Friday, 30 January 2009

Europe stands ready to swallow up Iceland

The European Commission are ready to fast track Iceland towards EU membership. Images of flies, webs and spiders immediately come to mind.

If Iceland does reluctantly join, the EU will be getting a bargain. The country would have to submit to the strictures of the Common Fisheries Policy. Iceland would quickly find their waters invaded by ravenous Spanish and Portuguese industrial fishing boats, busily hovering up the last great fishing stock in Northern Europe. What would the Icelanders get in return? A bailout and the opportunity to convert worthless Kroner into euros.

Iceland's sorry predicament serves as a stark warning to the dangers of allowing irresponsible financiers to run the show. In return for a few short years of rapid economic growth, followed by a catastrophic debt-induced recession, Iceland is about to lose their independence.

It isn't hard to see a similar scenario here. Although the UK has already handed over much of her independence to Brussels, monetary policy is still under the control of London. However, as the crisis deepens, UK monetary independence looks increasingly vulnerable. The pound could quickly follow the Kroner.


JPT said...

A perfect time to sneak in the Euro for Britain I'd say.

Anonymous said...

Alice, I don't think you've made the case for Britain to join... either in the sense of it being a "sane move" or a "a politically achievable move."

Since the emergence of Maastricht I was befudduled by the entire debate. I'd met people who said that the Euro must be good because quality of life is better in the Eurozone... and others who argued that it undermines sovereignty and neuters the extent to which democratic national elections can control economic dictators.

Without justification, I was mildly Eurosceptic - until I read Connolly's book: "Rotten Heart of Europe: The Dirty War for Europe's Money" - the work of a committed Eurosceptic, which - in my opinion - was fair and fascinating. Better informed, my Euroscepticism waned - and I might now be described as mildly pro-Euro... though definitely not a Europhile.

My pro-Euro stance has several supporting ideals. First, while I reject the idea that trade is facilitated significantly by stable exchange rates, I think it counter productive to embrace a system where it is extremely profitable to move capital around Europe without investing it. In the distant past, aristocrats carted gold across national boundaries in order to amass fortunes... I see no reason that this should remain a rewarded occupation. Secondly, I don't trust politicians... and I think that where the national government has exclusive control of a currency, while in times of war this confers a military advantage, during peace times it represents a moral hazard of biblical proportions. Given the lack of engagement that the public has with the day-to-day machinations of government, I'd argue that it is essential that the government is held to account for its spending - for example, by democratic response to taxation. Under a gold standard, governments were held to account by the size of their metallic store - though that had the disadvantage of stifling innovation and commerce through unnecessary restrictions on credit - and wasted human resources mining a pointless metal in far-flung third world countries. The Euro (or any broadly similar currency) promises an alternative that avoids much of the stupidity inherent in the historic gold-standard... and lures with the promise of efficient accountability of government.

Of course, the transition from where we are now to the utopia of a world in which profits arise from productive investment and governments are democratically controlled - rather than act as servants of plutocrats is strewn with spectacular risks. Risks so large that - maybe - a functioning single currency is a pipe-dream... though, I hope I've encouraged you to believe, a rather seductive one.

I don't see Britain joining the Euro in the forseeable future. Two years ago, I thought we might be 'on the brink' - but, today, our numbers are so bad (and our currency is so significant when compared with out population) that progressing with adoption of the Euro would seem to be on permanent hold - again. Sterling is too big to be rescued... (its value has fluctuated too wildly - and our government's spending and borrowing is too unpredictable) for us to quietly adopt the Euro. We missed the boat in the early '90s - and the British and Eurozone economies have diverged since... something that was rather obvious when comparing, say, German and British house prices a couple of years ago - when people still bought houses.

Anonymous said...

Iceland today, the UK tomorrow.

Anonymous said...

I just can't understand why anyone with half a brain would oppose the Euro or European legislation. Every single thing I despise - nasty legislation curtailing freedoms, yo-yo bubble economy and crazy house prices, blustery, incompetent politicians, toxic planning skills - come from Westminister. All the good stuff - human rights, hot women, nice food, great design - comes from Europe. Bring it on!

Anonymous said...

Anon 15:57

Seems like a well argued point.

Anonymous said...

Anon 15:57

Would I be forced to wear flares and pastel.

Or is my porn ancient?

Nick von Mises said...

The EU is the most corrupt organisation outside of Africa and can't get their accounts signed off. They are a centralising socialist bureaucracy with no public accountability. It is also run for the benefit of the French and Germans. It tries to squeeze together countries that have little in common and dominate them all.

It's a terrible terrible idea. At least our local dictators can be thrown out and the rival European nations defied.

Anonymous said...

Why don't we leave the EU and invite the Icelanders to join us - it might be a nice way to apologise for the "terrorist" stunt.

Anonymous said...

AC: "Europe stands ready to swollow Iceland"

Wow! What country deserves to experience two currency disasters in as many years.

Poor old Iceland, I rather like them. But now that they have experienced the hardship of 'the new world order' and just as they might be adjusting to the new reality. They cling on to some stinking rotten flotsam which happens to be floating by.

Next ... BAM! the Eastern European debt crisis hits, and BAM! the Euro plummets too, then BAM! the South American debt crisis hits and BAM! the Euro plummets again. next as Euro zone employment plummets BAM! the Euro plummets too.

Iceland and the saga, are they really going to find themselves in the maelstrom twice over?

Anonymous said...

Not to be completely AnAl. Islandic krona (singular). Using the term kroner is plural in Danish, Swedish, and Norwegian, while the plural form in Icelandic is krónur.

AntiCitizenOne said...

I hope the Icelandic population don't turn a disaster in a catastrophe by joining the EUSSR.

Anonymous said...

Iceland could adopt the euro without joining the EU - much as Bosnia has done. The only advantage of joining the EU as well is that they would then gain some influence over monetary policy; but, given Iceland's size and economic weight, I would suggest that the value of such influence wouldn't even justify the airfares to Frankfurt.