Europe react to the shocks of adjustment: rising inflation in
some countries, rising unemployment in others? What will be the relationships between the peoples and governments of Euroland and the central bankers who will now exercise such enormous power over
their lives?


‘Vaste entreprise’, as de Gaulle once commented, on seeing a poster with the slogan ‘Mort aux c-s’. But there is a simple answer to all of those questions. The euro can only work if the 11
economies rapidly become one, and if its 11 peoples begin to think of themselves as citizens of one country. Because it is one nation, England can cope with inflation in Mayfair and unemployment in
Middlesbrough. Europe will have to develop a similar sense of statehood, to deal with inflation in Munich and unemployment in Messina. It will also require the apparatus of statehood, especially a
common fiscal policy. As for the bankers, it would be intolerable if monetary policy were at the mercy of democratic whims; we should no more elect our central bankers than our judges. But there is
a democratic input into law-making; the same ought to be true of monetary policy. In Britain, the USA and Germany, the relationship between the central bank and the politicians is a product of
history and political culture. Europe will now have to create its own history and culture, by a process of accelerated evolution.

The democratic deficit is the biggest problem facing the euro. Like all recent developments within the EU, and on even more basic matters, the euro involves a transfer of power within nations from
legislatures to executives and, above all, a transfer of power from nations to the EU’s central institutions. As currently constituted, the EU has only a minimal claim to be a democracy; it is far
more of a bureaucracy, judgocracy and bankocracy. It has been observed that the EU itself is insufficiently democratic to meet the criteria for EU membership.

On the Continent, that analysis is widely accepted. The euro’s greatest architect itsAlbert Speer – Helmut Kohl, knew that it could only work if politics caught up with economics. His strategy was
Marxist: get the economic structure right and the political superstructure will follow.

Herr Kohl is gone, but the German position remains unaltered. On Monday, Chancellor Schroder said that the euro ‘will make Europe move forward and it will force us into new stages of integration’.
He was not just speaking for himself but for the whole of the euro-nomenklatura who dominate the politics of Euroland. Thus far, there are few signs of effective political resistance to the euro.
In France, Charles Pasqua has launched a counter-euro movement, and he js a formidable politician, much abler than his left-wing detractors would have us believe. After the narrow ‘Yes’ win in the
French referendum on Maastricht, he told the late Julian Amery that ‘Vichy is back in power, but only just.’ M Pasqua can claim to be de Gaulle’s political heir and is working towards a
presidential campaign. But he is 71, he has not inherited the General’s electoral powers and he will face resolute opposition from much of the French political establishment.

Throughout the whole of Euroland, most of the political establishment has invested its entire political – and emotional – capital in the euro. Failure is too hideous to contemplate. It would mean
the end of all hopes and dreams; it would be far worse if it failed than if it had never been attempted. This intensity of commitment is the euro’s greatest asset, but it cannot guarantee to
deliver the support of the peoples of Europe. The relationship between political elites and public opinion is a much discussed topic; the next ten years of the euro’s history will throw additional
light on it.

As the euro can only work if it is buttressed by federal and democratic institutions, we can expect early moves towards the integration which Herr Schroder was hailing. That is going to have a
profound effect on the euro debate in Britain. Even now, when every Continental Europhile is acclaiming federalism, our Europhiles can barely bring themselves to admit that the euro has a political
dimension; they are determined to maintain their conspiracy of deception. But within months, their Continental allies will make this impossible, by pressing ahead with plans for federalism. Yet
again, the momentum of events will work to separate Britain from Europe.

Some of our Europhiles are beginning to understand this, and there is a lot of covert dismay, plus anger, directed at Tony Blair. For years, the Europhiles have been looking for a second Ted Heath;
a politician who would deliver Britain into Europe by a combination of will-power and intellectual dishonesty. Some of them believed that Mr Blair’s unprecedented popularity and his massive
majority gave him an historic euroopportunity. They may well have been right; in his first months, Mr Blair probably could have won a euro-referendum. But he is now bound by his commitments,
deterred by his failure to square Rupert Murdoch and unwilling to confront a sceptical public opinion. Like Montgomery, Mr Blair does not believe in fighting battles until he is sure to win.

The British Europhiles are still putting their faith in public relations. They are planning a slick, heavily funded campaign to convince the British people that all the nice, trustworthy people
believe in the euro while its opponents are loonies, and that far from the euro meaning the end of British democracy, it will merely make it easier to buy a pint of beer in Benidorm. They are
basing their plans on an exceptionally low assessment of the British people’s political intelligence; it is not certain that they are wrong.

But they may be too late. However wellrun their campaign, it will not be able to drown out the federalist triumphalism from across the Channel. There is a delightful irony in prospect, of the
British covert federalists’ knavish tricks being confounded by overt federalism in Brussels.

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