Euro – the EU’s suitcase without a handle

The EU bureaucrats who stripped national governments of their powers have invested too much political and actual capital into the euro project to admit the single currency should have been abandoned, argues British Conservative MEP Daniel Hannan.

RT:The first question is one that is constantly being asked right now: where do you see the Eurozone headed?Daniel Hannan: Well we can now see very clearly that the euro is a recessionary instrument. It’s making people poorer, it’s causing deflation and immigration in the southern states, it’s causing tax rises in the northern states. If we were looking at this completely logically, we would immediately move towards an orderly unbundling of the single currency. But of course the EU is not looking at it logically. They come at this with so much political capital and actual capital invested in it that they can’t bring themselves to admit that it was a mistake so I’m afraid we risk the very thing they purport to fear which is a disorderly breakup of the euro caused by having tried to keep it together for too long.RT:An orderly breakup. Is that really the cheaper and least painful option here? There are some that would argue that a breakup would be the more expensive option. What do you think?DH: There are no good options from here. There are no easy outcomes when you are looking at states with the level of debt that some of the EU member states have. So we’re dealing with lesser evils. But there is no question that allowing each country to return to its own currency, to start pricing its way back to the market and exporting its way back to growth, is less bad for all. There may be some short-term uncontainable transitional costs, but that is less bad than carrying on with the current crisis. RT:On December 9, EU leaders agreed – most of them at least – to move on into forming a fiscal compact. The UK used its veto to prevent any treaty changes. Some are saying the UK will now probably have less influence in making decisions in the EU. Wouldn’t it have been better if the UK had just got on board with the rest?DH: Well this was the argument, of course, that we were given when the euro was launched in the first place. You have to be part of it or you’ll lose all the influence – you know, the City of London will decline and so on. Well, look who was right. There is nothing less attractive in politics than saying I told you so… actually there’s one thing less attractive, that’s listening to the same discredited arguments from the same shameless politicians who got it so badly wrong 10 years ago and who are now trotting out the exact same logic. What else has to happen before they accept their logic was flawed?RT:Which logic is flawed – the economic or political logic?DH: Mainly the impossibility of jamming widely divergent economies into a single exchange rate and a single interest rate. There is also a democratic cost. It’s not only a political cost. Last month we saw coups in two EU member states. In Italy, as in Greece, elected prime ministers were toppled in favor of Eurocrats – respectively, a former European Commissioner and a former vice president of the European Central Bank. They head what are called national governments. But the governments have been put together for the sole purpose of pushing through an agenda that would be rejected at a general election. So we see the, if you like, the anti-democratic tendencies that were always there implicitly in the eurozone, we now see them explicitly. Apparatchiks in Brussels deal directly with apparatchiks in Athens and in Rome. The people and their representatives have been cut off altogether. So I’m not saying that it will solve everything, but I think there would be some economic advantages to the UK in leaving the EU.RT:The EU is still continuing to ask and look for help from outside the European Union, outside the eurozone, for money to beef up the EFSF, the ESM, those mechanisms to help the bailouts of the eurozone countries, as well as the IMF. What do you think of these measures of trying to look for help from the outside? Will it actually help solve the problem?DH: This is treating a debt crisis with more debt. You don’t help an indebted friend by pushing more loans at him. When a country can’t meet its existing liabilities, it’s crazy to extend those liabilities. We should move towards a partial orderly default in countries which simply can’t meet their debts and an agreed separation of the eurozone. RT:So you’re saying that a euro collapse is the only solution here?DH: The collapse of the euro will be the beginning of a solution or at least the end of the euro as it currently stands will be the beginning of a solution. But the real solution will come when there is a proper devolution of power so that decisions are taken more closely to the people they affect. If you look at what are the really successful, prosperous countries in the world, they’re the little ones: Hong Kong, Switzerland, Monaco, the Channel Islands, Brunei, Liechtenstein. You can say, “Oh well, they’re all tax havens,” but that’s begging the question. They became tax havens because they have low tax. Why do they have low tax? Because they had the small state advantage – without the duplication, without the big government. And if you want a simple explanation of why the European Union is falling behind further and further in the world economy, that’s it.RT:The European Union would argue that, because of these projects, they are in fact helping the growth, expansion and progress of member states of the European Union. Do you think the good does outweigh the bad in this case?DH: If EU funds were the way to growth, Greece would now be the richest country in the Union, Germany would now be the poorest. And crowds would be marching furiously in Kiel and Hamburg and Dusseldorf protesting about the Greek loans. Just as with individuals, so with entire states. If you become dependent on subsidies from somewhere else, that saps your enterprise. You start perfectly rationally arranging your affairs around qualifying for the grants, instead of creating wealth. And this is the tragedy of those recipient countries – the lack of a future for the best and brightest of those countries – the entrepreneurs, the people who could’ve done so much, making things, inventing things, selling things, creating businesses in their home states. Because nothing can compete with the advantages of being on the EU payroll, they start gravitating towards either directly, the Brussels bureaucracy, or indirectly, becoming contractors or consultants dependent on Brussels loans. We in the contributor countries grumble about it. But the real pain is felt in the recipient countries.RT: One of the recent budgets is for the acquisition of new buildings for the EU Parliament for example. Do you think this spending is necessary and justified?DH: I mean, how crazy at a time like this when everybody, in every member state, people are looking at how to trim budgets. Do they really need two cars? Can they find a cheaper mobile phone operator? All my constituents are making all of these decisions. We’re all seeing a real decline in living standards. And the EU is blithely fire-hosing these euros, these hundreds of millions of euros, into visitors centers and museums, more entertainment allowances for commissioners. It’s extraordinary that my favorite story of the last commission is that Herman van Rompuy and Jose Manuel Barroso flew to the same summit in Russia in separate private jets, leaving Brussels within 4 hours of each other. Austerity is for the street sweeper in Sligo, for the classroom assistant in Corfu. It’s not for the eurocrat.RT:You’ve been an MEP for 12 years now. What do you know now that you didn’t know before?DH: When we joined the European Union, we thought it would be a common market. That was the phrase that people used, and if pushed, what we meant by common market was mutual product recognition. If I could sell a bottle of water in Britain, I should be allowed to sell it in France or Germany, and vice versa. What we found instead is that it’s a highly regulated market. So you find that in order to sell a bottle of mineral water, the bottle has to contain a certain number of minerals but not any of these, you know the volume has to be not greater than X and not less than Y, the water has to comprise the following elements. You can then find that even a bottle of mineral water that was never intended for export, that is only consumed within a very small radius of where it’s bottled, can fall foul of the EU regulations and be declared illegal. So instead of getting a common market, we have the opposite. We have a restricted market where instead of being extended, consumer choice is diminished.RT:Following your train of thought here, you’re saying that a European Union can exist in its current form, for example, only if it decentralizes power instead of consolidating it?DH: Well it wouldn’t exist in anything like its current form. In 1973, which was the year the UK joined, Western Europe accounted for 36 per cent of world GDP. Today, it’s 25 per cent, in 2020 it will be 15 per cent. Why is that? The main constraint on a big, inefficient government is international competition. You can raise your taxes up to a certain point and then the money starts going abroad to friendlier jurisdictions and you have to cut it. You can bestow incredibly generous entitlements on your workforce – maternity leave, paternity leave, 48-hour work week, up to a certain point. Then the jobs start relocating. But the European Union gets you out of that problem. It obviates the challenge of external competition. It allows you to export your costs to your rivals, and you could just about see the rationale for that 15 years ago when the main competition was coming from Greece. It is, of course, ridiculous when the main competition is coming from India, China and so on, and that’s why the European Union, through this policy of centralization or harmonization, of uniformity, has consigned itself to economic insignificance.RT:Despite being a Eurosceptic, what are the advantages that you see of the European Union and of being part of it, and the eurozone?DH: The one thing that the European Union has done is it has made secret diplomacy impossible.On any given day in Brussels, there’ll be a meeting of agricultural ministers, of transport ministers. It doesn’t even make a press release now. That is a good thing. We should be collaborating on matters that we cannot achieve singly. But to have that bit, you really don’t need all the rest. You don’t need the bureaucracy. You don’t need the common agricultural policy. You don’t need the common fisheries policy. You don’t need the euro. All of the rest is not only irrelevant to that goal but is actively harmful to it because as we now see, the extent of integration, far from spreading peace and goodwill in Europe, has had the opposite effect. It has actually increased national antagonisms to greater levels since World War II.RT: Many of the leaders still want to forge on with the EU and the euro in its current form, especially German Chancellor Angela Merkel. She has equated the survival of the euro and the Union to the survival of peace. What’s your take on that?DH: The EU is a consequence rather than a cause of peace in Europe. The idea now that peace in Europe depends on these massive bureaucracies is Europe is crazy. Peace in Europe is maintained by trade, by friendship, and above all by the fact that we are liberal democracies rather than authoritarian democracies.