There are only two possible results to the Euro-crisis: 1) collapse of intra-European trade, or 2) greater European integration. The first has far-reaching negative implications for Britain, Europe and the world. The second indicates a massive area for future growth in our shared economy.
While the current political challenge remains to deliver stability and growth at the same time it’s up to Britain to choose to find the political will and lead on the issue. Why? Because continual continental dithering and endless domestic bickering will mean economic conditions stay in the doldrums until the Eurozone countries wake up to the fact that no other options remain, and they forge ahead on integration without us, leaving Britain scrabbling for crumbs from their table as per usual.
If we want to set the terms of agreement and see the full benefits then we must resolve to fully commit to the process. Which means the real question is how much of the former are we prepared to accept before we move on to the latter.
As the only committed pro-European leader at Westminster, Nick Clegg is smart enough and sensible enough to understand this, but his frankness in offering regular reminders won’t help him win popularity contests any time soon. So he should be bolder in challenging public opinion in order to reap the political rewards later – after all there’s still time to get this strategy to pay dividends before the next election and most commentators argue he doesn’t have much left to lose. Having the courage of your convictions is a virtue which he – and we – can make the most of.
While the real possibility of Greek default grows ever nearer Clegg appeared to lay some foundations for giving the European project a vitally-needed boost in his widely-reported speech to the LSEby indicating his favorability towards shifting the British position to be more active on European integration:
“In terms of the Eurozone, the real failure has not been the original concept of monetary union. It’s that the rules were never applied stringently enough. The Stability and Growth Pact was actively watered down in 2005, allowing members to wriggle out of their fiscal commitments to each other. Now we are seeing the effects.”
“The single-most important question, the urgent question is what role can we play in helping the Eurozone avoid further turmoil, creating the stability needed for prosperity and jobs – in the Eurozone and in the UK too.”
With rising consensus that the coalition’s deficit reduction plan has assured stability while restricting ability to boost growth” there is no time like the present to use the Lib Dem reputation as long-standing advocates of European integration to our advantage, and strike the note of clear differentiation which members and potential supporters alike are desperate to hear. While Conservatives have forced themselves into a dead-end on growth, Labour lack credibility on stability — yet neither want to talk openly about Europe and the way their actions combined in tandem to undermine the Stability and Growth Pact.
As Clegg said, “we’ll do whatever it takes to return our economy to health,” but while we can pull all the right levers at home to provide a temporary demand stimulus it must also mean creating the conditions for sustainable growth by increasing cooperation abroad and driving ahead with integration to complete the single market and guarantee the four basic freedoms.
We cannot put stability at risk by loosening fiscal policy now, but neither can we avoid integration out of a misguided sense of patriotic pride when growth is at risk. Perpetual focus on stability results in stagnation, yet myopic focus on growth leads to escalating volatility – only the LibDems can successfully balance these twin impulses and therefore we must speak up more forcefully in the national interest both of Britain and each of our European partners.
* Oranjepan is the pseudonym of a Lib Dem supporter working in a politically restricted post.
15 Comments
I agree. We need to apply our core values to the situation in europe. One of our core values which I don’t think we’ve ever been able to express effectively is based in game theory. Game theory states that the best decision comes from whats in our own self interest and the best interest of the group as a whole.
This core value is needed in Europe more than ever.
We also must be clear that governments cannot just force through austerity. If people on the streets are protesting and rioting about decisions made by governments – that hinders growth.
We need to pull out altogether. It’s completely undemocratic.
“If we want to set the terms of agreement and see the full benefits then we must resolve to fully commit to the process.”
You are dreaming, and you know it, otherwise you would not be speaking-in-tongues when talking of the need for “greater European integration”.
What exactly do you mean when you talk of fully committing to, and leading on the issue of greater European integration?
A nation-state is effectively a collective agreement that a people are a family, who have sufficient trust in each other to accept indirect governance from representatives of the prevailing will of a majority, it is also a collective agreement to work together for the benefit of the whole rather than the individual. In short it is a marriage which results in a transfer union.
Inevitably there will be richer and poorer parts of the nation-states economy, and if that economy is not to tear itself apart from the strife resulting from a polarising divergence in wealth then there must be a compact agreed by the people that national taxation will be redistributed in a manner the assists less advantaged areas. In short the rich pay for the poor.
This compact is seen in every developed country, by way of social benefits applied equally throughout the territory, by way of regional development funds to promote wealth creation in poor performing areas, and by concentrating public sector activity in areas of reduced economic potential. It is fundamental to the cohesion and harmony of the society.
This is where the federalist ideology of the EU begins to face problems.
First, there is a massive disparity in wealth between the nations that supposedly have the aim of becoming a single ‘people, far greater in fact than is true of the wealth disparity within the constituent nations themselves.
Second, there is no single ‘people’ within the EU, thus there is no collective agreement to accept governance because it is not seen to be representative, and likewise there is no collective agreement to work to the benefit of the whole because that lack of representation prevents trust that paying money to others will be both used responsibly and reciprocated in time of need.
This is where the implementation of the EU begins begins to face problems.
First, to get around the problem of a transfer union being unacceptable to the separate peoples who have no collective sense of ‘family’ the Eurozone was created as a monetary union instead of an economic union. The single currency was to apparently able maintain its perceived value purely by having agreed targets on a budget deficit of less than three per cent of their GDP, a debt ratio of less than sixty per cent of GDP, low inflation, and interest rates close to the EU average. So regardless of the wealth disparity, regardless of the size and acceptance of the black economy, regardless of the potential for abuse from weak members exploiting the low borrowing rates of the strong, and regardless of the inability of national governments to use the economic levers available to sovereign nations to ameliorate the boom-n-bust cycle, the Eurozone was somehow supposed to work.
If you believe that Transnational Progressivism has any mileage then make the case openly, rather than continually sidling around the issue with metaphors about “crumbs”. Make the case openly and accept the response that results, i’m pretty sure it won’t be favourable.
http://jedibeeftrix.wordpress.com/2011/07/25/opportunity-or-threat-4-%e2%80%93-has-sarkozys-emf-revived-cameron%e2%80%99s-eu-plans/
How about an emergency levy on all the oil, gas and energy companies to generate a one off payment to every UK family of c£500, payable just before Xmas and with a promise to repeat the medicine if their price gouging continues. No impact on the deficit, punishes those who have abused the market, and encourages growth – and will get a few votes – what isn’t there for LibDems not too like?
“There are only two possible results to the Euro-crisis: 1) collapse of intra-European trade, or 2) greater European integration. The first has far-reaching negative implications for Britain, Europe and the world. The second indicates a massive area for future growth in our shared economy.”
Dream on. In what way will further integration help growth in our shared economy? The continent already has no restrictions on the movements of goods and people, and it has a common currency. There’s no way any unexploited economic opportunity will suddenly find itself exploited simply because we drop national anthems or hand over more political power to Brussels.
Secondly how will the Euro crisis cause the collapse of intra-European trade? Any break up of the Euro will give nations in economic trouble the benefit of a devalued currency. This would, far from collapsing intra-European trade, actually boost it because it would become cheaper to buy goods from Greece, Italy or Portugal but just as expensive at home whether home is Dortmund, Nice, or Basingstoke.
@jedibeeftrix
You say there is no single people in the EU, others say there is no single people in the UK. Which is why the European Union is just like the United Kingdom and faces the same challenges – some people want to destroy it, some want to be a free-rider, vulnerable neighbours depend upon coordination, many would love to join.
None of it works without a unified supporting framework to promote integration, however incoherent and confused its functions are in practice. Peace and prosperity depend upon fostering integration, since disintegration leads to escalating friction and events never stand still.
The IMF’s call for greater coordination has been met by the Treasury’s reasonable suggestion of support for Eurobonds, so there’s still a long way to go before tax-raising powers and fiscal transfers, which would require much greater democratic accountability, oversight and enforcement of regulation before LibDems could ever accept them anyway, irrespective of what is being considered in Brussels, Frankfurt and Berlin.
@Charles
break-up of the Euro may allow currency flexibility, but that in itself creates a barrier to trade even before you consider the fiscal variance which follows. The short-term effect of a competitive advantage gain from collapse is far out-weighed by the long-term burden of market shrinkage, so it can’t be ignored that any gain would only be one-way, proportionately favouring the larger blocs, as well as temporary.
What happens then at the next crisis point – dance the hokey-cokey?
@Oranjepan
Did keeping the pound hurt us?
Denmark, Switzerland, Sweden, Lithuania and Latvia and Poland have all retained their own currencies. The city states of Hong Kong and Singapore have their own currencies, and had amongst the highest rates of GDP growth during 2010. Does anyone in these nations bemoan long term market shrinkage?
Competitive advantage gained from a weakened currency isn’t short term, it last’s as long as the currency is weak only ending when the currency strengthens with the economy. Varying exchange rates help economies self correct, ensuring the flow of demand and investment go where it can do the most good. I don’t believe there is any net advantage of a currency bloc the size of a continent. Geographically any advantage to regions is either temporary due to piggybacking on debt (as Greece did) or is only experienced in the richest areas at the expense of the poorest. Economically the advantages to industry by having a common currency are outweighed by the inability of regional economies to respond to local recession.
Consider the US, it’s single currency and political structure is a potential model for the EU, yet you can clearly see how it’s single currency damages parts of the country. The rust belt is a prime example, suffering as free trade opened up competition with countries with much cheaper wage costs. Had the Rust Belt used a different currency to the rest of the states, as the regions economy had shrunk the currency would have weakened making outsourcing increasingly less attractive.
“You say there is no single people in the EU, others say there is no single people in the UK. The IMF’s call for greater coordination has been met by the Treasury’s reasonable suggestion of support for Eurobonds, so there’s still a long way to go before tax-raising powers and fiscal transfers”
The UK is a multi-nation state, but at the end of the day english people have proven content to subsidise the the periphery just as west germans have proven content to pay 10b euros a year in solidarity tax to former east germans for the last twenty years………… but;
Eurobonds are predicted to raise German borrowing costs by up to 40b euros a year to subsidise europes periphery, are germans happy to do that?
Would britain be happy to do that?
If your notion of fully committing to, and leading on, the issue of greater European integration is to encourage the eurozone nations to accept eurobonds, then contingent on eurozone polities be happy to accept the proposal, I am happy to agree.
The ‘remorseless-logic’ of a currency union is that it must evolve into a fiscal and political union if it is to have a viable future, which is fine if the constituent peoples of europe are happy to become a single polity.
However, not only have the eurozone governments failed to acquire the consent of their electorates, they have failed to even ask for it, so what you see now is authoritarianism masked as necessity and we all know where that leads.
If the purpose of the European project was to create a happier Europe, more at ease with its neighbours and less prone to industrial warfare, at what point did the means become confused with the ends? That is to say, to the point where ever-deeper-union is deemed to be a good thing regardless of the fact that it is now leading to a less happy Europe, because the model of governance is perceived to be unrepresentative and unaccountable!
If ever-deeper-union is to lead to social-unrest and civil-strife how does this meet the aim of peace and prosperity in europe?
Your assertion that “disintegration leads to escalating friction” is trite, and frankly untrue in the real world, friendly cooperation and collaboration for the benefit of all does not necessitate ever-deeper-union, particularly not when it is antithetical to the polities of those countries forced into it against their will.
@ Steve
We will never pull out altogether as Europe is where politicians go to further milk the gravy train. Example Kinnock and family and no doubt Clegg wants the same.
Charles,
in some ways, yes, it possibly did hurt to keep the pound. Certainly many previously poorer parts of Europe have caught up with and surpassed our quality of life. The other examples you give actually prove the point that relative size and exposure to global networks matters – even Poland’s low purchasing power reaffirms this.
The US is less a model for Europe than a lesson in how to get some things right and others wrong. It is highly centralised, making it less responsive to the demands of economic transition while at the same time benefitting from strong political institutions, and I’d argue this disparity is a major driver of economic divergence at many levels not just geographic.
Europe by comparison is less advanced along the path of integration, mainly because our continent is highly decentralised. We therefore suffer from weak political institutions. However the advantage of heightened responsiveness is only effective for localised problems – coordination and cooperation is required when faced with a global crisis, something which Greece has been able to resist (for obvious internal reasons, riots basically), due to EU institutional weakness (lack of enforcement, primarily), resulting in everything spiralling out of control.
Jedibeeftrix,
the point I’d make to you follows on from Charles in that the ability to advance integration depends on the level of institutional competence, which flows from widespread political agreement on the form of structure for those institutions – agreement which has not, as yet, been reached in Europe.
History shows agreement on evolving new institutional structures and devolving powers tends to be reached only when timid politicians are forced to desperately seek out solutions in times of crisis, such as we currently face.
I don’t accept that cooperation for mutual benefit is the default position of all powers (as shown by recent examples in Libya and elsewhere), rather that it requires an ongoing system of checks and balances developed diplomatically to win the argument for mutual advantage, and the establishment of competent, representative and accountable institutions to guarantee freedoms.
It is a matter of serious concern that these arguments have not been adequately communicated to the public since Britain joined the then-EEC, and the instability caused by public confusion is the reason behind faltering political will. I’m not prepared to throw away freedom because we have imperfect institutions, I think it’s a cause to push for reform.
There is a massive need for a comprehensive debate about Europe and why Britain must take the lead on the path integration should take, but the way the subject has been twisted by irresponsible headlines down the years (cheers, Rupert) means it is too often seen as too much of a political hot potato, and this has allowed a class of visionless functionaries to take over the project.
“There is a massive need for a comprehensive debate about Europe and why Britain must take the lead on the path integration should take”
Then make that case openly, but i think you will have to find another vehicle with which to promote your platform than the Lib-Dem’s, because they are becoming a party-of-power that respects that it can longer adopt rigid factionalism as broad pluralist positions are required to gain assent, or at least acceptance, across the country.
And the public aren’t interested.
Good luck, i wish you well.
Sheesh. I agree with Jedibeeftrix.
Never thought that would happen.
I didn’t realise i was such a divisive figure……! 🙂
jedi,
you’re right, the European argument must be sharper and made sharpish.
Basically, pooled sovereignty guarantees conditions of peace and stability, peace and stability enables integration and integration provides opportunity for growth and prosperity.
It is a virtuous circle. But it risks being turned into a vicious circle.
Cameron denied the national sovereignty argument through his humanitarian intervention in Libya, however the coalition has yet not put the pooled sovereignty argument, so we’re left in limbo watching the crisis grow, ignoring our ability to influence the outcome of it. We need to act responsibly.
It’s worth adding that Clegg identified £170bn-worth of annual trade is currently being lost to the UK alone as a result of not completing the single European market, which isn’t exactly helping anyone’s growth figures. And the damage to the economy of withdrawl would be much higher again.
Manufacturing companies in Britain have consistently lost out to continental competition because they have had better access to the European market, while we’ve had to work harder to innovate in different sectors and find outlets for our products. This has retarded British growth by as much as 1% yearly for several decades, while changing the balance of the British economy, with consequent social effects.
Our hesitance over Europe has effectively given us the worst of both worlds, with all of the burdens but few of the benefits. But now, with all of Europe facing a massive crisis we have a rare opportunity to regain some of that lost growth and share some of our new-found stability.
Our global position has been partial compensation, but that dividend is deferred and we need action now.
Cameron’s smartest political move right now would be to promise a referendum on EU membership if the Tories get an overall majority in 2015.