Wednesday, 17 November 2010

Euro Crisis: Britain Needs to Prepare for an Economic Dark Age Next Door

THE DAILY TELEGRAPH: The crisis in the eurozone shows why this country must widen its horizons, writes Simon Heffer.

The Euro might not survive in its present form. Photo: The Daily Telegraph

On a shimmering day last June, I was talking to one of our most intelligent diplomats about the future of the euro. He told me, matter-of-factly, that there would be a serious crisis again before Christmas, and he suggested that it might not even survive in its present form. He has been proved right about the first point. Whether he is right about the second is anyone's guess, but if the markets have their way, he will be.

Privately, those who understand the workings of the European Union, but who can manufacture the right amount of detachment about them, admit that the iron façade of common purpose in the European project is starting to creak and rust. For years, a series of pretences has been entered into by dreamers of the European dream about the union's ability to advance as one entity. It has become worse since the inception of the single currency, of which this country is not, thank heaven, a member.

The club pretends (or sought to pretend: it is now wearing a bit thin) that the great disparities between, say, an economy like Germany's and one like Ireland's or Portugal's could be accommodated within the same common policy; and could be so while individual countries were allowed a measure of economic sovereignty, such as setting their own tax rates. Technically, deficits were to be regulated, but in practice, and in the interests of not upsetting any applecarts, they were not: otherwise, France and Italy would have been booted out long ago. The result is that some countries are now threatening to break the system. And poor old Ireland, with a number of its state-owned banks facing oblivion, cannot even turn its economy around, despite heroic amounts of self-flagellation. But then, if you were trying to have an export-led recovery when your goods were denominated in a currency that is among the most expensive in the world, you would be suffering, too. Read on and comment >>> Simon Heffer | Tuesday, November 16, 2010