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Monday, April 11, 2011

When those who claim to know get it wrong

Last June, we published a pamphlet titled "They Said It: how the EU elite got it wrong on the euro", in which we compared what politicians, central bankers, journalists and opinion makers said about the Single Currency before the eurozone crisis erupted - to what they say now. It's a pretty shocking read, and should make people think twice before making the argument against EU-related referenda on the grounds that 'average people are too stupid to understand such complex issues'. On the euro, by far the most important issue relating to the European project, it was the elite (in politics, in media and elsewhere) who got it spectacularly wrong - for whatever reason: political vanity, ideology, short-term thinking, ignorance or plain incompetence.

Take the FT's Wolfgang Munchau, for example. For years, the guy churned out columns praising the euro, sometimes with caveats, but nothing like the stuff we're seeing now.

Back in 2006, Munchau argued:
"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".
And in 2008,
"The world's two large reserve currencies, the dollar and the euro, offer more protection from speculative attack than a free-floating offshore currency unit. The UK will at some point have to make a choice whether it wants to be in the Eurozone or whether it wants to seek an alternative use for those rather tall buildings in the heart of London".
We're not saying that he's not making many valid and interesting points in his columns. But seriously, these are painfully inaccurate predictions. And compare to what he's been saying over the last few months:
“The probability of scenario four [eurozone break-up] cannot be zero or even close to zero. When the eurozone crisis broke out, the probability of failure was considered as small, but non-trivially positive. It is higher now despite the ‘whatever it takes’ pledge…My point is that if Germany is serious about limited liability – and I believe it is – the probability of a break-up is anything but tiny.”
Trust us, we can make the list of contradictory quotes from Munchau very very long. In fact, we could write a new "They said it" every single month, and wouldn't have any difficulty filling it with material, as established figures continue to contradict themselves on the euro.

Take this from the BBC's economics editor Robert Peston - who clearly is a clever and nice chap - but on potential UK liabilities in a Portugal bail-out he was just plain wrong, as we noted at the time. Two weeks ago - when it was becoming obvious that Portugal would had to seek a bail-out -he noted on his blog and on the Today Programme (and contrary to what we said):
“Only in the event that the Portuguese financial crisis exhausted the available money in the eurozone's bail out fund - which it won't - would the UK become liable.”
Last week, when the Treasury had confirmed that the UK will be partly liable, Peston did a U-turn:
“First of all, it does now look as though the implied UK contribution to the Portuguese bailout will be around 4.8bn euros or £4.2bn (in line with what I've been saying).”
Excuse us?

Okay, so the eurozone crisis is a moving target and we all get stuff wrong from time to time, but this is pretty bad. It's also interesting that those complaining about the poor coverage of EU issues in UK media never quite seem to look at the flip side of the coin.

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