Euro Area Crisis: EUC Report

Lord Willoughby de Broke Excerpts

Monday 21st May 2012 Lords Chamber

[Lord Willoughby de Broke]

My Lords, like other speakers, I thank the noble Lord, Lord Harrison, for producing this useful report. I recognise, as the noble Lord, Lord Marlesford, said, that producing a report of this sort entails a lot of work: a lot of reading, many hours of listening to witnesses and probably a little bit of shut-eye, occasionally.

Having said that, I am slightly disappointed by the narrowness and rather blinkered focus of the report. I am disappointed but not entirely surprised because, as a paid-up anorak, when I knew that there would be an inquiry followed by a report, I wrote to the noble Lord, Lord Roper, who I congratulate on remaining in his place throughout this debate, suggesting that some of the witnesses were one-sided—what I call Europhile heavy. We had the foreign editor of the Economist, which is from the same stable as the FT, which has been wrong on just about everything for the past 20 years. We had Charles Grant of the Centre for European Reform, famously a Europhile think tank. We had Professor Willem Buiter, always pro-Euro, and Giuliano Amato.

They are all distinguished witnesses, but I wonder whether we should have had some more Euro-realistic views, which might have produced a greater balance to the report. Why not economics Professor Tim Congdon, Daniel Hannan MEP, Roger Bootle or Ambrose Evans-Pritchard? If they were too strong meat for the committee, perhaps it could have had Wolfgang Munchau from the FT. He has reinvented himself to what he would call a Euro-realist. We are left with a rather unbalanced and one-sided report, with statements of the blindingly obvious, as in paragraph 143, which states that,

“there remains an urgent need to establish a credible and well-financed system of rescue funding”.

Quite.

One point that I notice from reading through the report, which is symptomatic of the tone and why I am quoting it, is that right at the beginning in Chapter 2, Professor Buiter says:

“It is a sovereign liquidity crisis ... countries that one hopes and assumes are most likely solvent, as far as the sovereign is concerned … frozen out of the funding markets by markets panicking and refusing”,

credit. It is not the markets that are panicking; they are acting entirely rationally in refusing to lend to borrowers who they feel may not repay their loans. It is the eurozone Ministers, the European Central Bank and the European Commission that are panicking by using every sort of dodgy financial wheeze to keep the euro-zombie staggering along on ever-more expensive forms of life support.

The noble Lord, Lord Marlesford, mentioned the possible cost of this going forward, never mind the cost that has occurred so far. I have discovered a rather shocking fact, which I will share with the House: the bailout funds so far used to rescue the eurozone are larger in real terms than the reparation payments and reconstruction plans of the First and Second World Wars combined. The reference is David Marsh’s book, The Euro: The Politics of the New Global Currency. All that in the name of what? Solidarity, cohesion, European destiny, what the noble Baroness called vision. What a cruel joke that is.

How can anyone pretend any longer that the euro project is anything but a disastrous financial and social failure? Greece is in near revolt, Spain has 25% unemployment and over 50% youth unemployment, Ireland is in a double-dip recession, Italy is in turmoil, 11 Prime Ministers have been booted out since the euro crisis began—all this to keep the EU political bandwagon on the road and the euro delusion going, never mind the social and financial cost of doing so. I say to the noble Lord, Lord Davies, that if he is interested in a bet on the euro or the drachma, the biggest financial exchange dealers in the world—ICAP, at least—are all ready to deal in the drachma. He will be able to indulge his gambling whim with them any time now, I guess.

The best solution would surely be for Greece, and any other country that so wishes, to leave the eurozone. The noble Baroness, Lady Noakes, was absolutely right that that is their only chance of becoming competitive in a global economy. There is absolutely no hope for it at all in the eurozone. The report should have said that there is no hope for Greece and the other peripherals while Germany is master in the eurozone. The Greeks cannot become Germans. It occurred to me while reading the report that we could have had a monetary union of countries beginning with S, it would have been just as effective: Switzerland, Syria, Sweden, and Serbia. There is no reason why that should not have been as ineffective as the eurozone.

I agree with the noble Lord, Lord Monks, that Britain’s interest is in a Europe that is economically strong and vibrant. That is obvious. However, do the Government really believe that this can be achieved by propping up at ever greater expense the weapon of mass financial destruction that the euro has become? It is not the Government’s job and it is not in the country’s interests to encourage the EU elite any longer in its very damaging political illusion. I hope that the Minister and the Government will take with a heavy pinch of salt the blood-curdling threats that are already being issued by the Eurocrats should the eurozone break up. They should be heavily discounted.

After all, we have been here before. Twenty years ago, Britain went through precisely the same experience when it was stuck with an overvalued exchange rate in the exchange rate mechanism. As in Greece now, our leaders, all the main parties, the CBI, the TUC and the Bank of England assured us that leaving the ERM would be disastrous. On 11 September 1992, the Prime Minister John Major solemnly told us that withdrawal was:

“The soft option, the devaluer’s option, the inflationary option … a betrayal of our future”.

Four days later, we left the system. The noble Lord, Lord Lamont, who I am sorry is not here, was apparently singing in his bath at the time. Our recovery began immediately. Inflation, interest rates and unemployment started falling and we enjoyed 15 years of unbroken growth and prosperity.

That is what the Eurocrats really fear: that if Greece gets out it will be a success, and other countries will want to follow and also get out of the eurozone. Then the whole rotten house of cards will crumble. That is what they fear, and that is what will happen.