The Euro Takes A Pounding


The single currency was once such a contentious issue; only a decade ago it seemed likely that the UK would be joining the Eurozone. What happened? Today, Jack Straw predicted that the Euro will indeed fail following the inevitable defaulting by Greece of its sovereign debt, leading to a return to those old holiday favourites like the Drachma. As the media keeps reminding us ominously, despite our not being part of the monetary union, a collapse of the Euro would have a devastating effect on our economy, because of the global nature of our trade regime and our over-reliance on our closest neighbours for exports. This begs the question that if we cannot escape the effects of these sorts of economic crises in a globalised world, is it not time to become more unified to prevent the two-track system we have at the moment, where richer nations are being forced to bail out those in trouble?

I am no economist, yet if I learned anything from my second-year Interwar Economy course (between lapses into and out of a coma), it is that the attempt to ‘force’ currencies of varying strengths to use the same interest rates as part of the Gold Standard was in hindsight a fairly disastrous decision, without some sort of accompanying political union where individual nations have the same tax-and-spending and trade regimes – like BULS members’ attitudes to musical theatre, it seems we can only be either completely pro or completely anti EU. Given that Labour is a progressive party, and that in today’s global economy an insular economic nationalism is unthinkable (we have no industry for that), is it not the time to at least ‘float’ the idea of some sort of European federal state, if we are to keep the post-war dream alive?

This idea may be too much for many people to swallow, and the media will never accept it, but do we really have any realistic alternative when we are competing with economies like China and India? We cannot afford to let the European ideal crumble on the back of this financial crisis.

Luke

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5 comments on “The Euro Takes A Pounding

  1. Edward Trafford says:

    Interesting. I was in agreement up until the final sentence of the first paragraph, either you become more unified as you suggest (but this is unrealistic), or, realistically, you admit that the Euro was a stupid idea in the first place and become much, much less unified.

    This ‘post-war dream’ is dead – there is no way that governments across Europe will agree to ‘the same tax-and-spending and trade regimes’ necessary for financial union.

    As for us, the said ‘Black Wednesday’ in 1992 may actually turn out to be ‘Golden Wednesday’ since it ensured we never joined the Euro and so have less to fear about its failure than most European countries.

  2. maxattacks says:

    “like BULS members’ attitudes to musical theatre, it seems we can only be either completely pro or completely anti EU.” On the contrary Luke I actually enjoy some musicals…although I will admit “Chess the Musical” was not exactly that caught my attention

  3. Jack Matthew says:

    I’m afraid I’ve moved around a bit on EU issues over the last 7 years or so. I’m now becoming increasingly euro-sceptic. Competing with economies like China and India in terms of size is not a realistic goal. It is interesting to note that some of the wealthiest countries in the world in terms of GDP per capita are relatively small. I’m tempted to suggest that the increasing size of the EU has been its biggest problem.

    Domestically, Gordon Brown was praised for his swift response to the banking crisis, and I can’t see that kind of behaviour happening at a European level. I’ve often thought that America’s biggest problem is its own size; forging consensus from Washington to Florida is at best slow and at worst impossible.

    On a wider note, it’s interesting to see the parallels between Europe and America. When it comes to federalism, people seem to show astonishing flexibility. Democrats will decry states rights when it comes to issues of integration and will argue that the federal government should lead the way. But when federal measures against same sex marriage are proposed, democrats not only condemn the moves (quite rightly) but also take it upon themselves to suggest that it is not an issue for the federal government and should be left to the states.

    In Britain, there was a time when the EC/EEC was about free trade and market forces having a greater say over people’s lives. Labour was sceptical, the Conservatives tended to be in favour. By the late 80s early 90s, the EU was working in a more social democratic vein and surprise surprise, the parties swapped places. (I know this is a bit of a simplification but I think it’s a reasonably fair one.)

    We have much to gain from membership of the EU but I fear that a single currency, single fiscal system and an ‘open boarders’ policy, risk putting too many eggs in a single collective basket.

    • pete says:

      It’s interesting to note that the richest countries in Europe are members of EFTA (European Free Trade Association) current its membership is switzerland, Norway, Icland and lichenstein. However historically we were members, we set up EFTA after the formation of of EC/EEC so we could have free trade between EFTA members. If we left the EU and rejoined EFTA we would have all the benifits of being in the EU namely free trade with the EU as the countries of EFTA now for the European Economic Area with the EU countries which now allowes free trade between both groups and avoids the negative things of the EU namely the laws and dictats from brussels since the only rules EFTA make are to do with free trade

  4. Agueda says:

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