How Britain staying in can help hold the EU together

 Little by little, the Brexiteers are losing their battle to force our country out of the EU. Although it isn’t yet generally recognised that the vaunted ‘will of the people’ is being exploited by wealthy individuals who have no interest in the economic well-being of ordinary citizens,  moderate pragmatists in both the UK and the EU seem to be strengthening our ties, to mutual benefit – all the more desirable, in a time of trade war.

First, there was the acceptance by Mrs May’s government that things will stay the same, in UK  contributions and rule-keeping and access, throughout a ‘transition period’ up to the end of 2020. Now we hear that the EU Council, representing the individual states, has invited Britain to help determine the EU’s budget up to 2027, in the expectation that we will still be paying large sums to Brussels for years after Brexit.

According to a report in The Times on Tuesday, our government is accepting this invitation, to the fury of both Brexiteers and, interestingly, the EU Commission, which has just presented its seven-year budget proposals for the years 2021- 2028. The Commission is proposing that the gap in finances caused by Britain’s departure should be filled by higher national contributions and spending cuts. The Council apparently prefers to keep Britain’s contributions flowing in. If so, May’s wish for ‘greatest possible access to the single market’ could be granted for several more years, at a suitable price.

Yet this is surely just another sip from a poisoned chalice for Remainers. As with the transition period, acceptance of a further period of ‘belonging’ – like a foster-child bound to leave ‘home’ eventually – obscures the fatal date of the end of March next year when we are pledged to leave. Later rather than sooner, all the ills of severance from our greatest trading partner must happen, unless the British people are given the chance to vote to stay in through a referendum on the deal arranged this year. 

It is becoming plain that the EU needs us to stay in as much as we need it ourselves. The power of the Commission is under threat, along with the financial rigidity enforced in the Eurozone. In Italy, an EU founder-member state with the third largest economy of the EZ, the two populist parties successful in the elections look set to challenge EU economic management. They seek greater spending and tax cuts among other radical measures. Is the EU’s stability now being seriously challenged, at a time when Europe needs its collective strength more than ever?

None of the 27 states proposes to leave, but changes seem inevitable. Perhaps the Stability and Growth Pact will have to be revised. Perhaps the Italian populists who want to expel half a million immigrants will team up with the likes of Hungary and Poland to demand acceptance of border controls and individual states’ rights. 

Never has ‘Ever-closer Union’ seemed further away. The Hungarian financier and philanthropist, George Soros, joining the fight for a new referendum by providing funds for the Best for Britain campaign, surely is right to say that this is an ideal time for the EU to reform itself. The separateness of EZ states and the outer tier of states such as ours should be confirmed, with an end to the requirement to join the Euro. But with Britain staying in as a powerful voice for pragmatic reform, a less top-heavy EU may be strong enough to resist both internal populist pressure and external challenges. We need to pull together now.

* Katharine Pindar is a long-standing member of the Lib Dems and an activist in the West Cumbrian constituency of Copeland and Workington.

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99 Comments

  • David Becket 2nd Jun '18 - 10:57am

    Well said Katharine, but events over the last two days have totally changed the picture.

    It would be madness in a period of trade wars egged on by an unstable American President, to leave our most important trading partner. To fight these wars you need to be in a large trading block with influence, left isolated the dolts that run our country today would be lost.

    If the PM had an ounce of states-person in her body or an interest in preserving the UK and not just the Conservative Party, she would put a hold on Brexit now, before anymore damage is done.

    We could then use the effort to take on the issues raised by Katharine.

    The saddest thing of all is that our party has not woken up to this and demanded a halt to negotiations. Once again our party leadership fails to take advantage of a situation and fails to inspire. No wonder we are at 8% when we could be at 20%

  • William Fowler 2nd Jun '18 - 12:24pm

    Bit confused, one op-ed says LibDems should shout from the rooftops about unfettered freedom of movement, another says perhaps it is time for reforming it (easily done with a five-ten year residence test before access to benefits, tax credits, social housing, etc and made retrospective in the UK if you want to win the next referendum with exceptions for nurses etc). New PM’s in Spain and Italy could shake things up a bit, possibly opening the way for Catalonia, Gibraltar, NI and Scotland to become direct members of the EU, which will have govn running around like headless chickens trying to square the circle of frictionless borders with EU rules. Personally, think anything could happen about a second referendum so fingers crossed.

  • I detect a change in the mood music played by the brave Brexiteers. The ones i know (excluding the ones who have died and their are several of them) is to either go into a Basil Fawlty mode of “Listen, don’t mention the Brexit” or to sadly say they think Brexit could be a success “If only the EU could be more reasonable”, by that I take it they mean if only the EU would give us cake. As to as plan they genuinely seem puzzled, Brexit was going to be so easy and everything would be over in an instance the fact it is not and they are not getting their own private Brexit (each of them seems to have a slightly different one) and while they remain puzzled that it’s not happening as they thought it would, they are also becoming concerned; but not yet concerned enough to pretend they never voted for it (I suspect that will come, but probably not soon enough) or to prevent them from holding onto Nurse for fear of something worse. I suspect as time goes by their addiction to holding onto nurses hand will change as hard times roll in. However the propensity of the population to grab onto the next quick fix and snake-oil merchant should not be underestimated.

  • Katharine Pindar 2nd Jun '18 - 1:10pm

    Of course David Becket is right, that if trade wars are now on it would be madness to take leave of our most important trading partner. Perhaps you are right, our party should be demanding a hold on negotiations. However, I am glad that the party is now mounting an enhanced vigorous campaign to stop Brexit via another referendum. The essential thing is to persuade more of the voters to accept that these outcomes are both possible and desirable, and I believe our campaign must seek to co-ordinate with other non-party-political groups such as the students for a ‘People’s vote’ and Best for Britain.

    As for EU reform, it may be forced by the increasing turmoil within the EU. Perhaps our one MEP and ALDE can assist in this?

  • “Little by little, the Brexiteers are losing their battle to force our country out of the EU. ”

    Forcing? how do you come up with that terminology? it was put to a democratic vote and the majority voted for us to get out of the EU. I would not call that force, we are not living in a dictatorship

    @John Littler
    ” UK via the EU and no amount of pleading by May could make the UK an exception” Surly you have made your own point there, the UK could not be made an exception because as it stands today, the UK is part of the EU and so therefore would be made subject to the same tariffs imposed on the EU. You have tried to make it out to be a weakness of May not being able to get a uk exception, when in reality, we cannot get an exception as we are still tied to the EU.

  • William Fowler 2nd Jun '18 - 2:28pm

    If the UK and Mrs May had concentrated their efforts they could have persuaded Trump to exclude certain grades of steel from tariffs which aren’t made in the USA and just happen to be made in the UK. Given the ruination of Sterling, though, even a 25 percent rise in costs isn’t the end of the world, just means the money that disappears into tax havens will be lowered (large co’s notorious for creative book keeping where exports and imports are concerned).

  • Richard O'Neill 2nd Jun '18 - 2:39pm

    To me this would be a good time for the EU to put together a counter offer to allow remainers to present an option of UK staying in EU under fresh terms. But I can’t see any hint of this at moment.

    But the idea that we should break off negotiations puzzles me. That would just lead to a Hard Brexit. I’m not convinced there is this dramatic public shift against Brexit that has been spoken of over and over again for the last two years. But there is scope for a Softer Brexit which would embrace the old British tradition of compromise that seems to have been jettisoned by both extremes of the Brexit debate.

    As for Trump is there any evidence that he represents a long term trend in US policy rather than a blip. He’s so unpredictable it wouldn’t surprise me if he suddenly announced Britain was exempt from fresh tarrifs. We should be thinking ahead to a post-Trump America that can’t come soon enough (but can’t be later than 2024).

    But I’d love to see the big EU players step up and actively court Britain now.

  • david becket 2nd Jun '18 - 3:19pm

    If anybody thinks we would have got a better deal on steel with Trumps America First outside the EU they are not in the real world. Trump is a bully, and to stand up to a bully you need a strong power base.

  • Peter Martin 2nd Jun '18 - 5:25pm

    “It is becoming plain that the EU needs us to stay in as much as we need it ourselves.”

    I’d have thought just the opposite. I’ve just listened to a speech by Guy Verhofstadt calling for more EU integration to solve continual Eurozone crises which can only be a interpreted as a call for a USE. He’s right (except for the wrong reasons), but the last thing the EU would need is the UK being a member. The UK would side with Germany to put a spanner in the works.

    “…….changes seem inevitable. Perhaps the Stability and Growth Pact will have to be revised.”

    The Stability and Growth Pact was written in a different economic era. What seemed a reasonable set of rules prior to the GFC, very quickly looked a recipe by austerity and stagnation after the GFC. But that’s nearly ten years ago and we’ve seen no changes. Unfortunately, the thinking of the German ordoliberal establishment, and others, is that the reason for the EU’s poor economic performance since the GFC is due to a failure to enforce those rules rather than the rules themselves. GV said as much himself in his speech.

    Until this changes, which I can’t see happening any time soon, there will be no revisions.

    Their thinking is that if Germany can manage with the euro so should everyone else. GV seems to think this will need direct EU government to achieve. Except the reality is that Germany works because there is only one Germany.

    “……George Soros, joining the fight for a new referendum by providing funds for the Best for Britain campaign, surely is right to say that this is an ideal time for the EU to reform itself. The separateness of EZ states and the outer tier of states such as ours should be confirmed, with an end to the requirement to join the Euro.”

    Of course George Soros is quite right. Let’s see what he’s suggested being implemented, or even just proposed, by the EU and then we can have a meaningful new referendum on just what it is we do, or do not, wish to be a part of.

    But there’s Buckley’s chance of that!

  • Peter Martin 2nd Jun '18 - 5:45pm

    PS on the question of a “trade war” between the EU and the USA, I would say we should side who whoever has the lower overall tariffs. There is general agreement that tariffs are bad for world trade.

    So, even with the imposed new US tariffs on Steel and Aluminium, is this really the EU? We need to look at all the figures carefully and not just leap to the conclusion (tempting though that is) that Trump is the bad guy in all this. The USA has put up with high tariffs on USA motor vehicles for decades whereas EU imports to the USA only attract a 3% tariff.

  • Katharine Pindar 2nd Jun '18 - 6:28pm

    Welcome discussion, thanks, folks, when all is uncertainty. But, Martin, ‘what makes other borders different’ from the Irish border is I think clear – it’s a border between a state that wants to stay in the EU and one that (so far) says it doesn’t. And, surely, the Italian populists would welcome Treaty change to allow states to close their borders just as much as the Visegrad countries now, in order to block the continuing flow of immigrants?

    I do defend ‘top-heavy’ because of the power of the Commission and the financial controls which impose austerity. Peter Martin, you repeat what I have understood myself, that the established economic thinking of the powers of the EU would be that greater enforcement of financial rules is needed rather than any liberalisation. But the point, surely, is that there is now a powerful force, namely the new Italian government, which wants tax cuts and more government spending, for instance on welfare, which would seem to challenge the rules of the Eurozone. I don’t see therefore how the states can be ‘pushed closer together’, as Martin puts it, by Trump’s behaviour. Strengthening the EZ seems out of the question in this new scenario, and as George Soros said in Paris, there should be a distinction made between the states of the EZ and those pursuing a ‘multi-track’ approach to the EU. Guy Verhofstadt may indeed want closer integration of the EZ states but that seems unlikely now, and Britain can stay in the outer tier with less question than before.

  • Peter Martin 2nd Jun '18 - 8:16pm

    @ Arnold Kiel,

    “…….the Italian desire to add double-digits to its 230% national debt/GDP on a yearly basis……”

    The Italians want to grow their economy and that requires expansionary fiscal policies. Their debt/GDP ratio will fall if GDP rises even if debt levels rise slightly too. It’s just simple arithmetic. After WW2 the debt ratios of the USA and the western European countries fell. Not because debts were actually paid off. That rarely happens. It can’t happen. They fell because GDP increased.

    “…….exists simply no lender”

    Germany is the lender via the ECB and the Target2 euro banking system. Currently Germany is owed some 800 million euros by countries like Italy who are simply incapable of ever repaying. You might as well just write it all off now unless you are prepared to help and allow the peripheral countries to pursue expansionary policies. It’s only when their economies are in good shape that they will be able to repay or even afford to pay some interest. At present none is paid.

  • Peter Martin 2nd Jun '18 - 8:18pm

    Sorry. That should be 800 BILLION euros.

  • Little Jackie Paper 2nd Jun '18 - 9:31pm

    Peter Martin – It is worth pointing out that as I understand it the US Fedwire which is akin to TARGET2 clears balances. The ECB has (so far) not done so, although as Arnold Kiel points out I dread to think what would happen if it did or even how it could do so realistically.

    What though is less clear to me is how QE works in this. Presumably the intention was that the liquidity was to be put into national economies. The suggestion to me in TARGET2 is that the liquidity has flowed to particular countries (I think). Put another way, there is divergence within the EZ and not convergence.

    And to think that the arguments are likely to be about the next EU budget round, which put next to TARGET2 is trivial. EU enlargement anyone?

  • Katharine Pindar 3rd Jun '18 - 12:33am

    The central question for the Eurozone with the advent of the new Italian government may seem to be how far its spending plans can be tolerated, but surely this is only one aspect of a profound change for the EU. The populists are now in the tent, and must be heard. On many matters the EU will keep united purposes, often opposing Trump’s America, and Britain will naturally share those purposes, whether in trade, in security, in scientific and technical advance or in facing climate change. That together in the EU we can be stronger seems evident, whether we are EZ members or not. But the populists within could be a canker to eat at the heart of EU systems. Their radicalism could refresh and renew to some extent, leading perhaps to increasing subsidiarity and individual states’ rights; but in the long run, surely the radicalism must be staunched with pragmatism, at which the British are rather good.

  • Peter Martin 3rd Jun '18 - 7:19am

    @ Arnold,

    “Luckily, German taxpayers and voters do not understand the Target system”

    You’re letting your anti-democratic slip show! Those of us who like to think of ourselves as democrats would never think it lucky that voters were in ignorance. We do what we can to explain and inform.

    @LJP,

    Yes the US has Fedwire. All currency zones have a clearing system.

    The problem is that the EU is trying something quite new. It doesn’t matter in America if Delaware (for example) is in credit or Texas is in deficit and therefore owes or is owed by the Fed. Similarly , in the UK, is Yorkshire in debt to Hampshire via BoE imbalances? If it was even possible to find out it wouldn’t be easy. No-one cares anyway because we are all one country with one Govt, one currency and one taxation system.

    Therefore you wouldn’t easily find a similar graph for the USA in this article.

    https://www.zerohedge.com/news/2017-03-06/eurozone-capital-flight-intensifies-target2-imbalances-widen-again

    But they do care in euroland. Germany maintains a fiction that the EZ isn’t a fiscal transfer union by pretending that the Target2 imbalances are loans. Albeit at zero interest rate for lender and borrower. Its really just that – a pretence. To be kept, as Arnold admits, from German voters!

    QE does have an effect on Target 2. Countries sell their bonds to the ECB to finance their deficits. But the main purpose of QE is to keep interest rates down in the periphery. Otherwise no-one would willingly buy Greek or Italian bonds except at ultra high interest rates. There’s only the ECB that will buy them at current low rates. Using German taxpayers money 🙂 . That’s maybe not quite right when you consider that the ECB is the only source of euros and they can create as many as they like. But I know which way the AfD will see it.

    EZ membership wouldn’t then be a matter of choice for many deficit countries. They’d be forced out of the EZ by high rates which they simply couldn’t afford.

    So therefore, any talk of a ‘spread’ between German and other euro bonds is somewhat ingenuous. The spread is what the ECB wants it to be. The ECB obviously does know how the system works and does what it can to keep the wheels turning. There’s a slight problem that all this is illegal according to the terms of the Treaties and there are those in Germany who aren’t at all sympathetic to the EU who know this too.

  • Peter Martin 3rd Jun '18 - 8:01am

    @ Katharine,

    “…………surely the radicalism must be staunched with pragmatism”

    Yes sure. I agree with this. The problem, really, is that the EU elite are being ultra radical too. They have a dream of an ever closer union which is, in effect a USE. That’s the real purpose of the euro. As I’ve just said to Arnold and LJP, the only way they can keep the train on the tracks is to try to hide (albeit not very successfully) what they are doing from the voters and force the ECB into a total disregard on what is written in the Treaties and presumably European law too.

    The pragmatic solution is to go back to what we had prior to Maastricht and reinstate the EEC. I just can’t see this multi tier system working that much longer. If and when GV and others get their way and introduce a EZ Govt, all countries like Denmark will have the choice of being in or out. I’d say they’ll choose to be in and adopt the euro too.

    The same will apply to the UK. We too will be asked to either join in or leave the EU which will be also the EZ. Just as the USA is now the $Z.

  • John Marriott 3rd Jun '18 - 9:57am

    21 comments (and counting) between 10.30pm and 8am this morning. Wow, you folks keep funny hours. Well, it’s nearly 10am and the sun has arisen and we are still here. I have to ask myself, what is there left to say about Brexit? Is that really the only thing that gets some of you contributors excited?

    With world trade unravelling before our eyes, trouble brewing in the South China Sea, and then the on/off summit in Singapore, not forgetting the Middle East, it makes you wonder where the world is going.

  • John Marriott 3rd Jun '18 - 10:42am

    Apologies for the typo. That should have read 10. 30AM!

  • David Becket 3rd Jun '18 - 11:33am

    President Trump’s policy is not just America First, but America Decides.
    He is attempting to show that it will be for America to call the tune on trade, whatever the warnings from Theresa May about her “deep concern” about protectionist moves.
    Free trade deals with the US – with the UK for example – will be on America’s terms.

    So much for taking back control

  • Katharine Pindar 3rd Jun '18 - 2:57pm

    @ John Marriott. Hi, John, thank you for looking in! I think the familiar obsession that was being displayed here lately was not Brexit, but disapproval of the financing of the Eurozone, which was a distraction from two serious subjects touched on here.

    One is the threat of trade war between the USA and Europe. How that will go is anyone’s guess at present, but certainly would seem a reason for the EU to have a common front, and the UK to be part of it, putting differences aside in the face of the common threat.

    The other pressing subject for consideration is that a major EU state now has a populist government, which, if it agrees on radical measures like new welfare spending which will increase its deficit, and expelling immigrants plus wanting border controls, will be opposing EU rules and management. At the same time there seems some disunity developing among the EU central powers, if the Commission and the Council are disagreeing about whether Britain should be tempted to continue a major financial involvement after Brexit.

    What do these new circumstances mean for Britain? My guess is that the campaign against Brexit could be strengthened, if the situation can be presented as remaining in an EU in possibly creative turmoil, and having influence therein. No need then for the detachment of the Norway model!

  • Peter Martin 3rd Jun '18 - 4:15pm

    If those who are pro EU agree that the USA’s new tariffs are harmful, do they also agree that the the long standing practice of the EU imposing relatively high tariffs is harmful too? Or are EU tariffs somehow good tariffs but everyone else’s are bad tariffs?

    Is there a double standard involved here? The largest trade surpluses around the world are those in China and Germany. Because the USA has a problem with Germany it spills over into a problem with the EU in general.

    Why is it OK for EU/Germany to levy a 10% tariff on US cars, but the US can only levy a 2.5% tariff on EU/German cars?

  • Peter Martin 3rd Jun '18 - 4:17pm

    @ Katharine,

    I’m guessing you will be siding with Italy in the coming dispute with the EU? Arnold will be very much be on the EU’s side. How will that go? That’s “anyone’s guess” too. There’s no getting away from the fact you’ll be supporting a country led by those who aren’t at all progressive in their political outlook.

    So that’s a bit awkward. I wish it was the Italian left which was taking on the EU but they are nowhere to be seen. My inclination is to want to get away from the EU more than ever. The problem isn’t really free movement. Its the imposed austerity economics which is leading to the rise of fascism in the EU. If all the EU economies are doing well then why restrict anyone from crossing borders? There’d be no problem if the flows were less asymmetric.

    So if the extreme right do win, and they do succeed in expelling immigrants and reinstating border controls, why is that a strengthening of the “campaign against Brexit”?

  • David Beckett, I wish I could believe that with a trade war between the USA and the EU, that the EU will not impose any tariffs on British goods post Brexit.

    Katherine, if the EU was sensible it would want the UK to pay for single market access to avoid the €15bn per year whole in its budget and then use the extra money from increasing the 27’s contributions to provide more regional economic aid. I emailed our one MEP’s office requesting her support for my amendment to the Brexit motion at Spring Conference. I received no answer. If we had passed it, we could have spent the last 3 months trying to persuade our sister party to embrace EU reform to reduce economic migration within the EU and reform the Stability and Growth Pact to allow the poorer economies to recover from EU enforced austerity.

    Richard O’Neil
    “To me this would be a good time for the EU to put together a counter offer to allow remainers to present an option of UK staying in EU under fresh terms. But I can’t see any hint of this at moment. “
    I agree.

    Guy Verhofstadt seems to come across as a typical member of the pro-EU elite. As the leader of our group in the EU Parliament we should have been working on him to get him to accept reforms to the EU to assist us to win any future EU referendum on the deal and staying in.

    However, I don’t think the EU can act sensibly and do its utmost to try to keep us in the EU and deal with it regional economic problems. If the EU treats Italy like Greece then the road ahead will be very difficult for everyone in Europe both member and non-member countries.

  • Peter Martin 3rd Jun '18 - 5:38pm

    @ Arnold Kiel,

    As the GATT hasn’t existed since 1995 the previous agreement with the US would have been when Germany still had its own currency. In those circumstances, your ” wage restraint, innovativeness, and strong brands are not unfair” argument has some validity. Then, a successful economy meant that the DM would rise giving German citizens extra spending power to be able to afford extra imports which would limit any trade imbalance.

    Germany is very keen to use a “we must stick to the rules” argument when it suits but totally ignore any rules that don’t suit. The underlying problem, behind this and other EU economic issues, is Germany’s 8% (and rising) trade surplus. Yet there is, supposedly, a 5% GDP limit on EU trade surpluses. What about observing that rule?

  • Peter Martin 3rd Jun '18 - 6:10pm

    “However, I don’t think the EU can act sensibly and do its utmost to try to keep us in the EU and deal with it regional economic problems.”

    Why not? If the EU deals with its regional economies the EU will be a better market for UK exports (helping us reduce our debt problem) and there will be less pressure on inwards migration. At the same time EU GDP will increase which must be to the EU’s benefit.

    So its not a question of ‘can’! They can and should act sensibly but experience tells us not to hold our breathe on that one! They just refuse to.

  • Katharine Pindar 3rd Jun '18 - 6:11pm

    Michael BG, you are right to lament that it would have been good for ALDE to campaign for the reduction of economic migration within the EU and for the reform of the Stability and Growth Pact, and I agree that it is a pity that Guy Verhofstadt does not seem inclined to advocate these sorts of reforms, to enhance our chance of persuading the voters to vote to remain if a referendum on the Deal comes about. I remember your relevant amendment to the Brexit motion offered to Spring Conference, which was just unfortunate in that there would not have been time enough for its implementation.

    You also have sensible suggestions of what the EU should do in regard to our country, but no hope of seeing any of it happening. I think, however, that the central powers of the EU are so challenged now that they may indeed begin to contemplate changes, and certainly they would find Italy a tougher nut to crack than Greece if they tried to impose similar austerity. That aspect of the situation is to my mind hopeful, or at least open to interesting development.

    Thank you for contributing, Michael, but could you please spell my name correctly? 🙂

  • Peter Martin 3rd Jun '18 - 6:24pm

    @ Katharine,

    “it is a pity that Guy Verhofstadt does not seem inclined to advocate these sorts of reforms”

    Well, yes, but GV is a follower European liberalism which is quite different from US liberalism and also quite different from UK ‘Liberal Democracy’. You wouldn’t expect anything else. I’m really not sure why the Lib Dems are aligned with ALDE.

    ALDE includes the German FPD which is extremely right wing economically. The history of that party in the post WW2 period doesn’t bear close scrutiny. They were opposed to the de-nazification of Germany and campaigned for amnesty of what they termed “so-called war criminals”.

    https://en.wikipedia.org/wiki/Free_Democratic_Party_(Germany)

  • Katharine Pindar 3rd Jun '18 - 6:30pm

    Yes, Peter, I’ve been thinking much the same.

  • Peter,

    I get you don’t like the EU, but what I don’t get (along with the rest of the Brexiteers) is your plan going forward. I know we are leaving but then what do you plan to do. Are we to stand around interminably waiting for a plan to turn up (like a down market version of “Waiting for Godot”) ; will it be a case of “It will be alright on the night” or will we just muddle through. All these years of planning to leave, did none of you spend any time planning what you’d do next or was leaving as far as you got?

  • Peter Martin 3rd Jun '18 - 7:24pm

    @ frankie,

    Personally I was expecting that the EU would have extended some kind of improved offer to try to keep us in the EU in some way. But it now looks like that’s not going to happen .

    So we’ll have to see just how it turns out. We can only make a decision to leave. We can’t have a definite plan for a post Brexit arrangement with the EU. We can’t say just how the EU wants to play it. That’s down to them.

  • So let me get this right Peter. You voted for Brexit “expecting that the EU would have extended some kind of improved offer to try to keep us in the EU in some way” but because they are not bending over backwards to do everything we want it’s their fault. What ever happened to the Brexit battle cries of “They need us more than we need them”, “We hold all the cards” and my personal favourite Liam Fox has said a post-Brexit free trade deal with the EU should be the “easiest in human history”. Now all we have left is we will have to wait to see what the EU give us. How the mighty have fallen Peter, from puffed up super heroes to supplicants at the kitchen door waiting for scraps.

  • >Why is it OK for EU/Germany to levy a 10% tariff on US cars, but the US can only levy a 2.5% tariff on EU/German cars?
    ?Peter – Given your previous postings, this point makes me question whether you have lost the plot!

    As someone who believes the UK can abide by WTO agreements then you surely know how such tariffs get set and agreed and the rules of the game. Remember the UK whilst being a member of the WTO, it currently has no tariff card as it uses the EU28 tariff card. Post-Brexit there will be two new WTO tariff cards: one for the EU27 and one for the UK. The idea that the UK (or the EU27) can simply use the EU28 card has been dismissed by WTO members.

    So returning to your question “Or are EU tariffs somehow good tariffs but everyone else’s are bad tariffs?” the answer is obvious, the current tariffs have been negotiated and agreed by all parties, not imposed on the whim of one person on dubious grounds. So once again I find myself asking why you feel the need to ask this question…

  • Sean Hyland 3rd Jun '18 - 11:29pm

    Arnold the Euro was flawed from the day it was conceived and certainly when implemented. The architects of its creation knew it lacked the political and fiscal structures it needed. They pushed the creation of these to a future non determined date but the financial crisis came first.

    All the countries at the first stage of introducing currency, for want of a better word, ” cheated” including Germany. None of them met the criteria rules so they changed the rules to suit themselves so they could join. As others have pointed out Germany doesn’t meet the rules now but is happy to lecture on other countries failure to comply with the same rules. You don’t have to take mind or others words but you can’t escape the historical or present statistics and records.

    This is not a defence of Greece, Italy, or any other country for the actions they have taken. All i would say is its hard to be morally superior about the virtue of northern countries versus lying, cheating southern countries when they are guilty to some degree of the same crimes.

  • Peter Martin 4th Jun '18 - 6:31am

    @ frankie,

    I voted to Leave the EU because I wanted to Leave the EU. My vote wasn’t conditional on the EU trying to keep us in. In a way I pleased they haven’t done that. I didn’t, however, expect they would offer us a good deal outside the EU which is why we could end up on WTO terms. I agree we have to be prepared for that.

    @ Arnold,

    Your attitude sums up European liberalism very well which as I’ve pointed out to Katharine is quite a lot different from UK Liberal Democracy. What you call “currency nonsense” is really better described as an “inconvenient truth”. There’s a lot more to sharing a single currency than printing a set of common banknotes so anyone can pop over across a nearby border, and do a bit of shopping without the inconvenience of having two wallets or purses. But that’s as far as most people in Europe understand it.

    The euro project will certainly fail with people who think like yourself in charge. I genuinely feel sorry for all those who do have a genuine passion for the European ideal. They are being let down by people like yourself who not only don’t understand why currency zones can’t be set up as you would wish ( ie your ‘everyone just keeps to the rules models and everything will be fine’) but you close your ears and refuse to listen when anyone tries to explain why this isn’t an option.

    I know you won’t listen to a lefty like myself,but this is from Milton Friedman (heard of him?) saying pretty much the same thing in 1997.

    https://www.project-syndicate.org/commentary/the-euro–monetary-unity-to-political-disunity

    @ Roland,

    Yes I understand the history but the situation has changed since and there needs to be an update. Germany simply has to understand that it cannot run a $300 billion trade surplus (year after year) and expect highly advantageous non reciprocal tariff arrangements to continue indefinitely.

    Germany is the problem not us, but we are feeling the US flak because of EU membership.

    https://www.reuters.com/article/us-germany-economy-trade/germany-trumps-asia-with-worlds-largest-current-account-surplus-idUSKBN1F50WP

  • Katharine Pindar 4th Jun '18 - 9:43am

    Extreme views on the conception and working of the Eurozone are irrelevant: it will be interesting to see how Italy and Brussels work things out, but Britain should be poised to take advantage of the likely forthcoming clashes by staying in the EU and working within it for both our own country’s and Europe’s beneficial development.

    Peter, I so indeed question our party’s connection in Europe with liberalism there, but I should like us to be connected with social liberalism, and strengthening the social liberals there against populists, a vital struggle which the social liberals appear to be losing at present. Meantime, to be blaming EU membership for our ‘feeling the US flak’ seems the sort of absurd conclusion that one hears all the time from Leavers.

    Arnold, do you also favour the social liberal cause? I suspect not. I understand your viewpoint regarding the advantage Greece and Italy have had in being supported by the flow of funds from the centre, but I also understand that Greece has really no chance of ever regaining its financial sovereignty unless some of its debts are simply written off.

  • Peter Martin 4th Jun '18 - 10:25am

    @ Katharine,

    Yes you do have a point. I have just read that Canada has been hit with increased US tariffs on its exports and there seems no obvious reason for that. There is a reason that the UK does have to be included, even though the real target might be Germany, and that is due to free movement of goods within the EU. Germany would be able to route its exports, tariff free, through the UK otherwise.

    As you can imagine, I wouldn’t normally support Trump, but he’s quite right to want to do something about world trade imbalances. There’s a valid justification in having highly asymmetric tariff arrangements to allow a developing country run a moderate trade surplus and so accumulate reserves of foreign capital. But not Germany. Germany is in no way a developing country and its surplus is far from what might be termed ‘moderate’!

    The problem isn’t so much debts with Greece and Italy. The ECB readily buys up their bonds so the interest paid is ultra low. Maybe even slightly negative when inflation is included. The real problem is the 3% limit on Govt deficits. Greece has even had to negotiate that away as part of the last bail out. A Govt deficit is just the Govt spending more into the economy than it gets back in taxes. That’s what depressed economies need to get them moving again, creating a ‘pump priming’ effect’ and so producing future growth.

    PS we may have a few points of disagreement but at least I always do spell your name correctly! 🙂

  • Rita Giannini 4th Jun '18 - 11:04am

    I don’t want to enter into the substantive argument, but I do resent your calling all the other European liberal parties not liberal. It is the typical British attitude, and what in good part caused Brexit: we are the best, and you foreigners don’t understand us. Well, sorry, it is not true; and when I read this type of drivel I am almost pleased that you are leaving!

  • Peter Martin 4th Jun '18 - 12:00pm

    @ Rita,

    Who has said they weren’t liberal? My comment was that the word ‘liberal’ can mean different things in different parts of the world. In the USA it means someone on the left. In the UK it tends to mean someone who is in the centre. But it Germany it can mean this. Look how far to the right are the FDP economically if not socially.

    https://www.politicalcompass.org/germany2013

  • Sean Hyland 4th Jun '18 - 12:24pm

    Arnold Kiel, I think my point still stands. As I said I was not defending Greece, Italy or any other country. My point was to try and show that there are issues and causes on all sides. Germany remains in breach of the rules at the moment so it would be easy to condemn them in the same way that simplistic statements and generalisations are made against others.

    Katharines original reason for starting this thread was to open discussion on Pragmatism. Perhaps it we all focus on solutions and ideas rather than labelling others we may find a way forward. Whatever our individual views on EU, in or out etc we are talking about people’s lives which have often been at the mercy of the actions and motivations of their elected representatives.

  • Peter Martin

    However, I don’t think the EU can act sensibly and do its utmost to try to keep us in the EU and deal with it regional economic problems.
    … They can and should act sensibly but experience tells us not to hold our breathe on that one! They just refuse to.”

    You are correct in theory any organisation should be able to act sensibly. My point is that I don’t think the EU has the will to do so in this case. I also agree the benefits for the EU should be as you say. In fact I think the benefits are almost self-evident.

    Katharine, after all this time of spelling your name correctly I don’t understand how I got it wrong this time. Sorry. I would like to blame Gremlins in Word, but I think it happened when I was reordering and combining my comments on what you had written.

    According to Wikipedia the VLD was formed as a “somewhat Thatcherite party under its founder, Guy Verhofstadt” (https://en.wikipedia.org/wiki/Open_Vlaamse_Liberalen_en_Democraten).

    Arnold Kiel

    The EU did impose austerity on Greece. The single currency area doesn’t work as it should, because of attitudes like yours. Until the richer nations of the Euro zone recognise that they have to treat the poor countries exactly the same as poorer regions of their own country (this means huge fiscal transfers as happened with East Germany) then the Euro will continue on the edge of failure.

  • Katharine Pindar 4th Jun '18 - 5:40pm

    ‘Focus on solutions and ideas’ – I like your comment, Sean. Thanks also to Peter and Michael for interesting information about some of the European liberal parties. I have no special knowledge, Rita, but wish Lib Dems were associated with social democrats in Europe rather than liberals. To me we should always have been centre-left as a party, whether as liberals or now in the firmer identity of Liberal Democrats.

    Whether the EU can now begin to adapt usefully to new conditions we shall see, but it is a hopeful sign that Herr Juncker, President of the Commission, is admitting the treatment of Greece was heavy-handed, and saying that the Commission won’t meddle in Italy’s affairs. According to the report in yesterday’s Observer, he said that ‘I am certain the Italians have a good sense of what is good for their country. They will sort it out.’ Do you get the impression of a big beast scenting out another it feels may be a bit too big just to jump on?!

  • Katharine Pindar 4th Jun '18 - 9:59pm

    No, I suppose we aren’t social democrats, Mark (thank you for taking this question up), but I suggest we are social liberals. I see what you mean about not wanting to join a socialist grouping, but it seems a pity there isn’t anything in between. Is this also an area where the EU could do with some adjustment, perhaps some regrouping? Limited though my knowledge is, I feel our party may have more in common with the principles of the German SDP than with the Free Democrats there. I wonder if the Social Liberal Forum has any opinion on that, and on our fellow liberals in ALDE. Presumably we need as a party to be strongly aligned with parties that oppose far-right populism, as this is a threat to the EU. Pressingly, we shall have to be prepared for the EU Parliamentary elections and getting rid of our UKIP MEPs if we succeed in staying in.

  • Peter Martin 5th Jun '18 - 7:26am

    @ Mark,

    “We really aren’t social democrats…”

    So what happened to the SDP then? If they’ve merged with the old Libs to form the Lib Dems then you are are partially that!

    Having said this, I’m not sure that labels are that useful. My opinion is that democracy is more important than socialism, or liberalism or whatever. Which, to go back to the original question, is what the EU PTB need to understand if they want the EU to “stick together”.

  • Peter Martin 5th Jun '18 - 7:49am

    @ Katharine,

    “Presumably we need as a party to be strongly aligned with parties that oppose far-right populism, as this is a threat to the EU.”

    Given the history of the 20th century there are much better and stronger reasons than this for opposing the far right. The European working classes are suffering from the economic effects of austerity, but the traditional left and progressive parties have gone walkabout. They are nowhere to be seen in the struggle against neoliberalism. When Margaret Thatcher imposed her monetary policies, as neoliberalism was called at the time, there was no question that she was going to be allowed to do that unchallenged.

    And, to be fair to the 80’s Tory government they had much better reasons to adopt contractionary policies than does any EU govt now. Then inflation was a big problem and had to be squeezed out of the system. Unemployment touched 12% but that was only for a year or so. Opposition to her policies didn’t mean that everyone wanted the UK to split apart, so why is it different now with the EU? Why did the left, and I’d include the Lib Dems, have so much to say in opposition to Thatcherism then but have nothing (with the exception of just a few of us) to say now?

    It’s really no wonder the far right are doing so well.

  • Katharine Pindar 5th Jun '18 - 9:33am

    ‘Just a few of us’ to oppose austerity? How can that be, Peter, when the Lib Dems are now fully committed to working against inequality, and on the verge of shaping major policies to relieve poverty? Why are you not a Lib Dem member, to join the struggle? I note with interest your commitment to democracy, which echoes mine, and it would be good if you would join the party and enhance those of us, sometimes seeming to be a minority, who will no longer accept that it is enough to campaign as Liberals alone. What indeed of the SDP inheritance, as you ask Mark?

    The questions you are raising about populism and the far right are also very interesting. The reason why I started at some point above to deplore ‘far-right populism’ is because I thought that populism of itself may not necessarily be deplorable. I note in this respect that one of the major policies of the new Italian coalition is to bring in a universal citizens’ income. Surely a policy which many of us want for Britain?

  • Peter Martin 5th Jun ’18 – 7:49am………………………..And, to be fair to the 80’s Tory government they had much better reasons to adopt contractionary policies than does any EU govt now. Then inflation was a big problem and had to be squeezed out of the system. Unemployment touched 12% but that was only for a year or so…………………..

    Are the Thatcher years just a ‘history book’ lesson for you?

    Under Thatcher unemployment rose to the highest % level since the 1930s and stayed there for over 6 years. Between 1982 and 1986 unemployment averaged around 3 million (an average of over 12% of the workforce).

  • Peter Martin 5th Jun '18 - 10:17am

    @ Katharine, @ Joe

    I probably should have made it clearer that I was referring to EU imposed austerity. That does affect us too, even though we aren’t in the eurozone. So, whereas the Labour and Lib Dem parties do speak out, to some extent, against UK austerity there aren’t many of us who spoke out against what was happening in Greece three years ago. I thought the lack of support given to the Greek Govt was particularly embarrassing from a left perspective.

    EU imposed austerity has two effects on us. For starters, it has created an asymmetric migration pattern which might just have had more than a slight impact on the referendum result! Also it creates depressed markets in the EU which isn’t good for our exporters. This means our trade pattern is highly asymmetric too, which, in turn, gives us a debt problem. Someone has to borrow to pay the net import bill. If the Govt doesn’t want to borrow, then pushing the borrowing requirement on to the private sector isn’t a solution.

    Conceivably, it could be possible for austerity to take more away from those who are doing OK than it is from the poor. If you haven’t got much to start with then its difficult to take away what you haven’t got! But the net effect is always felt more acutely by the less well off. I don’t think many people were taken in by Cameron’s “We are all in it together” line.

    Austerity is really just another word for contractionary economic policies. There’s nothing lazy about it at all. Whether it’s the best term is debatable. I’d be happy to use the latter – except people tend not to understand it. Contractionary policies are in order, from time to time, if the economy is overheating and needs a touch on the brakes to control inflation. But there’s nowhere on the periphery Europe, where there’s any need for the level of fiscal restraint demanded under the terms of EU treaties. Imposing the level austerity demanded by the EU on Greece right now is little short of criminally incompetent.

  • Innocent Bystander 5th Jun '18 - 10:23am

    I readily acknowledge Thatcher’s many flaws but I won’t accept a re-write of history. I am a still living eye witness of those years during which I worked in an engineering factory on Scotswood Road, (the one you ‘gan along to see the Blaydon races). It was called “Red Tyneside” because of continual industrial disputes. Engineering firms were closing all over the area and unemployment was rising.
    The Prime Minister at the time? Margaret Thatcher? No! It was “Sunny Jim” Callaghan.

  • Peter Martin 5th Jun '18 - 10:27am

    @ expats,

    It wasn’t quite as bad as you claim but it was bad enough.

    The point I was making wasn’t to defend Thatcherism per se, except to acknowledge that there was an inflation problem which did need dealing with, but to ask why the European left has been so utterly useless in combating similar, but much worse, policies imposed by the EU, when there isn’t even the excuse of an inflation problem?

    https://www.economicshelp.org/wp-content/uploads/2010/10/unemployment-1881-2015.png

  • Arnold Kiel, it isn’t an issue for me, for us to say we got austerity wrong, the way we managed the economy was fundamentally wrong. That it would be much better for the people to have jobs than for governments to balance their budgets. It would be much better for all the people of the EU if the poorer regions and countries were as rich as the richer ones. Therefore it makes sense for money to be spent in the poorer countries to reduce unemployment which will create more demand across the whole of the EU. Therefore in a single currency area some governments do have to have much larger budget deficits than those which have full employment.

    Joe Otten, are you not aware that austerity is about reducing the deficit and so increasing taxes is just another way of doing it, which affects those in work? However, while in government we supported cuts in benefit which effected those not in work and the poorest of those in work. We now have policies to reverse lots of those benefit cuts as well as most of the Conservative cuts since 2015.

    According to the ONS Median Income was 204.757 in 2009/10 and 208.817 in 2014/15 having fallen to a low of 195.6 in 2012/13; and Mean Income was 222.024 in 2009/10 and 222.785 in 2014/15 having fallen to 214 in 2012/13 (https://www.ons.gov.uk/peoplepopulationandcommunity/personalandhouseholdfinances/incomeandwealth/bulletins/householddisposableincomeandinequality/financialyearending2016). In these figures I see little which can be judged as successful. It was because we followed Conservative economic plans that these figures are so bad. They are the direct result of cutting too much too early.

  • Katharine Pindar 5th Jun '18 - 5:09pm

    Whoa, let’s try and take stock! It would be good to focus now on the present and on the future prospects. So, the Eurozone will continue to function without any state dropping out, its rules will continue to demand deficit control by member states, and its managers are likely to come up against Italian expansionary policies but refuse enhanced credit. What compromises ensue I can’t guess, but it is clear that the EU would like Britain to remain as a contributor. It could even seem an urgent necessity that we do so, if EU development in any sense is now liable to be stymied, and that makes it the more likely that compromise may be possible on what conditions will apply if we remain in.

    We don’t have a government which understands how to or would agree to act readily for the good of the country, but while campaigning to remain our party and its allies can be working out what we want from the EU in the future, and telling the voters what that is. For our country, to be able to expect continued economic growth and greater prosperity along with the EU and as a part of it, but with perhaps more independence and more of a say over development in exchange for our financial input. And for our party, a firm commitment to an end to the neo-liberal policies that have caused poverty and increased inequality here, to taxation reform and constructive investment. We should be recommending like measures to our European partners. Let us also be populists in the sense of serving and empowering our people, and in understanding that our elites as well as those in other countries have badly served them in the last decade.

  • Peter Martin 5th Jun '18 - 6:34pm

    Michael BG,

    “….are you not aware that austerity is about reducing the deficit”

    Maybe some might think it is. And many claim that’s what its about. But it isn’t really. It’s about Govt spending less and taxing more. But Govt spending less slows the economy which reduces it’s tax revenue. And raising tax rates also slows the economy and may well reduce its tax revenue too. So the deficit may well end up higher than it was before the austerity was imposed. Not that it really matters that much.

    Austerity is about slowing the economy and should be done if demand -pull inflation is something that needs to be curtailed. Period. As the Americans like to say!

  • Peter Martin 5th Jun '18 - 7:40pm

    @ Arnold Kiel,

    “no country ever prospered through devaluation”

    This just isn’t true. I heard Guy Vehofstadt say something similar the other day. He’s wrong too. It’s one of these glib sounding arguments which appear superficially plausible but don’t stand up to scrutiny.

    I can point to the US experience during the 30’s when the dollar was devalued according to how much gold it would buy. The economy improved. It really improved, probably for the wrong reasons, when it was taken off gold completely when it became involved in the war.

    More recently the UK pound was pegged to the DM at an unrealistic rate in the late 80’s It came crashing out of the ERM on Black Wednesday. Guess what? The economy then improved. Iceland’s currency crashed after the GFC. It’s economy improved and its currency climbed again. Argentina’s peso was linked to the US dollar at an unrealistic rate during the late 1990’s. There was a crash around the turn of the millenium, the peso fell and …….

    Denmark deliberately devalues its krone by pegging it to the euro at a lower than market rate. This is the sort of perpetual devaluation which probably isn’t a good idea. Why make a currency cheaper than it should be? But on the other hand we shouldn’t make it dearer than it should be. That’s just as bad.

  • Peter Martin 5th Jun '18 - 8:10pm

    @ Arnold Kiel,

    “Assuming the UK remained, I would find it inacceptable to tell UK taxpayers…… but we now need to send some of your money to Italy, but cannot ask them for anything in return”

    That’s because we don’t share a currency with Italy. If we did there’d need to be net fiscal transfers between the UK and Italy just as there is with Scotland, with whom we do share a currency. If Scotland declared independence and set up its own currency that arrangement would cease.

    It’s seems to be hard work explaining all this to you. You don’t seem very quick on the uptake. Is it sinking in, just what needs to happen in all currency unions, albeit very slowly?

  • Sean Hyland 5th Jun '18 - 9:33pm

    Katharine no country at present in the Eurozone can take the risk of leaving. Apart from the cost of new currency provision including infrastructure conversion it is likely they will face massive capital flight. Already fragile economies would not be able to stand the shock. Financial markets hate the unknown and uncertain and at the slightest hint will head for the hills.

    A wider risk will be the current ascension states ,Poland,Hungary etc. Although committed by treaty to converge and join they have yet to take the final step. It would be easy if so inclined to hold from meeting the convergence criteria. There are already issues with nationalist tendencies in Poland, Hungary etc. If looking for change from the EU this could force it. A long shot i know but Sweden have avoided convergence though for quite different reasons.

    Even excluding Brexit there are a range of tensions within the EU at present. Apart from Italy the recent suggestions of moves to evercloser political union may not appeal to all citizens. Populist politicians may seem to respond to these feelings for their own purpose. We all remain at the mercy of our elected representatives.

    Will be interesting to see if the EU leaders recognise this and how they react.

  • Katharine Pindar 5th Jun '18 - 10:08pm

    Yes, Sean, there is indeed a range of tensions in the EU apart from Brexit and apart from the new threat to the Eurozone of Italian populism. Thank you for bringing the discussion back to this, and it will be good if others with extensive knowledge of the EU would like to consider the volatile situation there and how our country, and especially our party, may fruitfully react to it.

  • Peter Martin 6th Jun '18 - 7:18am

    @ Sean,

    “no country at present in the Eurozone can take the risk of leaving….. the cost of new currency provision ….massive capital flight……Already fragile economies …. stand the shock…..Financial markets hate the unknown….. at the slightest hint will head for the hills.”

    Certainly this is what the EU PTB want everyone to think. Sure, there’s bound to be some disruption but if a country leaves the eurozone, the euro assets of everyone in that country become the euro liabilities of everyone else that remains in the eurozone. So there’s potentially a significant advantage for the first country to break ranks and set up its own currency which will be probably be presented as simply a parallel currency to the euro. It could in theory start with an almost clean sheet and no National Debt.

    Mario Draghi, the President of the ECB is well aware of this and consequently has decreed that Italy would have to settle its Target2 account in full if it were to leave the EZ. Its currently around 400 billion euros but this would increase sharply to, I would guess, something closer to a trillion euros if there was a general panic to move euros from Italian banks to German banks. It doesn’t really matter because the Italian government wouldn’t be able to pay in any case. So how is Mr Draghi going to get his money? Unless the EU invades Italy and deposes the Italian govt he won’t. Even then he won’t. It’s just impossible.

    Leaving will be messy with lots of legal issues to resolve but it’s do-able. A lot of people have given a lot of thought on just how it can be done.

    https://www.capitaleconomics.com/wp-content/uploads/2016/11/wolfson-prize-submission.pdf

  • Sean Hyland 6th Jun '18 - 12:08pm

    Peter Martin many thanks for the link. Looks interesting on first view and will certainly read in full.

  • Peter Martin
    ….are you not aware that austerity is about reducing the deficit
    … It’s about Govt spending less and taxing more. …Austerity is about slowing the economy”.

    Austerity does reduce the economy, but that isn’t its aim. It is often carried out at the same time as the money supply is increased to stimulate the economy. Also, only tax increases or spending cuts are necessary, but both are usually carried out.

    JoeB,
    in 2010 we promised an economic stimulus in our first year in government before reducing the deficit with more tax rises than spending cuts. The best way to reduce a government deficit during an economic downturn is to increase government spending to get people into work and so increase the amount the government receives in taxes.

    I think the best way to improve productivity is to have full employment, so employers have to invest to improve productivity and don’t have the option of just employing more people to produce more.

    Having most people agree on an economic policy does not make it the correct one as the failures of economic policy in the UK from 1929 onwards prove with 3.5 million people unemployed in the UK; over 20% of the working population.

  • Peter Martin 6th Jun '18 - 9:09pm

    @ Michael B,

    “Austerity does reduce the economy, but that isn’t its aim.”

    I actually said slow rather than reduce. Not quite the same thing. Slowing the economy, ie austerity, can reduce inflation and put down ward pressure on prices and particularly wages. There’s no other reason for it.

    “It is often carried out at the same time as the money supply is increased to stimulate the economy. ”

    What money supply? M0, M1, M2, M3, M4 ……….MZM ? Just how does varying any of these stimulate the economy? Increasing the level of private borrowing can stimulate the economy. Borrowing brings forward future consumption.

    @ Joe B,

    “Keynesian stimulus (fiscal or monetary) is only a short-term response to demand shocks. Ultimately, the structural deficiencies in the economy have to be tackled.”

    Neoliberal claptrap, I’m afraid Joe. However you look at it, the level of demand in the economy should match its productive capacity. If demand is too high we get demand pull inflation. If it is too low, we get too much unemployment , too many business failures, too much stagnation.

    Only a currency issuing Government has the fiscal capability to sensibly regulate an economy.

  • Katharine Pindar 6th Jun '18 - 10:08pm

    I can’t help wishing there were some way to sensibly regulate economists, at any rate the Lib Dem ones who regularly disagree as economists are wont to do with the same arguments on all kinds of LDV threads, whatever the original theme of the thread! And alas, I end up none the wiser personally, but as they don’t agree with each other I guess that doesn’t matter.

    What can we agree on? I suppose, that it is good to have full employment, and that people should have jobs that are reliable and well enough paid, so they don’t end up falling through the Universal Credit hoops, and, yes, so that they can keep paying taxes and spending money to keep the economy growing. That they should be able to have the necessary retraining too, to keep up with the new digital challenges, and that the jobs should be well distributed over all the regions. There certainly is a lot of work to be done by our party to help the country attain all of that… onward and upward, please, colleagues!

  • Peter Martin 6th Jun '18 - 11:27pm

    @ David,

    I like Keynes too. As far as economics go that is! It’s not easy reading him though. His style of prose is quite difficult and sleep inducing!

    However, as you say, he mainly got it right. He has, though, been shunted aside in recent decades by the mainstream Economics profession. Essentially, what I’m saying is Keynesian or Post Keynesian in approach. It just needs to be recognised that things have changed a little since he wrote his major works. Currencies are now totally fiat and there’s no gold involved any longer. That’s the big change that needs to be added to the picture. And we then see quite a different picture from the usual “we must balance the budget” neoliberal nonsense that’s so prevalent in both the UK and the EU. This has led to Brexit and is leading to the break up of the EU. It’s all very relevant to the OP.

    Keynes was a Liberal who wanted a better functioning capitalism which worked for everyone. So why not reclaim him?

  • JoeB,
    I am disappointed that you haven’t gone back to our 2010 manifesto and found on page 21 our commitment to an economic stimulus – “To boost the economy and create jobs for those who need them, we will begin our term of office with a one-year economic stimulus and job creation package” p 21 (http://www.politicsresources.net/area/uk/ge10/man/parties/libdem_manifesto_2010.pdf).

    I note you are re-writing history and ignoring that in 2012 the Coalition government nearly had a double dip recession. At the time it was reported that we had one and it was only once the figures were revised that it had disappeared – just!

    Indeed, today the government needs to stimulate regional economies to reduce unemployment to below 3% of the working age population. It should not be acceptable to manage inflation by having a pool of unemployed people at 4.3%.

    Peter Martin,
    I did actually quote you correctly “Austerity is about slowing the economy”.

    Like you I do accept that from time to time the economy needs to be slowed down and this is done by the government having deflationary economic policies. Austerity is done not to slow down the economy but to reduce the deficit. However, I agree that austerity is deflationary.

    Do you really reject the core of monetarism simplified as MV =PT? It is good for an economy to increase the money supply each year because it is often needed for economic growth.

    Katharine,
    I agree we should have “full employment” but Joe and I don’t agree on what it is.

  • Michael BG,

    the economic stimulus was a continuation of the QE monetary stimulus program started under Labour and continued through to 2012. The 2010 manifesto spelled out the approach to dealing with the deficit
    “The health of the economy depends on the health of the country’s finances. Public borrowing has reached unsustainable levels, and needs to be brought under control to protect the country’s economic future.
    A Liberal Democrat government will be straight with people about the tough choices ahead. Not only must waste be eliminated, but we must also be bold about finding big areas of spending that can be cut completely. That way we can control borrowing, protect the services people rely on most and still find some money to invest in building a fair future for everyone.
    We have already identified over £15 billion of savings in government spending per year, vastly in excess of the £5 billion per year that we have set aside for additional spending commitments. All our spending commitments will be funded from this pool of identified savings, with all remaining savings used to reduce the deficit.
    We must ensure the timing is right. If spending is cut too soon, it would undermine the much-needed recovery and cost jobs. We will base the timing of cuts on an objective assessment of economic conditions, not political dogma. Our working assumption is that the economy will be in a stable enough condition to bear cuts from the beginning of 2011–12.”
    For all the rhetoric of George Osborne, in practice the deficit reduction program was in line with the program outlined by Alistair Darling in 2010 for a gradual reduction over two parliamentary terms.

  • @Michael BG and others

    Could I please ask a huge favour, i love following these threads and I learn a great deal from these forums from your reading all your comments. However, it is a struggle sometimes when people use abbreviations and I have no idea what you’re talking about
    “MV =PT?” for example.
    Would it be possible to write in full the first time and then abbreviate from there after, so that those of us that are interested can follow the discussion more easily

    Like I say, i enjoy the informative discussions and opinions but it is easy to get lost sometimes 🙂

  • Katharine Pindar 7th Jun '18 - 1:13am

    Ah, Matt, well done, for once you and I are in complete agreement! Many thanks also, David. The comments that followed were of course a case of QED, and though I understand Latin. these were all Greek to me.

  • Peter Martin 7th Jun '18 - 8:13am

    @Matt,

    MV=PT as first pointed out by Fisher a hundred years or so ago!

    M is the quantity of money, V is the velocity money flows round the economy, P is general the level of prices and T is the number of transactions.

    So assuming , as the monetarists would, the velocity of money is stable and assuming the number of transactions are stable. the quantity of money determines the price level. Or assuming , as some supposedly “New Keynesians” would have use believe, that prices can remain fixed then increase in the supply of money will expand the economy.

    The BIG problem is that neither of these assumptions are reliable or true. They probably weren’t even true in Fisher’s time when transactions were made much more in cash. A £5 note changing hands just once has the same economic effect as a £1 note changing hands 5 times. They certainly aren’t true now when money is largely just a collection of electronic IOUs which can be created and destroyed at will.

    What matters is what is spent in the economy. If spending is too high we can have inflation. If its to low we have recession.

    There’s various words and phrases to watch out for if you suspect neoliberalism is being peddled. Such as “money supply” and “structural”. Joe has just identified another from the Lib Dem manifesto. “health of the country’s finances.” It’s all nonsense. The pound is an IOU of government. Money, Bonds, Gov stocks etc are all Govt debt. Don’t think that Govt debt can be “paid off”. It never will be because it just can’t be. It’s the lifeblood of the country’s economy.

  • Matt and Katharine
    I am sorry, you are correct I should have defined M, V, P and T. Peter has defined them correctly. However, it is not true that only neo-liberals think of it is a useful way of looking at the money supply. If M is increased then P or T or both will increase. Therefore for me this means that the money supply needs to be increased every year to increase T the number of transactions and I am also happy for P to increase a little as well, because a small amount of inflation is much better than any reduction in overall Prices. However, if it is increased too much P is more likely to increase faster than T. When Peter talks of government creating money to finance its increased spending he is talking about increasing M.

    Joe,
    you are mistaken to think that the economic stimulus was going to be a Liberal Democrat government dictating to the Bank of England to increase Quantitative Easing as that would be against our policy of there being an independent Bank of England; the economic stimulus was fiscal. During the Coalition negotiations it was quickly dropped in favour of deflating the economy to the turn of £6 billion. This economic stimulus was not mentioned much, if at all, the emphasis as you rightly say was on the long term tax increases and spending cuts, starting after a year in government when the economy was stronger and would be able to cope with gradual reductions in the budget deficit.

    The deficit reduction actions of tax increases (e.g. VAT) and spending cuts were greater than planned for by Alistair Darling in the early years of the Coalition. Once it was reported we had a double dip recession the government modified its deficit reduction plans, but at no stage did it plan to follow Alistair Darling’s plans.

    I would like you to produce evidence that the budget deficit in 2015/16 was at the same level as planned by Alistair Darling.

    I do not accept there is any way anyone can know the size of a government’s structural deficit, or than any discussion of a guessed at structural deficit is a useful exercise. This is partially because we would both define full capacity at different levels so your structural deficit is always going to be larger than me.

  • Peter Martin 7th Jun '18 - 2:37pm

    @ Michael BG,

    “If M is increased then P or T or both will increase.”

    What about if V changes?

    M in any case is undefinable. Are we talking about M0, M1,M2,M3, … Or MZN. Or maybe a weighted average of all the lot? The Thatcher govt had this very problem in the early 80s and couldn’t solve it. Which ever parameter they picked on didn’t work for any length of time. They soon gave up and monetarism morphed into interest-ratism.

  • Katharine Pindar 7th Jun '18 - 2:40pm

    Urgent political questions of the day do not seem to include questions of budgetary deficit, however interesting. To me, the view of the contortions of both major parties in their attempts to keep all the advantages of being in the EU while not admitting the need for continued membership cries out for the Liberal Democrats to shout, Enough! Leaving would be disastrous for the country, slippery attempts to avoid saying so betray the British people, and the people must be given the chance to make the decision to stay in for all our sakes as soon as possible. Talking to ordinary people, that is what I hear now.

  • Peter Martin 7th Jun '18 - 3:43pm

    @ Katharine,

    You can call it austerity economics, neoliberalism, ordoliberalism or monetarism if you prefer. It’s the cause of the dispute between the EU, which is controlled by those who think like Arnold Kiel, and Italy (which unfortunately isn’t controlled by those who think like me!) but, nevertheless, is pushing against imposed austerity . Austerity is the cause of Brexit too IMO. If the economic situation had been better throughout the EU there would have been an easy win for Remain.

    If the EU crushes Italy as it did Greece, then I can’t see any chance of a new referendum producing a different result. But, if the EU sees the need to reform itself and allow for expansionary policies in the periphery you probably can expect a reversal. I, for one, would be prepared to change sides. There’s probably not that many others who see it the same way but there would be enough of us to tilt the balance.

  • Peter Martin 7th Jun '18 - 9:10pm

    @ Michael BG

    When Peter talks of government creating money to finance its increased spending he is talking about increasing M.

    No, I’m not !

  • Katharine Pindar 7th Jun '18 - 9:44pm

    @ Peter Martin. Glad to know you could change sides. Actually the demographic trends 30 months on may help Remainers if we have the People’s Vote! But I do think you are seeing EU matters in too black-and-white a way. The EU isn’t going to ‘crush’ Italy, nor could it. There are interesting nuances going on. For instance, Mrs Merkel is reported to becoming closer to M. Macron’s ideas for the EZ, but she isn’t on board for having a central Finance Officer appointed. There would surely be plenty of opposition from various states to greater central control, and having sceptical Britain back in would be a boost to multi-track Europe and deterrent to economic rigidity.

  • Peter Martin,
    When Peter talks of government creating money to finance its increased spending he is talking about increasing M.
    No, I’m not !”

    You don’t refer to it as increasing M, but you do accept it does increase the money supply, as it does.

    I had assumed that V didn’t change, it is a theory remember. I assume that in the UK M4 (broad money) is the normal measure of the money supply. I was not advocating running the economy based on monetarist economic ideas, I was just pointing out that monetary theory is useful in understanding why if a government prints too much money to fund its deficit it is likely to increase inflation (P) rather than create only growth (T).

  • Peter Martin 8th Jun '18 - 7:05am

    @ Michael BG,

    OK, but instead of making any assumptions about either M or V why not just treat their product M x V which is S or the total spending in the economy? Then we have:

    S = P x T

    Or Total Spending = Average Price per Transaction x Number of Transactions

    We can split Total Spending into Government , Private Domestic, and Overseas. The latter being what is spent buying our exports. Spending on imports (in the first instance) doesn’t result in transactions in our domestic economy so we can leave this out for now.

    ∴ SG +SPDS+SO= P x T

    Instead of making any assumptions, or engaging in any economic theory, we are simply using normal accounting methods.

    If we have a £2 trillion pa economy we could have an average transaction of £10 and 200 billion transactions pa. But it doesn’t really matter how it’s split up. Again, it is the product of two unknown variables which is important.

    So if we want a bit of growth from one year to the next, we need to increase the number of transactions without it increasing the general price level. This is always the tricky bit. No-one has really solved that problem apart from very authoritarian governments who simply decree that prices cannot be raised and impose drastic punishments on anyone daring to do that.

    So we have three options:

    1) Increase Government Spending: We know the political problems with this line of argument.

    2) Increase private sector spending: This is always the choice of Tory governments. They simply deregulate lending and lower interest rates to encourage everyone else to borrow more. Borrowers (in the normal sense of the word) are almost always spenders. There’s no point borrowing money if you aren’t going to spend it! It works for a time but creates a boom to bust cycle. see Fisher’s debt deflation theory.

    3) Increase export sales. The German solution. This does require that we have a policy on the exchange rate. We can’t just let if float in an unmanaged way. It might work for Germany but it can’t work for everyone. Someone has to run the deficits.

  • Katharine Pindar 8th Jun '18 - 10:08pm

    Sorry, Peter, but I do wish you would stop giving an economics lecture on this thread, as on so many others in LDV, which may be over the heads of some contributors including me. Join, come to Conference and engage in useful debate there, as we expect much from the autumn motions and new proposals.

    Meantime I’m listening to George Soros on the new Italian question, writing in the Guardian on Wednesday. He points out that Europe’s flawed migration policies have put an unfair burden on Italy, with the closed borders of the states further north since September 2015 causing too many migrants to be stuck there, and he believes this is the main grievance which has brought about the populist government. Though he doesn’t expect the present government to last long, he urges that in order to influence the next Italian election the EU should alter the Dublin 111 regulations which make migrants the responsibility of the country where they land, and pay ‘the lion’s share’ of the cost of integrating and supporting the migrants in Italy. Meantime expect ructions, as the populist government moves to exceed EU spending limits, but he suggests too heavy-handed a response would only strengthen the support for the populists in a country which has been generally pro-EU.

  • Katherine, bit harsh on Peter there. I last did an economics class 40 years ago but I was able to follow the drift and it’s not even 8.00 and I haven’t had my first cup of tea of the day. Anyway, thought final point about exchange rates was pretty close to the heart of the euro problem and I wouldn’t mind hearing a solution to that one.

  • Peter Martin 9th Jun '18 - 8:38am

    @Katharine,

    There’s always going to be grievances caused by immigration and the arrival of refugees. We see that in many countries. Trump promised to build a wall. I haven’t heard much about that recently. True, there are difficult problems to be solved, but to say the EU’s problems are mainly caused by ” Europe’s flawed migration policies ” isn’t correct. You are right to say that most people don’t understand the economic reasons why they can’t afford decent accommodation, why the NHS is creaking at the seams, why their children’s education is suffering through unnecessary cuts, why the local park is being sold off, why they are treated so badly when they apply for a Jobseeker allowance, and can’t find anything better than a minimum pay job.

    So what to do? Give up trying to explain anything (ie why the fundamental problem is economic neoliberalism) and let them get on with blaming migrants?

    @ Chris,

    The options for the UK are 1 or 3 in my list above. We’ve run out on 2. Interest rates can’t go any lower. There aren’t any options for countries like Italy and Greece in the EZ. They can’t control their fiscal policy, they can’t control their monetary policy, they can’t impose tariffs to balance their trade, and they can’t control their exchange rate.

  • Katharine Pindar 9th Jun '18 - 10:35am

    @ Peter. I understand that our country needs to increase Government spending and export sales, but the need for a policy on the exchange rate is above my head – having missed out on economics classes, unlike Chris! However, I have long understood from your repeated explanations that the Eurozone suffers from the fixed exchange rate that has not allowed countries any leeway other than accumulating debt, as would not have happened if they had had currencies which could float. So the problems of the EZ are different from those of this and other European countries outside it. And George Soros’s explanation of the populist surge in Italy, that excessive migration led to blocking of movement by more northern states so that huge numbers of migrants have stayed there causing grave difficulties and some aggravation, is surely likely for that country.

    Whether the easing of the Stability and Growth Pact, which I understand from you and from Michael BG would potentially allow some change from the excessive piling up of surpluses in Germany and deficits in the poorer states, would have any effect on the particular migrant problems seems doubtful. But in any case the economic problems of the EZ and our country are different, and it was the political problems of the former, arising for various reasons, and how they may impact on Britain with our Brexit problem, which seemed to me most worth exploring in this thread.

  • Peter Martin 9th Jun '18 - 1:56pm

    @ Katharine,

    Have you ever read the Ragged Trousered Philanthropists? A large part of the novel details the exchanges between Owen and his workmates. Like this:

    ‘Yes,’ said Crass, agreeing with Slyme, ‘an’ thers plenty of ’em wot’s too lazy to work when they can get it. Some of the b–s who go about pleading poverty ‘ave never done a fair day’s work in all their bloody lives. Then thers all this new-fangled machinery,’ continued Crass. ‘That’s wot’s ruinin’ everything. Even in our trade ther’s them machines for trimmin’ wallpaper, an’ now they’ve brought out a paintin’ machine. Ther’s a pump an’ a ‘ose pipe, an’ they reckon two men can do as much with this ‘ere machine as twenty could without it.’

    ‘Another thing is women,’ said Harlow, ‘there’s thousands of ’em nowadays doin’ work wot oughter be done by men.’

    ‘In my opinion ther’s too much of this ‘ere eddication, nowadays,’ remarked old Linden. ‘Wot the ‘ell’s the good of eddication to the likes of us?’

    ‘None whatever,’ said Crass, ‘it just puts foolish idears into people’s ‘eds and makes ’em too lazy to work.’

    Barrington, who took no part in the conversation, still sat silently smoking. Owen was listening to this pitiable farrago with feelings of contempt and wonder. Were they all hopelessly stupid? Had their intelligence never developed beyond the childhood stage? Or was he mad himself?

    If you know the novel which was written about 100 years ago you’ll know we haven’t moved on a lot since then. We still worry about the same silly things. It was immigrants and painting machines then and it’s immigrants and the rise of the robots now.

  • Andrew Tampion 9th Jun '18 - 4:11pm

    “If you know the novel which was written about 100 years ago you’ll know we haven’t moved on a lot since then. We still worry about the same silly things. It was immigrants and painting machines then and it’s immigrants and the rise of the robots now.”

    For an earlier example of anti immigrant bias see the play Sir Thomas More believed to have been written around 1592.

    However, the play has its high spots. The scene in which More quells a May Day riot when Londoners protest that “aliens and strangers eat the bread of the fatherless children”

    http://www.britishtheatreguide.info/reviews/thomasmore-rev

  • Katharine Pindar 9th Jun '18 - 7:13pm

    Thanks for the amusing literary references, chaps. We can always do with a bit of light relief! I don’t actually see a reference to immigrants in yours, Peter, but the grumbling is indeed timeless. Yours is a very relevant quote also, Andrew, but what struck me most was the description of the play as ‘a hotchpotch of ideas, topics and theories which don’t always come together’. Hmm, I’m thinking that isn’t too far away from being a description of the discussion on this thread! 🙂 But to be serious for a minute, I think I would be pretty agitated about how to help so many immigrants and keep the locals happy if I lived in Italy or Greece. And George Soros is suggesting sensibly how to tackle that. As a Hungarian, he must be ruefully aware of many problems in the EU.

  • Peter Martin 10th Jun '18 - 12:56pm

    @ Katharine,

    Tressell’s Ragged Trousered Philanthropists is possibly too socialist for many Lib Dem tastes but I’m sure you’d like it. On the subject of immigration:

    Yes,’ said old Joe Philpot, tragically, ‘and then thers all them Hitalian horgin grinders, an’ the blokes wot sells ‘ot chestnuts; an’ wen I was goin’ ‘ome last night I see a lot of them Frenchies sellin’ hunions, an’ a little wile afterwards I met two more of ’em comin’ up the street with a bear.’

    Notwithstanding the disquieting nature of this intelligence, Owen again laughed, much to the indignation of the others, who thought it was a very serious state of affairs. It was a dam’ shame that these people were allowed to take the bread out of English people’s mouths: they ought to be driven into the bloody sea.

    Owen expresses opinions on economics too! I’ll not go into those here but he’s definitely on the right track!

  • In These Times (an American politically progressive/democratic socialist monthly magazine) described The Ragged-Trousered Philanthropists as “a classic of modern British literature, that ought to rank with the work of Thomas Hardy, D. H. Lawrence, and James Joyce, and yet is largely unknown…Tressel’s bitterness and anger are mixed with compassion, sympathy and a sharp sense of humour.”
    The author Robert Noonan writing under the pseudonym Robert Tressel died of tuberculosis at the age of 40 in the Royal Liverpool Infirmary Hospital attached to Workhouse. He was buried in a paupers grave along with 12 other people. His daughter managed to find a publisher and an edited version of the book first became available in 1914. The unabridged version was not published until 1955. Geoege Orwellconsidered it “a book that everyone should read” and a piece of social history that left one “with the feeling that a considerable novelist was lost in this young working-man whom society could not bother to keep alive.
    The essential message is set out in a dialogue in the first chapter:
    ‘… What we call civilisation – the accumulation of knowledge which has come down to us from our forefathers – is the fruit of thousands of years of human thought and toil. It is not the result of the labour of the ancestors of any separate class of people who exist today, and therefore it is by right the common heritage of all. Every little child that is born into the world, no matter whether he is clever or dull, whether he is physically perfect or lame, or blind; no matter how much he may excel or fall short of his fellows in other respects, in one thing at least he is their equal – he is one of the heirs of all the ages that have gone before.”

  • Katharine Pindar 10th Jun '18 - 4:51pm

    Yes, but, Joe – thank you for this further quote from this important book Peter M. first cited – that quote suggests that civilisation is progressive, so each age builds on the one before. Is that true? I’m not sure it’s true in terms of values. Medical and scientific knowledge, yes; poor Noonan/Tressel (Tressell?) need not have died of TB at the age of 40 had he been born in our days. But values? I used to believe in progress, delighting in the ending of apartheid and the Soviet Union, and setting aside my belief in the tremendous contribution to civilisation of ancient Greece. But then the ghastly worldwide use and even acceptance by American leading figures of torture seemed to set us back in the context of the Middle Ages. And now Obama has been succeeded by Trump. We reach towards the stars magnificently in astronomy, but the universal love the American preacher called for at the Royal Wedding is still, alas, very far off.

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