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Thursday, May 27, 2010

How the EU elite got it wrong on the euro

Yesterday we published a range of different promises and reckless predictions made by politicans regarding the euro over the last 15 years. Its quite clear that politicans, central bankers and others got it spectacularly wrong on the euro - displaying a combination of naïve idealism, incompetence and dishonesty.

Yes, it's now in everyone's interest for the eurozone to sort out its mess. But we also need to be honest about the fact that beyond the economic failure - as serious as that is - this crisis is about a breakdown in trust between the political class and European citizens.

If people are ever going to re-gain faith in politics - and their belief in the EU's ability to deliver what citizens actually want - now is the time to push for an alternative model for European co-operation, one that is more democratic, and both politically and economically sustainable.

Here are some examples of broken promises and bad predictions on the euro illustrating why we simply can't go on like this (for the entire briefing, see here):

The Community shall not be liable for or assume the commitments of central governments, regional, local or other public authorities, other bodies governed by public law, or public undertakings of any Member State, without prejudice to mutual financial guarantees for the joint execution of a specific project
- Article 104b, Maastricht Treaty, 1992.

We have a Treaty under which there is no possibility of paying to bailout states in difficulty
- German Chancellor, Angela Merkel, 1 March 2010.

[Greek Prime Minister] Papandreou has said that he didn’t want one cent. The German government will not give one cent, anyway
- German Economy Minister, Rainer Brüderle, 5 March 2010.

The single currency, far from being an agent of continental style corporatism, is probably the greatest export vehicle of Anglo-Saxon economics. The euro has done more to enforce budgetary discipline, to promote privatisation and force through labour and product market liberalisation in the rest of Europe than any number of exhortations from the IMF, the OECD, or the editors of The Economist

- Lib Dem leader, Nick Clegg, 2002.

The reality of the euro has exposed the absurdity of many anti-European scares while increasing the public thirst for information. Public opinion is already changing […] as people can see the success of the new currency on the mainland and the alarming fall in inward investment into Britain as international companies show an increasing reluctance to locate here
- Kenneth Clarke MP, 2002.

The euro has been a rock of stability, as illustrated by the contrasting fortunes of Iceland and Ireland. Joining the single currency would be a major step
- Former Labour MEP Richard Corbett, 2009[5].

We must enter the euro with a clean sheet on all the criteria
- Then Greek Finance Minister, Yannis Papantoniou, 1999

The thrust of the spirit and of the letter of the Treaty is that everything is done to construct the euro area as an optimum currency area. First by ensuring that it incorporates economies that have already proved being convergent in the fiscal field as well as in the monetary and financial fields
- Then Governor of the Bank of France, Jean-Claude Trichet, 1997

It is sometimes said that while the single monetary policy may be ‘right’ for the euro area as a whole, it is ‘wrong’ for many individual countries within the area. I disagree with this view. First, it overlooks the fact that within a single currency area adjustment can occur via prices and wages

- Then President of the European Central Bank, Wim Duisenberg, 1999

Solidarity is possible, [and] will exist. A bailout is not possible and will not exist
- Then EU Commissioner for Economic and Monetary Affairs, Joaquín Almunia, 29 January 2010

I will defend European Central Bank’s independence under any circumstance and with all my strength
- ECB President, Jean-Claude Trichet, 2007[10].

The euro is a protection shield against the crisi
- European Commission President, José Manuel Barroso, 5 February 2010[11].

The Maastricht treaty obliges the European Central Bank to pursue price stability and the ECB is more likely to overfulfil its treaty target than to ignore it. As long as this is the case, there is not the slightest danger of a break-up of the Eurozone […] On the contrary, I expect the Eurozone to be exceptionally stable in the long run […] Make no mistake, the Eurozone is here to stay
- FT columnist Wolfgang Munchau, 2006

The euro area now represents a pole of stability for those countries participating in it by protecting them from speculation and financial turmoil. It is strengthening the internal market and contributing to the maintenance of healthy fundamental figures, fostering sustainable growth
- European Council conclusions, 2001


Bill Halson said...

It seems that we are hearing some irreconcilable statements:
1 The Euro problem must be solved
2 Without a huge loss of sovereignty on the part of members of the Euro, the Euro problem cannot be solved
3 The public/voters of members of the Euro, will not tolerate the necessary loss of sovereignty.

Therefore, the problem is insoluble.
Therefore a 'plan B', must be developed, however unpalatable to the politicians, that respects sovereignty. If this involves a 'New Euro' ( Francmark?)that is re-launched at new national parities, or even a revived Ecu, tant pis.

Anonymous said...

The EEC started with a great big lie and the politicians have been lying ever since. What is more important, the "man in the street" has no way of throwing these liars out!

Time to move on an out of the totally corrupt dictatorship!

Molly said...

how could anyone not see the blatantly obvious result of the 'one size fits all policy!'on the euro ? 27 countries all trying to fit into one nest, a nest that is ill equipped to cater for the 27 variates, in more simple terms show me a chicken that lives happily in the same hole as a fox.Britain must show the way out starting with our own country!

robin goodfellow said...

yes but UK Being a member of IMF Is liable for 5% of EUROZONE DEBT .Greece bailout 467billion pounds,works out roughly at 23.5billion. uk has to borrow to keep euroland afloat,;
we are skint and have to bailout a currency which is causing,Stagflation across the continent.

Can Write Will Write said...

I am a great admirer of Open Europe, and if you did not exist it would be necessary to invent you. However, you really must put thought into your statements and lay off the management jargon.

You said 'It is in everyone's interest for the eurozone to return to stability. However, moving forward, we must also ask: how did we end up in this mess?'

So you want to RETURN to stability, and LOOK BACK to see how did we end up in this mess. How come then , in the middle, you say MOVING FORWARD ? Think before you write. Moving forward is jsrgon. Drop it.
Apart from that, you do a great job.