TO grasp the sheer unfairness of the euro system, consider Slovakia. For a few days last October, this nation of five million defied the might of Brussels. Its MPs refused to approve the bail-out fund, arguing that it was wrong for prudent countries to be fined so as to reward profligate ones. The EU promptly turned its hideous strength against the plucky Carpathian republic. Within five days, the government had fallen and parliament had ratified the fund.
When we read of the latest euro-calamities – three Portuguese banks bailed out yesterday, Cyprus on the point of bankruptcy, retail sales across the eurozone far lower than expected – we feel sympathy rather than panic. Countries in the single currency have no such luxury.
“Since we joined the EU,” says Richard Sulik, leader of Slovakia’s liberal SaS party, “our net receipts from the Brussels budget have come to just over one billion euros. Under the European Stability Mechanism, we are liable for 13 billion. All to bail out countries with higher GDPs than ours.”
According to the polls, two thirds of those who use the euro believe it has made them worse off. They’re right. On Europe’s periphery, monetary union means deflation, poverty and emigration. In the core, it means unprecedented tax rises.
EU leaders no longer argue that the single currency boosts growth. Instead, they fall back on the cure-would-be-worse-than-the-disease shtick. Imagine the chaos of a break-up, they tell us, eyes wide with horror. The bank runs, the capital controls, the return to protectionism!
Oh, come off it. Every country currently in the euro has, by definition, managed precisely such a transition within the past 15 years. Adopting a new currency would be easier today than it was then, because more money is digitised, and notes and coins represent a smaller proportion of the currency in circulation. Defenders of the euro sometimes claim that leaving a currency union is not the same as joining one. True, but I can count at least 29 occasions when it has happened since the Second World War.
I asked a Slovakian economist how his country had managed its monetary divorce from the Czech Republic in 1993 (I am in Bratislava campaigning with local Eurosceptics). “Quite easily,” he replied. “We waited until a Friday afternoon, then the head of our central bank phoned all the banks and told them that someone from his office would come round with a stamp for their banknotes and that, until the new mint came into operation, that would be our legal tender. On the Monday morning, we had a new currency.”
All right, it’s a little more complicated than that, but only a little. In April, the five finalists for the Wolfson Economics Prize presented their plans for an orderly unbundling of the euro. All of them found ways to overcome the technical difficulties.
The truth, of course, is that supporters of the euro were never interested in the economics. Newly released documents show that Helmut Kohl was specifically warned against including countries with high debt levels. He decided that the political imperative of integration mattered more than the economic practicalities. The present Chancellor has made the same call. “If the euro fails, Europe fails,” Angela Merkel told the Bundestag when seeking support for the bail-out fund. “No one can take another 50 years of peace for granted.”
Put like that, it’s beyond argument. Everyone wants peace in Europe. But supporters of integration never stop to explain why jamming Europe’s states together without the consent of their peoples makes the continent more stable. Listen to how Greeks are talking about Germans and vice versa. The euro, which was designed to soothe national antagonisms, is having the opposite effect. And the money committed to the bail-out funds hasn’t been called in yet.
What about all those scary studies telling us that a break-up will cost gazillions? Wasn’t there one recently by UBS that put the price at 6,000-8,000 euros per family? Yes, but banks are hardly disinterested observers here. The break-up of the single currency, if accompanied by a series of defaults, would indeed be bad news for banks. But if we absolutely must bail out our financial institutions again – and I’ve never believed that ordinary taxpayers should rescue wealthy bondholders from the consequences of their bad investments – surely it would be cheaper to recapitalise them directly than to pour money into preserving the currency which is causing the problem?
In any case, what about the cost of saving the euro? Yesterday, as a dog returneth to its vomit, the European Commission reiterated its plan for an EU-wide financial transactions tax – 70 per cent of which would fall on the City of London, where most such transactions take place. They want to stick us with the bill to prop up a currency we didn’t join. Yet we have already committed £12.5 billion to the bail-outs. We are, in effect, paying for the privilege of impoverishing our trading partners.
This cannot go on. Eurocrats are treating the tumour instead of the patient. They see the survival of the euro as more important than the prosperity of the people using it. Outside the euro, countries could devalue, price themselves into the market and start exporting their way back to growth, as Britain did when it left the ERM in 1992. This, I suspect, is precisely what the EU elites secretly fear. Europe’s economies would recover; their reputations would not.