TIM EXPLAINS IT ALL

Renown economist, Tim Congdon explains the collapse of the euro is not a disaster.

We have all had those moments when someone has been given news they don’t want to hear and we have watched their face drop and the following reaction – I am sure that two of those moments must have happened when Angela Merkel and her sidekick, Nicholas Sarkozy, were given the news that the Greek Prime Minister, without consulting them, had promised the Greek people a referendum on their wonderful bail-out – I wish I could have been there.

Could you imagine their response, what audacity that the elected Prime Minister of a supposedly sovereign nation – albeit a bankrupt nation – offers his electorate a democratic say on their wonderful deal thrashed out behind closed doors in the EU – the nerve of the man considering his voters! Everyone know that when the electorate are consulted on EU matters they always vote the wrong way and everyone has to go through the inconvenience of doing it all over again until they give the result the EU want.

So would the total demise of the euro actually be such a bad thing? Would the world come to an end economies collapse, governments fail and wars break out? Of course not, but to listen to the anguished wailing from within the EU as they see their precious project flushing down the pan of history before their very eyes – you would come to that wrong impression.

What is happening now reminds me of the Exchange Rate Mechanism (ERM). All the same warnings and predictions were made; we were going to be left behind if we did not join, Britain would marginalised, our business would collapse and trade move abroad. So we joined and what happened, we were lumbered with an interest rate that was wrong for us, our pound sterling was set at the wrong rate and as a result businesses collapsed, trade moved away, people lost their jobs and homes and unemployment rocketed. All that changed drastically when the inevitable happened and we crashed out – instead of gloom and doom we prospered and our economy shot up and recovered – ERM had been the disaster – not our leaving it.

Now we are witnessing all the same things being said about the euro, all the same warnings of gloom, doom and total disaster – yet in our heart of hearts we all know the sooner the whole lot fails and we can all get back to normality with different nations once again in control of their own economies and their own currencies, then the good times will return – it is the euro that is the disaster not the leaving of it or its total failure which is not far off.

Professor Tim Congdon, the renown economist, has written this below which says it all, only he explains the situation in a far better way than I could. Read on and learn:

Angela Merkel, the German Chancellor, is reputed to be a sensible, level-headed lady. So, when she claimed in the Eurozone bail-out negotiations that their failure could threaten continued peace between Europe’s nations, the media latched on to her words. Could it really be true that, 66 years after a world war that had been calamitous for her country and its people, the leader of Germany could be warning of a similar horror? Would that be the price for Europe’s citizens if their single currency area were to disintegrate?

A fair comment is that Merkel’s remarks caused bemusement to many not directly involved in the negotiations and able to maintain a degree of objectivity. The United Nations today has 193 members, while the European Union has 27 and the Eurozone 17. 176 countries do not have the euro as their currency and 166 which do not even belong to the EU. According to Mrs Merkel, the adoption and retention of the euro are a basic condition of peace between nations. We might then expect discord and tension – indeed discord and tension verging on military hostility – among the unfortunate 166 countries that have not participated in “the European construction” engineered by France and Germany since 1957.

But that is not what we find. According to Wikipedia, the world at present has five on-going “wars”, three of which are actually large-scale outbreaks of civil disturbance in the Arab world. Only one of the five, Kenya’s military engagement in Somalia, resembles a war-like conflict between sovereign states. But arguably even that does not count, since the Kenyan incursion is in fact a policing operation. The world at large – the world of 166 countries outside the EU – is at peace; it is at peace even though the 166 countries do not belong to the EU or enjoy the benefits of the single European currency. Sorry, Mrs. Merkel, no relationship whatever holds between the euro currency and the avoidance of war.

Indeed, no relationship holds between EU membership and the avoidance of war. Countries can have no direct association with the EU or the euro, and yet still be at peace with every other country in the world. True, the riots in Athens in the last few months have some similarities to the disturbances in the Arab world. However, they can be blamed not on Greece’s abstention from the euro. Instead they arise from its foolish decision in 2003 to introduce the currency of foreign countries with utterly different traditions of budgetary management from its own.

As the bail-out negotiations were reaching their finale, George Osborne, the Chancellor of the Exchequer, said he was concerned that Britain might become “a second-tier state”. His worry was that the 17 Eurozone members might meet by themselves, without the ten EU members which have kept national currencies, and reach conclusions which would adversely affect the “outside” ten. According to Osborne, the Eurozone inner core might in this way “bounce” Britain and the others into courses of action against their national interests.

But what does that mean for the rest of the world, those 166 lonely, neglected and presumably desperate countries which do not belong to the EU at all? The poor things not only do not have the euro as their currency, but also – so sadly for them – are not subject to the tens of thousands of directives, regulations and rules that emanate from the European Commission and the Council of Ministers. If forlorn and unhappy Britain is relegated to “the second-tier”, in what league should the United States, China and Japan be placed? And are our Commonwealth friends, like Canada and Australia, in some remote outer darkness?

May we now leave Mrs. Merkel and Mr. Osborne in their crazy EU hothouse, and return to common sense? The fact is that no country anywhere in the world – and that no means no country in Europe – has to participate in the structures of the EU or the Eurozone. There is nothing compulsory about membership. Some obvious facts cannot be overlooked. For many years the growth of output and trade has been appreciably faster in the world as a whole than in the EU (see the table below), while the vast majority of non-EU states have enjoyed an international peace that is premised on overwhelming American military might, not on the existence of the EU.

George Osborne and his Cabinet colleagues should remember how de Gaulle dealt with upstarts from European institutions in 1966. Say “no” (or “non”, as the case may be), walk out of the room and leave an empty chair. That is the right way to respond to attempts by our neighbours to “bounce” us.

Talking of de Gaulle, shortly before the D-Day landings he and Churchill had one of their many sharp exchanges. The question was whether Britain’s most profound geopolitical commitment was to Europe or to the rest of the world, including of course the Commonwealth and the USA. Churchill was forthright, “If Britain must choose between Europe and the open sea, she must always choose the open sea.”
Yes, the “open sea” – the world other than Europe – with its 166 countries and its 83% of global output must always matter most to Britain; it must certainly matter more to us than Europe, even in its present allegedly “united” form, which – without us – has 26 countries and only 17% of world output.

Tim Congdon.