Tuesday, 13 December 2011

A lose-lose position? I don't think so.

The FT had some harsh words for David Cameron.

"Mr Cameron’s coalition is now in a lose-lose position. If the eurozone fails in the effort to rescue the single currency, Britain will be caught in the ensuing economic tsunami. If the euro is eventually saved by the creation of a fiscal union, Britain will find itself marginalised in European Union decision-making in areas pivotal to its own prosperity."

Is that really an accurate description of Britain's current predicament?

True, if the Euro fails, Britain will be caught in the "economic tsunami." But that observation is rather superficial. In or out of a fiscal union, there is nothing that Britain can do to save the Euro. Economically, Britain isn't big enough to alter the fate of the single currency. It could perhaps contribute some cash to bail out Southern Europe.  That generosity would weaken our finances to bankroll the fiscal irresponsibility of others.  Moreover, it would be a big ask, especially as other Eurozone countries - notably Germany - aren't ready to offer any substantive fiscal transfers.

Nevertheless, we aren't helpless victims waiting to be drowned as waves crash onshore.  We have an independent currency.  This puts us in a far better position to mitigate the consequences of a Eurozone collapse. To maintain our monetary independence, we had to isolate ourselves from the rest of Europe.  We had to stay out of the single currency.  Sometimes, isolation is preferable to collegiality.

Then we come to this old canard about influence. What is the true value of influence within the EU?  Over the last fifteen years, our partners have conjured up a profoundly unstable single currency, which now threatens to destroy every economy from the North Atlantic to the Black Sea.  European economies are over-indebted and over-regulated. Economic growth is anaemic; European banks are on the verge of collapse, and everyone thinks they should retire at 50.  Did any British government ever persuade our continental partners to stop screwing things up?

By staying out of the European Fiscal Union, we maintain the right to influence our own fiscal policies.  We could, for example, cut corporate income tax, and make our economy the most attractive in Europe for foreign investment.  We could also decide to go on a borrowing binge and pile up a public debt stock that would embarrass Italy and Greece.  Whatever we decide, the choice is ours.


Jim said...

I've never understood this 'influence' stuff.

Why do we want to influence what the Germans or French do, if we can do what we want 100% anyway?

I'm coming round to the conclusion that all the Pro-Europe brigade are solely in it for the personal cash they can make, and see any moves that break our ties to the EU as losing them money, and thus must be opposed.

Pure naked financial self interest. Treason in fact, as they are selling the nations sovereignty for personal profit.

dearieme said...

FT journalists are, by and large, EU lickspittles, brown-nosers and bum suckers. So it's scarcely worth heeding their opinions, often (I suspect) just dictation taken down from the commissars in Brussels.

Mark Wadsworth said...

I don't understand any of this pro-EU propaganda being pumped out, none of it makes sense, bears any relation to actual hard facts etc. That makes me assume that they have no good arguments, or else they'd use them.

All we know is that Dave probably did the right thing for the wrong reasons, he only did it to protect UK bankers, who are all vultures and cockroaches and should be exterminate. But hey, at least they're OUR vultures and cockroaches and we should be exterminating them, not Merkozy.

miken said...

We are better off out of Europe. We have been devaluing our currency and now our exports are soaring.

Soon the UK will be the best place in Europe to invest. We haven't reached that point yet. We need to get our yearly budget deficit down to zero. If we're at zero and the economy is growing (with no more QE) then this will be a good sign.

Strategist said...

This blog used to be interesting as the p.o.v. of an extreme sound money fetishist, but now it seems to be just another boring outpost of Conservative Central Office with a tragic wingnut fanclub.

If you really gave a damn about the "UK Bubble" then you'd be supporting Sarkozy's attempts to take down the insane and destructive multi-trillion shadow banking system which destabilises the world economy from its pirates' nest of London, not supporting Cameron's pitiful attempts to keep his paymasters in cocaine & whores for a few more months or years until they crash the bloody car again.

The position that would have kept this site distinctive, rather than dull, would have been to have come out strongly in favour of Merkel, the sound money frau to end them all (and end the rest of us).

Alice Cook said...


You make some fair points, and I will accept your critique with good grace. However, I strongly support Cameron's decision to exercise the veto over a new treaty. If it sounded like a conservative part boreathon, then I apologize.

The RBS report reminded me of the horrors of the UK banking system. I will get back to that theme shortly.


Strategist said...

Thank you for being gracious.
Be anti-Merkel *and* anti-Cameron. They are both slaves to bankers, just different types of bankers.

I personally on balance prefer a Rhineland banker to a City/Wall St banker, but each to their own.