Greecehog Day

Am I the only one sick of hearing about crisis after crisis between Greece and the rest of the Eurozone? Of a desperate struggle to pay the debts and get support? Of fears Greece is going to crash out of the Euro?

The single currency was always a political project first and an economic one second. The convergence criteria were fudged to allow in as many countries as possible and the expectation was that the separate economies would quickly learn to converge. A period of economic growth also encouraged optimism and complacency - the UK may not have joined then or since but it was a period when our government smugly talked of having ended boom and bust.

And then came the not quite global crisis. Each country has different circumstances and needs to take different measures to get itself out of the mess. Democracy also demands the people decide just where the country will escape to. But the Eurozone doesn't allow for that. Instead it severely restricts the options available to the Greek government and demands cuts on a scale like nothing we've endured here.

And so we get this endless cycle as Greece and other European countries face off with seemingly no end in sight.

Somewhere I can hear my old Economics teacher saying "I told you so".

Maybe it's time to admit the inevitable. To say that Grexit is not a question of if but when. To stop pretending Greece can do enough to meet both its obligations and its voters' demands. To say that ever closer European integration is not an irreversible process. It will be an immense upheaval - but there's no shortage of those at the moment. It will bring immediate economic hardship - but that's already there. What it will do is allow Greece to find its own way forward and follow an economic policy that's the best for Greece rather than continuing the pretence that what's good for Germany is always good for Greece.

It's time to let Greece leave the Euro.

What's better? 3% or 2%?

Amidst all the other current economic woes, the pound has been falling and the high street commercial rate is now below parity. I must check to see if I have any Euro notes lying around...

And the old debate about whether or not to join the Euro is slowly coming to the forefront, although the levels of political ferocity seen in the past haven't yet materialised. But one point I haven't seen much of is the debate over which interest rate is better for this country - the Bank of England's 2% or the European Central Bank's 3%?

A single percentage point doesn't look that much different, does it? Yet such a difference has very real consequences for borrowers and savers, for mortgage levels, for taxation - one cold go on endlessly. Not for nothing does the Bank of England's Monetary Policy Committee decisions get heavily analysed, even when the rate is shifted only 0.25%.

So is anyone calling for the UK to have the ECB interest rate? Because that is what entering the Euro will involve. The British economy has long followed a different path from that of many other European countries and frequently the two interest rates have moved in opposite directions because of this. Joining the Euro is not going to change all this. Nor is it going to be a magical solution to current economic problems.

"People who matter"?!?!?!?!?!

I see that once again José Manuel Barroso has gone an shown the utter contempt for democracy that is at the heart of the European Union. He has gone about declaring that the current economic crisis has made it more likely that the United Kingdom will join the Euro, which is a fair enough comment (though the degree of "never" makes it splitting hairs) but what really sticks is this:

I know that the majority in Britain are still opposed, but there is a period of consideration under way and the people who matter in Britain are currently thinking about it,

(BBC News: UK 'closer' to adopting the euro)
"People who matter"?!?! As any decision to join will be taken by a referendum, it is the "majority in Britain" who matter!

It is another example the typical contempt for democracy that is so prevalent in Europe and which Barroso regularly expresses. You may remember him intervening in the domestic debate about whether or not the people should have a say on the EU Constitution "Treaty of Lisbon" to again pour scorn on the very idea of democracy.

Of course since Barroso was never elected President of the European Commission in any meaningful sense it's no wonder he spouts this rubbish. And for someone who said when he was appointed that he wanted to tackle Euroscepticism, he's doing a pretty lousy job!

On why we should not jump into the Euro

Just a quick note to say that it's rare that I find myself in vigorous agreement with John Redwood, but he's written a very good piece on why The strength of the Euro does not mean we should join it!.