THE NEWS IN BRITAIN, where I visited in May, was dominated by the plight of the euro, the single currency adopted by 17 European countries. Greece has been a big problem, but it’s possible that Spain will be worse. Recent polls suggest that most Greeks want to stay with the euro, which makes sense. Within the eurozone, Greeks may reasonably expect the European Central Bank to bail them out. Spain is too large for that and looks set to cause the greater problem.
It’s risky to comment on still unfolding events. But the uniting of Europe has been the preeminent project of the ruling class since the 1950s. Now it’s in serious trouble. European leaders took a big risk by installing the euro and abolishing most national currencies a little over a decade ago. There’s a real question whether this grandiose, deceptive, and foolhardy project can survive. For those who distrust elitist schemes, it’s an interesting moment.
The attempt to unite Europe has been “the biggest disaster of the continent in my lifetime,” wrote Charles Moore, the former editor of the Daily Telegraph and biographer of Margaret Thatcher. So how did Europe’s vaunted leaders manage to get the continent into such a mess?
In Britain, the European project has been supported by television outlets, including the BBC, which is by far the most influential news medium in the country; by newspapers, like the Guardian and the Financial Times; and by many other institutions. It has also been supported, for obscure reasons, by Britain’s feckless Prime Minister and Tory Party leader, David Cameron. His government won’t do anything without the approval of its coalition partner, the Liberal Democrats. They, in turn, practically define the conventional wisdom on everything from Europe to global warming. They seem to be quietly running the show in Westminster.
European unity has been opposed by the Daily Telegraph and Daily Mail, and by a substantial majority—perhaps two-thirds—of the British people. But apart from a 1975 vote on staying in the Common Market, no referendum has been allowed. Britain has retained its currency, the pound sterling, so it’s not directly affected by the euro crisis. But if there’s a sustained bank run—capital has already fled Greece and Spain for safer countries—everyone will be hit.
The European Union has been a liberal project, using the word “liberal” in the American sense of something that intellectuals who are not explicitly conservative are likely to support. Despite the radicalism inherent in abolishing national currencies, the euro is still portrayed as something that only extremists would oppose.
Decidedly undemocratic, the European authorities recently forced unelected leaders upon Italy and Greece, and, as Charles Moore wrote, “entire states, such as Ireland, are mortgaged to European control in order to save banks.” Nearly half the youth of southern Europe are unemployed. In elections all over the continent, voters have thrown out incumbents—this being one of their few options remaining. A happy exception was Boris Johnson, the mayor of London, who recently won reelection in a close race. Conservatives are hoping that he will eventually become prime minister.
The ultimate aim of “Europe,” although long concealed, has been to merge the respective countries, despite their different languages, traditions, and customs, into a United States of Europe. Then it would be able to compete with the USA. Size was assumed to be the prerequisite for such a challenge.
What started as a Common Market became the European Economic Community, with Brussels as its notional “capital,” filled with inaccessible eurocrats armed with supervisory authority and rewarded with tax-free salaries. The Treaty on European Union was signed in 1992.
The author and commentator Christopher Booker has referred to the European Union as the “Castle of Lies,” and his book The Great Deception is well worth studying. He reports that Mrs. Thatcher herself was deceived as to the European project’s true goal: the abolition of nation states. As late as 1989, she said in the House of Commons that “economic and monetary union would in effect require political union. That is not on the agenda now, or for the foreseeable future.”
But local currencies were abolished anyway. Independent nations were still unwilling to be merged (abolished). But as the political commentator Peter Oborne wrote recently, the overriding purpose of the single currency was political. The eurozone ringleaders were determined to use the euro to promote political union, to push the separate countries into a reluctant embrace. And that has been its undoing.
A single currency is like a chain that ties runners together, forcing them to move at the same speed. The fastest has been Germany, and the dawdlers, such as Greece, Spain, and Portugal, have tumbled or soon will, and must either be saved or cast loose. Separate currencies with flexible exchange rates would be a more workable arrangement (as Milton Friedman argued a decade ago).
But today’s remedies all aim to preserve the euro. The new French president, François Hollande, has called for more “growth,” less austerity. But growth will require more government spending, which means more borrowing at the high interest rates now prevailing for the “slow” countries. The rate Spain must pay investors to buy its bonds is over five percentage points higher than that of comparable bonds issued by Germany.
A call for eurobonds, which would allow improvident nations to tap into the low interest rates yielded by German savings, has been wisely rejected by Angela Merkel. “The French and Italians want eurobonds precisely to put Germany on the hook for their future spending,” a Wall Street Journal editorial noted.
The die-hard supporters of the euro have but one recommendation: more of the same. Nations must move quickly to surrender more sovereignty to Brussels. But the vast majority of people still don’t understand what “Europe” is all about. They think of their governments as being based in London, Paris, Madrid, or Berlin—certainly not Brussels. And they will keep on thinking that for a long time.
Peter Oborne commented that a principal goal of the euro was to “domesticate Germany,” which had earlier caused such trouble. But, Oborne added,
far from holding back Germany, the single currency has empowered the country’s industrial base in a way that was never expected. Peripheral eurozone countries such as Greece and Ireland have been reduced to a source of cheap labor and agricultural goods.… Unable to trade with Germany as equals, they have been reduced to colonies.
The European project “has failed on all counts,” Oborne concluded.
INFLATION IS THE TRIED-AND-TRUE WAY to erode government debt and punish savers, and it may be the europhiles’ final card. “Growth” may turn into “monetary growth,” as the European Central Bank floods the zone with newly printed euros. But inflation works to the advantage of governments only if markets don’t anticipate it. Today, the “bond vigilantes” are wide awake, and at the first sign of renewed inflation, interest rates will rise to compensate lenders for the loss of real returns. Most things that politicians can do today, markets can protect themselves against.
Some of the European problems also exist in America, where government has been equally irresponsible with a debt that now reaches 100 percent of GDP. The big difference is that the U.S. is a real country. People in search of jobs can much more easily move from Michigan to Texas than they can from Portugal to Poland. The belief that ancient, entrenched national differences could be overcome by bureaucratic fiat was the cardinal error of the euro-elites.
Christopher Booker recently wrote that national interest “is reasserting its sway” in Europe, although the goal was to suppress it. In the coming days and months, he added, “the eurozone will disintegrate. The European dream has entered a nightmare stage from which there is no rational escape.”