Saturday, 19 September 2015

Greek tragedy

The Greeks are once again going to the polls to elect a government. Although Greek governments have spent public money recklessly the roots of their chronic economic crises lie with the political objective of achieving ever greater union between the countries of the European Union. Greece never met the qualifying criteria for membership of the Euro, but was allowed to join for political reasons despite the likely financial consequences. Most fortunately Britain avoided getting enmeshed in this doomed project.

It is to the credit of Gordon Brown, both as chancellor and prime minister, that he kept Britain out of the Euro. He did so despite considerable pressure from so called 'progressives' and 'moderates' who were desperate for Britain to join. It is worth examining the reasons given for their enthusiasm.

The Liberal Democrat manifesto in 2001 stated that 'membership of the Euro at a competitive and sustainable rate would offer Britain considerable benefits. It would end the exchange rate instability which has destroyed many thousands of jobs, safeguard the investment in hundreds of thousands of further jobs by overseas firms, and reduce the costs of trade with the rest of the EU'.

Michael Heseltine, about the same time, opined that 'we cannot remain competitive outside the Euro for much longer. We have lived through a decade of warnings and with those predictions we have always been offered choices. Now is the time for Britain to make a choice. For business the choice is clear.'

In practice there was no evidence for this alarmism. Unemployment in Britain continued to fall for over seven years until the financial crisis of 2008. We had much lower levels of unemployment than many countries in the Eurozone. The claims of the Euro fanatics, not for the first or last time, were wholly without foundation, and this was most probably known at the time by those 'moderates' making these claims. Instead their motivation was to further the political objective of ever closer union which, more accurately, can be described as ever diminishing democracy.

Countries such as Greece, have lost control of their economic destiny, and are now supplicants to the European Central Bank. They are caught in a vicious circle of bailouts, conditional on austerity and deflationary measures, which contract their economies still further thus requiring more bailouts, and so it goes on. Despite the contempt that Greece has been shown by European Union leaders, both the current, and likely alternative governments, support Greece remaining in the Euro. Sadly, despite all the difficulties and economic meltdown, the majority of the Greek people also support continued membership. Eventually reality will break through, since there can be no doubt that Greece, and other countries in a similar fix, will eventually default and be forced out of the Euro, with disastrous consequences not just for the countries themselves but for the global financial and banking system. This is what happens when ideology triumphs reason.

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