Money Matters

Money matters have been to the fore this week as the Polish parliament has debated both entry to the common currency and ratified the EU fiscal pact which was agreed to last March by 25 EU member states. As to the former, the Polish prime minister said that Poland should adopt the Euro as soon as possible but only when it is 100 per cent ready. Unlike Gordon Brown’s famous five tests for the UK which tests could, of course, never be met, Poland is bound by treaty to enter the Euro at some point so all that may be debated is when not whether. As to the when, the prime minister said that Poland will proceed to fulfil the membership requirements as quickly as possible with the decision to adopt the Euro being calm, safe and built on the necessary domestic consensus that is when the euro zone is ready and especially when it will be 100 per cent safe for Poland.

And that, of course, is a bit of a challenge. Nothing is 100 per cent safe in this life (apart from this statement) least of all adopting the Euro as is clearly demonstrated by the continuing Euro crisis. Nevertheless, the prime minister called on the right to give up euro-scepticism and to join the debate without fear or concern that something has threatened Poland’s sovereignty (which it has) while the left was urged to give up the rush to enter the euro zone now before Poland is properly ready. After all, the end is not in doubt for, as the prime minister sees it, the euro is the main axis and core of the changing European Union. Which is exactly the point: the EU is changing and eventually, the EU and the eurozone will be one and the same (a sort of greater Germany as I hinted at in Other People’s Money).

But don’t just take my word for it. Across the Baltic the Swedish prime minister thinks that the eurozone’s push towards closer fiscal integration could undermine the EU while doing little to resolve the Euro debt crisis. In contrast to David Cameron, he urges hesitation in moves towards a fiscal union which he thinks might undermine the fundamental structure of the EU. The concern arises from increasing moves by eurozone countries to agree policies that exclude (but potentially affect) EU member states that have not adopted the Euro. He also sees fiscal union as detrimental in that some countries may postpone structural economic reforms because of the expectation of transfer payments. None of this is surprising since, although there seems to be general reluctance amongst those who should know better to admit it, currency union requires fiscal union which requires political union. Mr Borg rightly questions the democratic legitimacy of more powers being centralised in this way but, as I have written here before, what is happening is a logical consequence of trying to save the Euro albeit that the politicians will neither acknowledge this nor propose the ultimately logical step of a properly federal Europe in order for these arrangements both to be understood and to have the democratic legitimacy to succeed.

We may also agree with him in his criticism of the planned financial transaction tax which, as he points out, would put a tax burden principally on EU countries outside the eurozone. Across the North Sea David Cameron is no doubt of the same view since, instead of celebrating the fact that in London the EU has one of the world’s main financial centres, the EU seems determined to drive financial trade away completely as it seeks Anglo-Saxon scapegoats for the Euro’s woes. Thus, the proposed financial transactions tax which, as the Swedish prime minister points out would have a negligible effect on those member states pressing hardest for it, the attempt to limit bankers’ bonuses, the attempt to restrict Euro trading to the eurozone, and so on. Given the disproportionate reliance of the UK economy on national income generated from the financial services sector, this is hardly a positive way of selling to the UK the benefits of continued EU membership to any but most committed anti-capitalists. Turning a deaf ear to David Cameron’s call for an open, flexible and dynamic EU which will help it to create the wealth on which all its citizens depend does not help either.

Be that as it may, what is the view back across the North Sea at HQ in Berlin? Not surprisingly, perhaps, there seems to be the same unwillingness to admit the logic of the position and the required solution (assuming the Euro is to survive) as elsewhere. Chancellor Merkel seeks to reassure everybody that Germany is fully behind the Euro while trying to tell Germans that they will not have to bail out southern Europe. Her solution is always more Europe with better institutional structures promised but with neither an indication of what more Europe actually means nor a plan for keeping those promises. Which is a pity because if the people of Europe were presented openly with a coherent plan for a federal Europe, with a single currency, democratic accountability, a clear relationship from citizen to state to union and with rational economic policies and open markets to encourage business and trade so that Europe could face the growing challenges from Asia with confidence, many might find this attractive and the obfuscation and blatant dishonesty from our politicians over the whole EU project might be consigned to history.

So while money matters, it appears that, in so far as the euro/EU difficulties are concerned, transparency, logic and the truth do not.

This entry was posted in Economy, EU, Finance, Politics. Bookmark the permalink.

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>