Monday 27 July 2015

Another way to look at it

Another one of those tiresome articles on Greece (and whether Poland should now join the Euro) appears on Zero Hedge. The huge misconception this time around is that the Greek situation is a problem with the Euro. It isn't. Had Syriza not ripped up their reform commitments and effectively set course for default, we wouldn't even be having this conversation. The Greeks wanted in the Euro - and they still do - some because they thought it was another pot to raid, others because they see it as the only way to modernise their clapped out economy.

As far as I know, Poland isn't as badly gone as Ukraine or Greece when it comes to endemic corruption, and while more could have been done, Poland has made made some considerable effort to clean up its act. Moreover there is reason to believe that the EU would be as committed to Poland as it has been with Greece. Not so much Ukraine, but that is another story.

The fact of the matter is that none of these basketcases are ever going to claw their way out of perma-poverty unless they make massive reforms to their public sectors - not least reducing tax rates, building effective tax collection systems and formalising their grey economies. These periodic near default crunches we see will probably not be confined to Greece, but the EU's treatment of Greece is a warning to Spain and Italy that if they don't start to actually govern, then their auditors will. Anything that even slightly threatens the Euro gives the EU every excuse to do so.

The question we need to ask is whether we support the EU in its aims of pulling these states out of their perpetual economic funk. I would say we do. It's going to cost Europe a lot of money to take care of the inherent problems in these countries and it is going to take time, but the EU rightly cannot allow our money to be fire-hosed at these states without absolute assurances that their governments are making reciprocal efforts. Greece most certainly didn't. There are tentative signs that Spain is getting to grips with it and we should applaud that.

In effect the EU is a political union for the primary purpose of developing Europe into the first world continent it pretends to be. For sure, we can say hubris meant that it bit off more than it could chew but like it or not, one way or another, it did survive the crash of 2008, and while we saw a decade of stagnation, partially through regulatory correction, it has endured.

As to whether what the EU is doing is in our interests, well of course it is. Half the reason asylum seekers and migrants move to Northern Europe is because of administrative delays in immigration processing and the lack of viable employment. In any strategy for controlling influxes of immigration you need international development and effective administration - and that begins in Southern Europe.

I do not presently believe Poland should join the Euro, mainly because it doesn't need to. It could do more in terms of industrial regulatory compliance but in terms of brushfires in the EU, Poland isn't much of a concern. Italy most certainly is though.

Effectively, in creating the Euro, France and Germany willingly chained themselves to the weakest links. They did so in the knowledge they were effectively taking responsibility for countries with poor governance. That is no small undertaking. I am glad we didn't join because it's not a responsibility we want, are not obliged to take it on, and have no need of it as an internal development mechanism for ourselves.

The recent "crisis" we have seen is effectively the theatre they needed to stage in order to create the political will for the next EU treaty - a treaty that gives the EU the necessary leverage it needs to intervene in non performing states. That then formalises the two speed Europe we effective have already. That is what Cameron, a passenger of these events, will attempt to sell to us as reform. He's had virtually no influence in it but that second tier of the EU is where they want to park us. That will be his great phantom victory.

Personally, I have no objection to the EU doing whatever it is going to do. It made a massive mistake in Ukraine and we should say so, but it is the only game in town that can transition southern Europe into functioning states and not the quasi-failed state basketcases we see today. But that's the EU's concern, not ours. The Southern states were under no illusions as to what they signed up for, it's ultimately their decision and despite what some may think, Greece did not vote to leave the Euro nor did it elect Syriza in order to do so.

But since that is the future for the EU, one which we will still necessarily contribute to financially, we have to ask if that second tier status is enough. Since we are never going to go all the way in, I would say the limbo is simply not good enough. It means we take all the worst aspects of the EU while having no real say in our own trading affairs and the EU retains exclusivity over trade policy. I cannot imagine a worse place to be... On the fringes of Europe but prevented from pursuing our own avenues.

That is why Eurosceptics must drop the Europhobia and the jingoism. The EU is doing something good that would otherwise not be achieved. It just isn't really something we are central to. So rather than mouth-foaming hate of the EU, how about some constructive leadership from the outside, but politely decline their offer to be tied as a member state to their statehood ambitions? We can vote no and still be friends.

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