The Euro Comes With a Price

by John Laughland

Single currency incompatible with the basic principles of democracy

Things could not be clearer. This recent vote illuminates with brilliant clarity the single most important fact about the Euro: that the single currency can never work because it is structurally incompatible with the basic principles of democracy. Consequently, either the Euro will continue to weaken–dragging Europe’s economies down with it–or democracy itself will have to be suppressed.

I am referring, of course, not to the British general election, in which Europe was not a key issue, but instead to the referendum in the Republic of Ireland which rejected the European Union’s Treaty of Nice by 54%. At the very moment when the Blairite media–supported by the usual gang of unelected but self-appointed Tory grandees– were attacking the British Conservatives as extreme and out of touch on Europe, ordinary voters across the Irish Sea were sticking two fingers up at Brussels’ latest attempt to grab more power for itself.

Third successive referendum the EU has lost in ten months

This Irish ‘No’ to Nice is the third successive referendum the EU has lost in ten months. Indeed, every time people are allowed to vote in a referendum on Europe, they vote against it. Last September, the Danes voted against the European single currency. In February of this year, the Swiss voted against joining the European Union. And now the Irish have sabotaged the latest click in the ratchet of European integration.

The reasons for these three votes are not difficult to divine. People are coming to understand that the structures of the European Union are incompatible with a country’s right to run its own affairs. Just as the European Union infuriated the Danes and the Swiss with its arrogance and bullying, so the European Commission enraged the Irish people recently when it ordered Dublin to raise taxes in order to protect the Euro from the rising inflation rate in Ireland.

In a piquant irony, this instruction was itself a consequence of the EU’s ‘Stability Pact’ for the Euro–the very Pact which was signed at Dublin in 1996 and hailed as a triumph of Irish diplomacy at the time. This agreement makes the tax policy a matter of common concern for all those countries which have been foolish enough to abolish their national currencies and adopt the Euro instead. Too much debt or inflation in one Euro country can affect the stability of the Euro zone as a whole, says the Pact. So adopting the Euro means giving up the right to fix your own tax rates and run your own economy. It was precisely because the Irish have now understood that more European integration means less freedom that they voted against Nice.

People of Europe do not want the Euro

The money markets also know this. They are not stupid. They know that policy in the European Union is made as a consequence of terrible horse-trading between countries. They know that the result is usually an ugly compromise. We will soon see another such ugly compromise bungled together to allow the Nice treaty to stagger on. But, like a Heath-Robinson caricature of an absurdly complicated flying machine, there comes a point when the whole ghastly contraption flaps its last and is forced to come down to earth in the end. This moment may be fast approaching.

The markets know that the people of Europe do not want the Euro and do not particularly like the EU. A mere 10% of Germans now say they are strongly pro-European. 70% of Germans do not want the Euro. The French do not want it. The Swedes do not want it. And the Austrians, over 60% of whom voted to join the EU in 1995, are now the third most Eurosceptic country in Europe.

Europeans living in a foreign land

In six months’ time, this hostility to the Euro may rise sharply, when the European currency is introduced physically and when the great historic currencies of continental Europe are abolished. In a logistical operation of mind-boggling complexity, billions of national coins and notes will have to be physically exchanged for billions of new Euro ones. Thousands of lorries and trains will have to leave on time every day for weeks and weeks to deliver the new currency. Countless millions of cash machines will have to be readjusted. Once the operation is complete, hundreds of millions of ordinary Europeans will find themselves living in a foreign land in which their national currencies no longer exist. And all this massive de-stabilising revolution will have been undertaken without even bothering to ask the people whether they agree with it. Not one single European country has voted specifically to adopt the Euro.

Policy of the European Central Bank can only fail

Such con-tricks come with a price. Policy-making behind closed doors, or against the will of the people, can never carry conviction on the money markets. Unless there is a single integrated economic policy – i.e. a centrally co-ordinated rate of tax and spending, something for which there is absolutely no support – then the monetary policy of the European Central Bank can only fail. This is already happening. The Euro used to be worth $1.17; it is now worth about 85 US cents. The purchasing power of the entire Euro zone economy has fallen by over one quarter. This is the equivalent of your house price falling from £200,000 to £145,000. Because the currency is worth less, imports are more expensive and so inflation is rising. The Germans, who are used to having inflation of between 0% and 2%, now have inflation of over 3% and rising. In Ireland, it is 7%; in low-inflation Holland, 5%; in Finland and Portugal, 4%. The lowest inflation rate in Europe is in non-Euro Britain.

Both the Dublin government and the Brussels Commission recently declared that the Irish must now vote again on Nice because they did not understand the question in the first place. In other words, if the people reject the European project then the people must be wrong. Our Euro-politicians are very foolish. They seem to forget that the last regime which took a similar view ended in a pile of rubble in Berlin in 1989.

This article first appeared in The Mail on Sunday on 10 July 2001. Reprinted with kind permission of the author.