The Eurozone


We can take no pleasure from the euro’s fall

Euro-sceptics should not gloat over the eurozone crisis – we’ll feel the pinch too, says Boris Johnson.

Talking yesterday to my old friend and colleague Phil Johnston, who happened to be editing this page, I was reminded how right we were, all those years ago, about the euro. In 1990, he and I were sent by this newspaper to cover the Rome summit – the one where European leaders ruthlessly ambushed Margaret Thatcher and tried to get her to agree to what was then called the Economic and Monetary Union of Europe.

It was a blood-curdling scene. Thatch was backed into a corner – a minority of one – as they all piled into her, Kohl, Mitterrand, Andreotti, Delors. Come on, they said, let’s create a single currency! Let’s scrap the franc and the Deutsche Mark, and let’s scrap the pound while we’re at it. No, said Thatch.

It wouldn’t work, she said, because there was no history of a successful currency union without a political union, and she certainly didn’t want Britain to be swallowed up in a United States of Europe. “No, no, no,” she famously said to Parliament a few days later – in a display of ideological obstinacy that infuriated the Europhiles and led shortly to her defenestration at the hands of Heseltine and Howe.

On and on the other EU countries went with their plan, and I was there at virtually every stage. I remember when they decided it had to be called the euro, because Helmut Kohl thought “ecu” sounded too much like the German word for cow. I remember when they decided the Eurobank had to be located in Frankfurt, and all the while we sceptics offered sheeplike coughs of dissent. You can’t just control interest rates, we said. What about tax? What about spending? How, we asked, can you have a single monetary policy while you let a very diverse bunch of economies continue to run independent fiscal policies? How, bluntly, can you jam northern and southern Europe together? How can we expect Germany to be part of an effective currency union with Greece?

And all our objections were brushed aside. The process was unstoppable, we were told. It was as natural and ineluctable, said Helmut Kohl, as the flow of the Rhine. It was history, they said; and for the first few years it must be admitted that our fears seemed unfounded. The euro seemed to hang together pretty well. It was a handy thing for travellers.

It was only when the financial crisis came along in 2008 that we suddenly saw that the Greeks had been doing exactly what we said they would do. With the help of some smart bankers, they had massaged their debt figures to qualify for the euro, and then they had used the low interest rates of the eurozone to hitch a giant free ride. They’d been paying themselves far more than they earned. They had been racking up huge debts. They were rumbled, and, according to Angela Merkel herself, the euro is in danger of collapse as a direct result of their bad behaviour.

European governments have stumped up for a colossal 750 billion euro (£650 billion) fund to guarantee the debts of southern Europe – and still the markets are not satisfied.

The crowds regularly seem to be rioting in Athens in response to the programme of cuts, and there is a general mood of panic reminiscent of 1992, and the destruction of the Exchange Rate Mechanism. The Germans have actually tried to ban short-selling, and everyone is wondering who will be the next target. Portugal? Spain? Italy?

For the Euro-sceptics, for those who had their doubts from the beginning, the whole situation offers an almost irresistible temptation to gloat. Told you so, we cry. We said it would end in tears, we say. Nah nah na-nah nah, we say. And yet if we think we can just settle back in our island home, twiddle our toes and thank our lucky stars that we never joined the euro, I am afraid we have got another think coming.

This euro disaster affects us here in the UK and at every level. It’s not just that the euro’s fall has hit UK exports to the eurozone, and makes it more difficult to attract European tourists to London. Dealing with the current crisis means, above all, managing the sentiment of the markets. As James Carville once said, if reincarnation existed it would be nice to come back as the bond market, because the bond market can intimidate anybody. The markets have scared the hell out of Greece; they are scaring the eurozone, and one of the side effects of the whole crisis is that other countries have to work extra hard to convince the bond markets that they are not Greece.

It is that terrifying Greek comparison that today obliges the coalition Government to set out the first £6 billion of cuts; because unless we see some fiscal rigour, they fear, the markets will come sniffing around us and demanding a higher price for our borrowing; and interest rates will go up so high that we will be plunged back into a double-dip recession. And if we cut too much, we risk choking off demand and we have the same outcome.

Of course we need to sort out our finances, and I don’t wish in any way to minimise the role played in the fiasco by Gordon Brown (remember him?). It is the Labour government that is responsible for our parlous fiscal position. But it is the Greek crisis that means we have to be so theatrical and draconian in our cuts; and the Greeks would never have got themselves into such a mess if it had not been for the flawed constitution of the euro, with its unholy mixture of low German interest rates and high Greek government spending.

It would be monstrous if vital infrastructure projects in this country – Crossrail and the Tube upgrades – were to become collateral victims of the crisis in the eurozone. And it would be doubly monstrous if we were to start slicing the sinew of the UK economy in the hope of showing the bond markets that we are not Greece. Truly, my friends, we have been proved right about the euro. But, as so often, there is little joy in being proved right.

You can read this column in The Daily Telegraph here

29 thoughts on “The Eurozone”

  1. Wot!, not even a little satisfaction? Not even a glimmer of schadenfreude at the sight of good old hubris giving a well aimed kick in the ghoolies to all the arrogant empire builders in the E.U.?

    p.s. That is the way you spell ghoolies, is it not?

  2. yep yep , its all going pear shaped , and I already see the people whinging about Osborne cuts today. Where oh where do the people think we are going to get the money to get ourselves out of this pickle if we dont make some cuts ? There are so many benefits and handouts on offer , it has to be paid for somehow…..I despair.
    Money doesnt grow on trees as mum used to tell me.

  3. I want out of the EU as much as the next man.

    However, Boris Johnson says it would be monstrous if Crossrail were to suffer from the Euro’s ills. It is equally monstrous that he allowed western Congestion Charge payers to vote themselves out of paying for the CC as a sort of bribe to vote him (Johnson) in.

    The revenue could have gone towards Crossrail.

  4. Boris’s article made me think what how hugely brave and strong Mrs. Thatcher was to stand up to every other head of Europe trying to bounce her into accepting the single currency. Mrs. Thatcher had such a clear vision of what was right for Britain, that she was prepared to take on all those heads of state single handed to fight for what she believed was the right thing. How many politicians today have that sort of courage?

    Time has proved her right on this issue, and even though David Cameron has changed the Tory Party’s course on many policies, I hope that Europe is one thing on which he never, ever falters. He has given us his word the pound is safe with the Tories in power and we must trust him to honour that promise.

  5. I see the BBC has appointed itself as the opposition party, whilst the red brigade sort their act out. It seems to have forgotten where the debt came from, only what terrible damage the cuts are going to do, it was a little amusing to see little 4’11” Justin in the South West draw himself up to his full height and go into full whinge mode. Unfortunately being a little island of red in a sea of Blue and Yellow is going to make it very hard for him.

  6. Memories are short. The toughest fight that Margaret Thatcher had wasn’t with Scargill and the unions, wasn’t with the Argentine and wasn’t even with the European Union. It was with the wets, between 1979 and 1983 – Heath, Prior, Walker et alia; and what worries me is that Cameron has imported 59 of them, by necessity. I wonder if his efforts to get this nation back on the road will be frustrated by these strange guys. Maybe they’ve got the stomach for the fight? I hope so. But they, like most of us on this side, better get ready to be hated again. And get ready to stick it out to a successful end.

  7. ummmm that didnt come out as it should of

    What i do not understand here is;

    the e.u is a union – a union being a system set up for the benefit of its members, to stop them being mistreated, to provide security and reassurance, to make sure their members receive better pay working conditions, are able to stand up and be counted not controlled by their employers, not be bound by contracts which are detrimental to them, to be supported by a body of people who are aware of the exact needs of its members, who are in fact run by and for its members…….

    is why does the E.U call itself a union ?

  8. It is a union in the same way that the USSR is. It is not. It is a group of unelected and socialist dictators enforcing their rule on the rest of the ‘union’ and building their own empire.

    Personally, I hope there is a lot of pain. It will cause people to remember and we will need that. Now Cameron is leading the Conservative party towards Socialism and defeat at the next election we want the EU to be destroyed to ensure a new invigorated Labour will be unable to take us into it unopposed whilst real Conservtives fight to regain their party before, if defeated, split off and form their own new party. One with real conservative values.

    There was a reason that Cameron failed to make any headway for years against the worst UK government we have had in the history of the planet. We warned you in the polls we didn’t want him and you ignored us now we have another Socialist government. It seems unbelievable to me that we will have another Labour government in next time but I genuinely believe that will be the case. Gordo is gone, sadly unpunished, and the Labour party is recovering, already gaining new members whilst we still have Cameron, a socialist, and the Conservative party is falling apart so next time I’ll be voting UKIP again to actually get some Conservative policies.

  9. You’ve got a point, Janina. I think the European Union was sold to the public as a union of peoples, striving together for the greater good, end of strife, pursuit of happiness, etc.,etc.,etc.
    In fact it is a union of politicos, united in pursuing the happiness of politicos, and of many generations of politicos to come. You can see why Mandelson fitted in so well, as a third generation Labour apparatchik!

  10. Oh, and while I’m at it, Doctor T:
    “Personally I hope there is a lot of pain”
    I take it that you hope your fellow countrymen and women will suffer this pain.
    Which just goes to bear out what most of us think about UKIP, which is that they are a little group of nutters.

  11. @ed

    When you consider that Labour almost was returned to power at the last election and if Clegg had chosen Labour instead of the Tories they would have been in power again it shows that the UK electorate have not learnt a thing. There are two ways to learn 1) by examining things and experimenting and 2) by rote and the cane. The electorate are clearly too thick to learn the first way so we go the second. Yes, I do hope there will be a lot of pain and that despite Cameron punishing his supporters to prop up Labour supporters, which is what he is doing, that pain trickles down. Labour supporters won’t support Conservatives anyway they would rather chop off their arms and cameron is driving conservative supporters away with his policies.

    The country needs to fall apart so we can be reborn. Their is pain in that.

    Oh. And I’m not a UKIP supporter although many of your Tory pals are. UKIP will be the new tory party soon. I’m not sure who the nutters are here. Someone that calls themselves a tory who supports a socialist party or someone with a cause shared by a large part of the population.

  12. I’m just astounded and chagrined that Labour should get off scot free after what they have done to us. The Queen’s Speech showed part of the horror and the penury we’re all going to suffer and what are the culprits doing?

    Picking a new leader who will lead them into yet another fine mess and affix us to the EU so hard we will no longer be the UK. They’re acting as if “well, it’s all just politics and we’ll do better next time.” No, no, a thousand times no.

    We got Red Ken out and put Boris in – now we have to get Red Dave out, dismantle Labour and try the culprits.

    By the way, like the new Routemasters but the old ones were better.

  13. “Boris Johnson, the mayor of London, has instructed his officials to seek legal action to remove peace protesters camping outside the Houses of Parliament.”

    Jenny Jones, a Green member of the London assembly, said: “The mayor clearly doesn’t respect the right to demonstrate as he says, or else he wouldn’t be seeking the legal power to evict legitimate protesters from Parliament Square. His commitment to democracy is laughable – he has launched this action on the day that the words ‘allowing members of the public to protest peacefully without fear of being criminalised’ are in the Queen’s speech.

    the people in Parliament Square will of course mostly not have homes or cars, and therefore be living a much less selfish lifestyle than the wealthy silver spooner Boris Johnson.

  14. Mr Johnson said, adding: “West London never wanted the [Congestion Charge] extension and it is right that residents can tell us whether this Christmas should see the end of it.”

    OOOh: let’s give everyone what they want! Let’s swing around like a weather cock!

  15. Any comments, Bozza, on your vendetta against Brian Haw and his friends? How much did that police exercise cost? On the day that Slimy Dave mouthed off about freedom. You should be ashamed.

  16. @ed

    and? I’ve watched those movies too. I don’t think it quite compares with executing an entire village to achieve an objective. With throwing up strawmen like that are you sure you are a tory and not a liberal?

  17. In fact the Pound Scots was linked to the Pound Sterling in 1603 and the two currencies remained at the same fixed exchange rate succesfully until Union in 1707.

    One must admit that Gordon made two big decisions correctly when he became Chancellor: not joining the euro and allowing the Bank of England to decide interest rates, though the latter was largely forced upon him by the EU. What a pity that his every decision after that was wrong.

    The euro will survive and the EU will learn how better to manage a single currency with multiple national economies. It will always be messy, however.

  18. @ed gibb: I have a feeling that they are a bit like the NHS….

    – it was a good idea at first and the intentions were good

    – People did benefit from the union – mep’s and those in brussels

    – only after a while standards started to slip, we threw more and more money at the staff with no visible improvements, there are far too many admin involved draining the money from the service, rules and regulations have seen some gain more and others lose out, we can ring up in case of emergency but then have to worry about the painful procedures involved, if something goes wrong and we take things further the whole outfit is so big that we dont stand a chance.
    & …. they wonder why so many of us would now prefer to go private?
    (but if we did could you imagine the bills, they’re bad enough as it is!)

  19. @Janina,

    Actually the bills would come down. The NHS is a very inefficient organisation. Big business is not and would do what it could to maximise profit yet remain competitive.

    Think of a vet. You pay for all of that, quick turn around and efficient service. Scale that up to big business and providing you keep the governments deadly fingers away from it it would be quicker and more efficient than the NHS. Of course the cost would change but consider you have to pay the NHS now and get crap service. Remove that cost and you can afford health insurance.

    Of course that isn’t perfect but its better than we have now.

  20. I am resisting the urge for personal abuse, but Lord T you push me to the limit. Yours is the most stupid remark I have read even in this pit of reactionary codswallop. I would not trust my health care to BP or HBOS. Business exists only to make profit, there is no care or compassion in any of it. Even the American people are being forced to admit this, thanks to old Barack (who is a tad right wing for my liking, but that’s another story). If I have an ounce of national pride (and I hope that I don’t) it is the NHS that stirs it within me.

  21. @Vicus,

    You don’t have far to go before you hit your stops then do you. I’ll guess you spend as much time thinking about things as well.

    Why do you think people from all over the planet go to the US to get well? Even British people go there for leading edge treatment. Over the years the srvice from the NHS has gone downhill. People going in with ingrowing toenails have come out in boxes due to the poor conditions. It’s because the NHS spend too much time box ticking than cleaning wards and looking after those with illnesses. Because the government takes so much off you in taxes, and soon to get worse, most don’t have the capability to go private. Although many still do because they are paying extra to get a service.

    I would guess you have not been in hospital lately or know someone who has. I can get my cat an XRay the same day and a cancer diagnosis within a few days. People take months on the NHS just to meet a consultant who will then arrange for checks. Look how long it takes OAPS to habe hip implants and so on.

    It need sorted and taken out of government hands. Government screws up everything it touches.

    If the NHS gives you pride then I am sorry for your lack of ambition. I have pride in many things but blind pride on something that is as failed as the NHS is misplaced.

    Considering this is a site for Boris, one of the few remaining Tories, there seems a lot of whingy whiney liberals and socialists on it.

  22. Behind Thatcher was Sir Alan Walters.

    The emotional reaction to the Euro’s plight is froth. The situation needs handling. Greece and maybe others will have to quit and relaunch their own currencies, defaulting on their debts, or at least linking them 1:1 to their renewed national currencies. That fact is not even near the brains of the politicians, yet it is obvious to any objective bystander.

    It will cost a lot to help these countries qui the Euro which will happen. SO what’s the point in $1 trillion bail-outs trying to prevent what is already inevitable.

    The crisis will sap what’s left of the creditworthiness of the stronger countries creating a universal collapse. It is crucial that insolvent countries are helped out out of the Euro as quickly as possible at far lower ultimate cost.

  23. Silly man. People from all over the planet go to the US because they have swallowed the branding of the US medical system, which is a shockingly venal and quite commonly deadly one.

  24. @raincoaster

    so the statistics on survival rates etc. are just made up figures then.

    Look at the survival rates and lifetimes from the various countries around the world. Take special care with the figures for the US and the UK. If you think you can handle it then look at the previous years and see how the UK has consistantly fallen.

    Now in a few years time when Obamas health care bill is in full flow. Watch the US rates tumble.

Comments are closed.