How to break up the euro
Silvio Berlusconi went to offer the president his resignation last night — in an Audi (right). George Papandreou left office in a BMW. Thus the leaders of Italy and Greece were literally driven from office by Germany (© Dugald MacMillan).
The Eurosceptics may have been right that the euro would not work, but that does not tell us what to do now that the mistake has been made. This is the gist of my column for The Independent on Sunday today. As I noted on the blog last week, if floating exchange rates would be better for the European economy, including Britain, then someone should be working out how to undo the euro and return to them.
However, there are two stages to the argument before we get to that point.
One is whether breaking up the euro really would be in the best interests of Europe. On this, my friend Oliver Kamm, who has the advantage of knowing what he is talking about, disagrees with me. (He also points out that Labour has long had its doubts about European union, and that the Conservatives were responsible for all the main steps of British integration, so my invoking of Peter Shore and Bryan Gould is merely recalling the true Labourist tradition.)
Someone else with whom I disagree, although his analysis is also commendably clear, is Tony Blair, who was on BBC1 Sunday AM to say that it would be “catastrophic” for Britain if the euro broke up.
The second is that, even if we were satisfied that the euro could never work and that it would be in everyone’s interest to break it up, assuming that could be done, the Germans and the French may never agree to it for politico-historical reasons and may insist on limping on with the project, pumping mostly German taxpayers’ money into the periphery countries.
As to how to do it, one of my correspondents, Simon Chapman, drew my attention to a prescient essay by Alan Brown of Investment Week a year ago, called “How the euro can be dissolved”. It cites a 1999 academic paper (pdf, subscription), which includes, among other historical nuggets, the fact that the Iraqi dinar was pegged to the pound until 1967.
Brown says it can be done, but it seems to involve putting stickers on euro banknotes over a weekend (James Forsyth — scroll down to third item — reports speculation about doing it over Christmas in the Mail on Sunday). If it did not have such serious potential consequences for us, the temptation to tell Angela Merkel that her country got into this mess and it will have to sort it out would be overwhelming.
Also worth reading is my excellent colleague Hamish McRae from last week: “We cannot see the detail; but we can’t go on like this for ever.”
Photograph: ReutersTagged in: euro, euroscepticism, tony blair
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