Sunday, 27 May 2012

Global leadership needed..

As well as brushing aside the economic objections (to European Monetary Union), he simply ignored or dismissed without argument the political consequences of joining a single currency, and would not admit that a currency union would require a political union as well, to control tax and expenditure. Whether this was from intellectual laziness or political prejudice, I could not tell writes  David Heathcoat-Amory in his memoirs. The date was May 16, 1996. He was speaking to his boss, an arch-euro supporter and at that time Chancellor of the Exchequer, Ken Clarke, to tell him why he was quitting.

In an excellent piece, Dominic Lawson explains how our political class - New Labour, the Liberal Democrats, the pre-Thatcher Conservatives and others of like opinions - knew the critics were right that EMU would inevitably demand the creation of a European government, but that because the people of Europe would not allow their politicians to discard their national sovereignty, they needed to impose it on the people by a process of stealth and denial - until it was so deeply embedded as to be unstoppable in its momentum and could be admitted and finally implemented.

As Amory explains, Thus, the countries which voted no to the treaties of Maastricht (1992), Nice (2001), the European constitution (2005) and Lisbon (2008) were ignored or told to try again. This contempt for public opinion comes at a price. It has created an EU which is all-powerful in legal terms but politically stunted, lacking authority or respect. When the EU has to do something difficult or controversial, such as rescue its currency, it can call on no loyalty or allegiance.

Now the people of Europe can clearly see that democratic deficit. In Greece, anger has spilled onto the streets. The road has run out. Yet still the European political class continues driving full-tilt, foot on the pedal, into a brick wall says Boris Johnson in a recent piece. Europe now has the lowest growth of any region in the world. We have already wasted years in trying to control this sickness in the euro, and we are saving the cancer and killing the patient. We have blighted countless lives and lost countless jobs by kidding ourselves that the answer to the crisis might be “more Europe”. And all for what? To salvage the prestige of the European Project, and to spare the egos of those who were wrong and muddle-headed enough to campaign for the euro.

It becomes more apparent by the day that Europe cannot - or simply will not - see the wood for the trees. At some point a more global perspective that understands the terrible destruction to wealth, nationhood and social cohesion which the European Project has wrought, will need to be put forward. Someone will have to hold a mirror up for European politicians to recognise just how disastrous the European Project has become. Someone must tell truth to power, and that time is not long away.

Cameron, who claims to have formed a Coalition in the national interest, should now be looking to initiate a global plan with the help of President Obama and other similarly minded world leaders outside the euro zone, to start telling Europe that the euro is no longer viable.

At the very least, if the individual countries of southern Europe are not to reintroduce drachma, escudo, paseta and lira, we need a southern European euro-currency to split from a harder, northern European euro-mark currency valued at a level that is appropriate for those economies. But that is just the first stage.

The problem that has never been properly addressed since the financial crisis first struck in 2007, has been debt. Massive corporate debt that has destroyed the balance sheets of global banks throughout the US, Britain and Europe. Sovereign debts in Europe are but a further symptom of this mess. In conjunction with the re-alignment of European currencies, we also need the greatest global write-down of corporate debt in our history.

Like a latter-day Marshall plan, we need a vision whereby the western nations write-down the destructive debts of their bankers - which will also involve the write-off of a substantial proportion of our national wealth - in return for clean balance sheets and a viable economic future that can be financed by credit worthy and properly functioning banks. And this time, conditions will be attached.

This will likely involve the destruction of both shareholders and bond holders who currently own our banks and with them a good part of our investment, pensions and insurance industry. Their plight, will need to be addressed at a later date, lest poverty become a prevailing condition of our ageing population. But in the short-term, the western economy relies on the ability of capital to finance economic activity. A pre-condition of that is the availability of capital and that is what we need to secure.

So far in this economic crisis, no government of whatever political persuasion - left, right or centre - has managed to get re-elected, despite many of them being the victims and not the architects of the financial crisis. A point of which Obama and Cameron must be acutely aware. The reason is that since Gordon Brown bailed out the banks by socialising the debt (and without any conditions being attached), all governments have followed suit and dealt only with the symptoms. Effectively, we have kicked the can down the road and not addressed the underlying cause. I may be wrong, but it seems to me that a politician who at least attempted to lead the world towards a comprehensive and lasting solution to this economic crisis, just might get the credit.