"As it is now demonstrating, the Euro was a political, not an economic project – conceived by politicians who beneath their grand vision saw greatly enhanced career prospects. Rolling back the mistake will also involve rolling back the growing political class which created it. It will be difficult, but it is necessary."
• I spoke on Friday over in Copenhagen at a European Parliament organised conference called: “Solving the current crisis: What role for the EU?”. The title of the debate was almost oxymoronic as you can see.
The debate saw me pit my wits against Scottish Socialist David Martin and Swedish Liberal Ollie Schmidt. It was moderated by the very capable and always charming Nik Gowing of the BBC.
Below you will find my speech in full. It was generally well received…
“Ladies and Gentlemen:
I would like to thank the Danish government for giving me the opportunity to express my views and those of the political group and the party I belong to.
Before seeking a role in solving the crisis the EU institutions – Parliament included – should first look in the mirror to examine their own role in creating it – and in many cases making the situation worse.
Let me begin by quoting article 3.3 of the Treaty on European Union, as amended by the Lisbon Treaty: The Union shall establish an internal market. It shall work for the sustainable development of Europe based on balanced economic growth and price stability, a highly competitive social market economy, aiming at full employment and social progress, and a high level of protection and improvement of the quality of the environment. It shall promote scientific and technological advance.
Now we know that this is not a constitution, as that was voted down by the French and Dutch electorates. But this is as close to one as the EU has at the moment.
Does it look like a constitution? No, it looks like a wish-list, specifying things which have no place in a basic law. It is really a call for the EU to interfere in all aspects of life, ignoring the laws of economics.
The EU gave away a huge amount of funding without proper verification in place to ensure that it actually went towards growing the economies. For example Greece received €60 billion in structural funding over the period 2000 to 2010. Where did it go? What was it used for? The present state of affairs shows it was not properly spent, and proper monitoring arrangements were not in place.
The EU talks a great deal about support for Small to Medium Sized Enterprises (SMEs). A glance at commission budget lines devoted to SMEs – such as for example the one on “improvement of the financial environment for SMEs” or the other one on “Harmonised e-business processes and standards”- give us a general picture of what can only be described as meddling – not large enough to help but large enough to get in the way.
So what can the EU do that will help SMEs flourish and provide much-needed jobs? It can get out of the way and allow the firms to get on with creating them. What does it do instead?
Well, the massive amount of regulation coming from EU, such as the Social Chapter and the Working Time Directives, has drowned SMEs in red tape and financial obligations that they cannot afford. It works in the favour of large corporations which have the resources to comply with – and lobby for – requirements which keep smaller businesses out of the market. On the other hand EU regulation has left the doors open and even actively encouraged countries not bound by such regulations to penetrate the markets of the European Union whilst we have not been able to reciprocate, such the case for example of the EU-Korea trading agreement. The result is jobs exported, and youth unemployment rate of over 50% as is the case in Spain.
Mrs Merkel appears to have realized that the EU bureaucracy is useless as a means of leading the EU out of the crisis and has sidelined the Commission and the Parliament. She proposes a “one size fits all” solution to preserve the Euro based on greater and greater austerity, without considering that the crisis has different origins and behaviours in the different member states.
The Spanish crisis, for example, is directly linked to the property bubble which was a predictable (and predicted) result of the low interest rates and general euphoria following the introduction of the Euro. It has left many Spanish banks in real trouble with non-performing property loans on their books. It has also left individuals in distress, with unfinished properties often built illegally by builders who have often gone missing. Most people cannot sell the property and even when they can they are now worth far less than the outstanding mortgage.
Greece’s problem is very different. It is linked to high rates of public sector employment, both directly and by means of small firms whose only real customer is the government. This is connected to a large welfare and pension provision.
Greece was allowed into the Euro even though the figures it presented did not meet the entry criteria. Had Greece not been in the Euro – which was instrumental in the large fall in Greek government borrowing costs between 1995 and 2005 – signals from the markets would have increased the interest rates they had to pay and would have reined in their government finances at a far earlier stage.
What role for the EU?
For a start it should stop forcing governments to bail out their banks as it did with Ireland and is now doing with Spain.
It should stop wasting taxpayers’ money on projects that have proved not to have grown Europe’s economy.
Furthermore, it could try turning itself into the intergovernmental free trade area with reasonably open borders and a respect for national sovereignty that British voters were told they were getting back in 1973. How does it get there?
It would have to curtail a pointless but voracious appetite for power, and return to basics.
Among other things, this would mean letting Greece leave the Euro, and giving her people a respite from an austerity programme that clearly isn’t working. Others would have to follow.
There is now a sense of urgency in the need to avoid Europe falling into deeper recession and growing exports appears as the first and most efficient measure.
It is clear that the Euro as presently constituted is not working. For many countries it completely removes any chance of regulating their own economies to suit their own needs.
As it is now demonstrating, the Euro was a political, not an economic project – conceived by politicians who beneath their grand vision saw greatly enhanced career prospects. Rolling back the mistake will also involve rolling back the growing political class which created it. It will be difficult, but it is necessary.