Europe: September 2008 Archives

Chasing a sinking ship.

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eurodesign.JPGVince Cable is apparently bouncing the Liberals into a more sceptical position on the Euro. 

First, it's tactical, of course, being the Liberals: " is a ship that has sailed out of the harbour. There is no point in jumping into the sea and swimming after it." 

Second, it's a slightly vague recognition of the problems the Euro has caused a number of European economies: "There are various things that we have learnt about euroland, and about the eurozone, which are clearly problems that need to be resolved." 

Consider the problems the MPC have each month here - do they cut rates to try and kick-start the housing market, or do they raise them to try and bring inflation back within Brown's targets? For five months they've been stuck in these headlights, and have kept interest rates steady at 5%.

Now imagine trying to set one interest rate across a continent with varying inflation rates, and varying economic conditions. For example, Spain's inflation is at 5%, Italy's at 4.1% (same link), while the Dutch are at 3.25%. Simultaneously, the Guardian reports that Latvia's house prices have fallen 24.1% over the last year, Germany's have gone down 6.9% over the last two years, while in Spain, France and Greece they're still rising at a little over 3%.

How on earth should the European Central Bank reconcile all that? How would you feel if you lived in Latvia, and interest rates were set to suit Germany, or vice versa? Where's the democratic oversight? (Note: Latvia are part of European Monetary Union but have not yet adopted the single currency, but their currency is pegged to the Euro).

Anyway, if the Liberals do come round to the flaws in monetary union, this would leave the only British party wishing to subscribe to a Europe-wide interest rate as... the SNP. I've never understood their argument that we shouldn't let London make our economic decisions for us, but instead they should be taken in Frankfurt. 

To quote an SNP press release: "With distant London in charge, Scotland will just keep on slipping further behind." Isn't Frankfurt even more distant?

In that same release, the Nats cite Iceland, Ireland and Norway as the so-called "arc of prosperity". They're an interesting experimental lab, actually. Ireland's on the Euro, while Iceland and Norway are out of the EU altogether. Personally, I'll take the latter model, but let's see what happens.

Footnote: there are plenty of Greens who believe in the single currency, including many here in Scotland. For some, it's a key symbolic part of being pro-European. Personally, though, I am comfortable being utterly pro-European but against monetary union, as per the party policy, set in an internal referendum in 2001, which reads as follows:

"The Scottish Green Party believes that governments should be free to set their own levels of taxation, public spending and public borrowing in areas that only affect their own country. We consider that European Monetary Union will undermine local and regional economies and that it takes no account of environmental or social criteria. It is run by a collection of bankers subject to no effective democratic control, but able to override democratic decisions made by member states. We therefore oppose Scottish membership of the Euro."

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About this Archive

This page is a archive of entries in the Europe category from September 2008.

Europe: June 2008 is the previous archive.

Europe: October 2008 is the next archive.