"The major economic issue for Britain relates to the Euro. I believe that participation would be economic folly since the crucial ingredient of all successful major currencies in the world is a single government and this ingredient does not exist in the Euro’s case. Many commentators including, for example, the CBI (the Confederation of British Industry), do not appear to have acknowledged this central fact. We experienced severe economic dislocation as a result of the failed attempt to impose the ERM (the exchange rate mechanism), the Euro’s predecessor, on diverse European economies, and should learn from history." The text above appeared in Wetherspoon’s annual report, in 1999.
As we said in 1999, the concept of the euro was ‘economic folly’, since it did not have the essential component of a single currency – a single government. In a ludicrous and surreal response to this, the majority of the financial world, including our own government and the great majority of economists, professors and financial journalists, argued that the euro would survive as a result of ‘convergence’ among the euro economies.
As I write now, I find it difficult not to laugh, because the whole idea is so absurd. Has there ever been economic convergence between Newcastle and London or Cardiff and Merthyr Tydfil, let alone Amsterdam and Athens? The concept is breathtakingly daft.
Indeed, Gordon Brown and the treasury even devised a number of fairy tale tests, so that Britain could join, once there was a sufficient degree of‘convergence’. Wake me up, before you go go – I must be imagining this! But the realms of madness are being pursued to even more absurd heights, now, by a raft of fantasists similar to those who dreamed up convergence.
The new loony words (read, for example, economists David Smith in The Sunday Times and Martin Wolf in the FT) which prescribe a remedy for the euro’s ills are ‘fiscal union’. Sorry, I’ve had to stop writing, as I’ve had a laughing fit. The idea, here, is that Greece, Portugal and the other unfortunate countries which fell for the euro blarney a decade and a half ago will join in a fiscal union (don’t worry, no one knows exactly what that means) with Germany and the Netherlands, so that lenders won’t mind making loans to any country in the eurozone, since they will be guaranteed by the mighty economies of northern Europe (please stop giggling – I’m not making this up).
It’s hard to know where to start, in dealing with this load of baloney. Just imagine that you’re a German citizen, living in Berlin. You pay a lot of tax to the German government on your own behalf, but are a bit worried that it's not spending it too wisely. “Never mind,” you say to yourself. “If it doesn’t make a decent job of it, it won’t get my vote at the next election.” As a German citizen, you know that the situation isn’t perfect, but you and fellow electors have considerable control over the allocation of money, as a result of the democratic system.
However, in a fiscal union, you, your fellow citizens and your government will become responsible for Greek and Portuguese debts. No one will lend to them at the current time, because the euro system has encouraged them to overborrow and has produced interest rates which have been inappropriate for their economies for over a decade. However, if you agree to put your name to the Greek and Portuguese loans, the lenders will be happy to cough up.
The problem with this idea is that it’s incredibly stupid, but the German and Dutch citizens are not. It’s fair enough for citizens of a democracy to be, in effect, liable for the debts of their own government. They’ve voted it in – and they can vote it out, if they don’t like what that government is doing. It’s quite another matter, though, to ask the citizens of one country to underwrite the debts of another, when they do not have the democratic power to control the activities of that foreign government.
In fact, the idea of a ‘fiscal union’, whereby you assume that you have responsibility for other countries’ debts, yet no vote, is the worst of all possible worlds for all European countries.
The only way to create a sustainable European currency, like the euro, is to first create a single government, hugely reducing the powers of national governments and commensurately increasing the power, especially the tax and spending power, of Brussels, so that it adopts the same role in euroland affairs as do the federal governments in Australia and the United States, for example. Anything less is economically illiterate, since (I repeat) no currency has survived in history, without a government behind it.
In the meantime, what worries me most is that incredibly strong advocates of Britain’s joining the euro now play extremely influential roles in our national economic policies and debate, but have not explained how they managed to get it so wrong or why we should listen to them now. As I said in the last Wetherspoon News, euro advocate Adair Turner is now chairman of the Financial Services Authority, in charge of supervising our banks (beam me up, Scotty). Richard Lambert, who censored anti-euro comment at the Financial Times, was, until recently, head of the CBI. Peter Mandelson was, until recently, Business Secretary. Michael Heseltine remains a power behind the scenes in the Conservative party, Chris Huhne is in charge of our energy policy (I just can’t believe that…) and Ken Clarke is Justice Secretary.
Come on, guys, what do you say? Why did you think that a common currency could be created without a single government, when its predecessor, the ERM, collapsed and there was no historic precedent? We all want to know what you think now or do you, like Peter Mandelson, still think that Britain should join the euro?