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: Reuters

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• Boudicca_Icenii

  Whilst recounting Labour’s history of Euroscepticism, you omitted to mention that Gordon Brown signed the Lisbon Constitution – signing away massive areas of policy, imposing QMV in many areas and the loss of our VETO – without bothering to hold the Referendum which he and his predecessor promised in their election manifesto.

  EU politicans freely admitted that the Lisbon Treaty and the EU Constitution were virtually identical.  Brown claimed they were different and signed it without a mandate.

  Labour is just as culpable as the Tories for the UK’s entrapment in the EU.

• TarquinBroxted

  It was folly to link the mighty DM with the moribund drachma. Has anyone noticed BBC News putting on silly accents when pronouncing Berlusconi and other foreign leaders names? Their bash at “Angela Merkel” sounds like a cross between a drunken scouser and some thesp audition for Colditz. 

• Old Oldrightie

  I doubt the German people will wish to bail out the euro so it’s future is already lost. It may limp on but the sooner it is dismantled, together with the dead hand of EU regulation, the sooner the World will recover.

• Guest

  The breaking up of the Euro will cost every country. But ‘economics’ is a competition between nations and every nation with the single currency will suffer the most. 

  So I’d call it a win for the UK 

• http://www.facebook.com/people/Chris-Edwards/1135371937 Chris Edwards

  There´s nothing wrong with the Euro,It´s just a currency and It really doesn´t matter what you pay your bills in,whether Drachma or Deutschmark.The problems start when Greece treats the Euro like the Drachma by giving everybody 5% pay increases annually without realising that the Euro doesn´t need that kind of insanity.
   The German system works because the whole economy is micro-managed,Gerhard Schroeder thought  that he could be like cool hand Bill Clinton and the Economy would look after Itself,WRONG!Germany stagnated for eight years under his lethargy and is just recovering from the after effects.
   Germany has no minimum wage,It´s now discussing a system where minimum wages can be raised on a regional basis.
   If all the Countries in the EU micro-managed their economy and collected taxes instead of paying exhorbitant pensions at 55 there would be no problems,If Germany can take on 16 million East Germans who had to start pension and health  systems from scratch then why the Hell can a Country like Greece or Italy not get their act together.
   The Euro is a great idea but there´s too many that think that Europe can be run like the greed fed US of A and it can´t,so Bye Bye Bongs Bonga Burlesconie the one that forgot that Bill Cinton didn´t have to worry about universal sickness insurance and state pension schemes which can only be achieved by fiscal control,not by trying to be everybody´s darling or getting the secretary onto her knees whilst Italy burns.
   Rabid Socialism is killing Europe,not the Euro!

• http://www.yahoo.co.uk/ Firozali A.Mulla

  John, I would love to say Bye to the peron who danced with 17 year old girl, who bought the media, sport avena, but I also have something else. Monday, 14 November 2011  I see now even Tony Blaire is worried about the cash flow. You know it is very amusing that we have many who would like to confess, “Dear sir, I am sorry. I am the one who put you in the soup. I was misguided. .The wars are bad. However I confess when the 2 wars took on the forces of the World,   I was too young or not even born. BBC, Colin Powell, and many disillusioned me and I was led astray. I am sorry. I am very much prepared to pay few coins in the kitty of the church. I do not want to go to hell. I am scared. I have sent many there, cut their limbs and they are coming with the lot wives, mothers, fathers, sisters, brothers, elders, religious Padres, to say, “ Confess you idiot. What did you do with you smile? It is the gif from the creator and you messed with the laws. I  am pleased Tony heard and now he is going to the Politics again then I have no idea what will be granted to him. Fire or peace. Romney, ;” Obama failed with Iran and Iran is the greatest threat  to the USA and others. I.E. USA,. Why Why  Why Iran always.” What a bunch of whiners we have! President Obama is asking China and Russia to unite with us to stop Iran from getting a nuclear weapon. The Republicans are bristling and calling for war. Which would you prefer–working with Russia and China to stop Iran or a nuclear war? Russia and China have supplied Iran with missile technology and oil for years. Will they stop? That remains to be seen. But rather than predicting the future and saying they won’t, I prefer to wait and see for a little while. You can join the Republicans and get hysterical and call for war if you want. Foreign policy experts state that sanctions have worked about 33% of the time since they have been imposed in modern times. If you know how to use the internet for research and not just for comments, computer games and email, you can discover this for yourself. I’ll take 33% those odds rather than war any day particularly considering how strong sanctions can be if imposed by the U.S., Russia and China. Others will join. I have been in the military during wartime as have many others. What you whiners and advocates of war know about war and death is likely nothing, yet you find it so easy to call for war. I’d like to see if you have the guts to actually go into battle. I know darn well you don’t! You’re all talk. Immature talk!  I thank you Firozali A.Mulla DBA

• http://www.yahoo.co.uk/ Firozali A.Mulla

  So what is the problem. Please if you have ideas put them on the table, we read and try try try try to implement. You see That IS THE HUGE PROBLEM IMPLIMETATION BELL THE CAT? I thank you Firozali A.Mulla DBA