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Eurozone crisis: Be careful what you wish for, Eurosceptics | Michael White

One of the many risks facing the world economy is protectionism – we must aspire to remain an open market

You may not know it from the Daily Mail’s front page headline – “PM’s ultimatum on plastic bags” – but the German parliament has just voted to save the Eurozone from collapse, something that would have brought much of the EU economy down with it. Plenty of British jobs, exports and savings would be in the wreckage.

So it’s two cheers for the Bundestag, but don’t break open the brown ale yet.

If that wasn’t enough to concentrate a few minds, the European commission has also decided, via a rabble-rousing speech from its president, José Manuel Barroso, to back the financial transactions tax (FTT or Tobin tax) on global trades.

That may have a similar debilitating effect, albeit over a longer timeframe. It’s a neat idea, but it won’t fly far, as Larry Elliott explains here. Even nice Bill Nighy’s eloquence can’t make it so.

Not much about these earth-shaking events commands space on Fleet Street front pages, where horizons are collapsing as quickly as they do in the brain of the average Tory Eurosceptic.

But let’s try to look on the bright side. Only last week, Peter Oborne, the multimedia pundit and Channel 4 scourge of Tony Blair, denounced a BBC conspiracy to promote the EU and its single currency.

For 50 years, it has been a plot that gave most of the airtime to assorted Europhiles, Pundit Pete opined. But be careful what you wish for. Showing more subtlety than licence payers have come to expect in recent years, the Beeb has retaliated in the unkindest way possible – by taking the Daily Telegraph’s Savonarola at his word.

How so? Last night’s 10 o’clock News on BBC1 led with Barroso’s podium-pumping performance and then proceeded to interview not some limp-wristed Ken Clarke type of Euro-wet, but no less than three muscular Tory Eurosceptics – Daniel Hannan MEP, John Redwood and his younger Westminster colleague, Douglas Carswell, the MP for the port of Harwich, increasingly Britain’s maritime gateway to the world, including Europe.

They all made good points, many with which I agree. But, as retail politician hoping to persuade viewers with one eye on the telly and a brain mostly engaged elsewhere, their combined charisma makes Ed Miliband look like a cross between JFK and Ronnie Reagan (as you may have seen if you caught Miliband’s conference Q&A session last night, he’s actually smart and funny).

Oh bliss! Desperate Dan, Kamikazee Carswell and the Vulcan, all with IQs the size of the Greek debt but short of the common sense stuff, and all of them in one TV package! Christmas has come early this Indian summer.

As I say, be careful what you wish for. What this lot wish for is a break-up of the eurozone as the least painful option compared with pouring more money into the breach in the zone’s dam to save Greece from political and economic implosion – something that would spread contagion across the EU’s exposed southern flank.

It sounds easy but, like the Tobin tax, it won’t be as easy in practice.

Our own coalition is taking a back seat on this one, which may be a consequence of speaking with several different voices. The foreign secretary, William “Billy” Hague, feels today is a good one on which to tell the Spectator magazine he was right in predicting, back in 1998, that the zone would become a cautionary “burning building” for future historians to marvel.

But Nick Clegg, our intrepid DPM and a mini-EU in his own family DNA, flies to Warsaw today to warn core eurozone states not to risk watering down the EU’s single market – free movement of people, capital, goods and (in theory) financial services – if they deepen the fiscal union in the eurozone, as they now look like doing.

“The European Union is built on consent, co-operation, participation. While the UK has chosen not to join the euro, we respect the decisions taken by its members to support it. But we cannot accept arrangements that would privilege the eurozone as a decision-making body over the European council,” he will say.

Clegg made a poor job of defending his pro-euro policies on air the other day, saying no one could have predicted what might happen inside the new zone – that’s not true.

As the ex-commissioner Mario Monti writes in today’s FT, the zone created the promised anchor of monetary stability, but failed – surprise, surprise – in its other convergent goal, to turn all 17 zone members into cultural Germans, hard-working and disciplined.

The fact that France and Germany, with Italian connivance, tore up the Bundesbank-imposed growth and stability pact (no budget deficit beyond 3% for more than three years) in 2003 after bullying small state budget defaulters like Ireland entitled Redwood and Co to say “told you so”. I probably said it myself.

But Clegg is right on this one. One of the many risks now facing the world economy – not just the crisis-racked North Atlantic – is protectionism. I was glad to see Miliband speak against it during his Q&A, and to do so without notes or hesitation. We must aspire to remain an open market, albeit one that trains its citizens and nurtures its productive economy – predators as well as producers sometimes – better than we have done.

Where both sides of the argument, as played out in print and on the airwaves, strike me as misrepresenting the common interest is in the way they present the Greeks (etc) as the sole villains of the drama because they borrowed money they can’t pay back and retain an Ottoman system of corrupt governance that modern Turkey is (touch wood) finally shaking off.

But German and French banks lent them all the money and stand exposed to ruinous losses if Greece collapses – and heavy losses if the Bundestag and other parliaments vote for the package because the bondholders’ claims will get what the trade calls a financial haircut. But not so bad as in the disorderly collapse that still looms.

So when you hear “Greek bailout” on the telly again, try murmuring “payback to foolish German banks who lent the money”. It may sound more reassuring, though the subject of intense debate with France.

Self-interest is the case EU leaders have failed to put with force and clarity to their own electorates. Closer to home, when George Osborne chipped in our cash to help sustain the Irish banks it was not mere neighbourly solidarity but also a desire to prevent a greater collapse and loss.

Likewise trade. It’s a cliché that we are all each other’s largest trading partners; I wish it were not so. But as with the eurozone, we are where we are and grateful that our debts are mostly to our fellow-countrymen and denominated in our own currency, which our own institutions control (sometimes badly). Europe is our prime market, too.

But the Germans stand to lose more than their neighbours if the rescue fails and the zone goes down because they might then end up with a German currency suffering familiar problems of being uncompetitively overvalued for export purposes.

Does Angela Merkel say this loudly enough? I don’t speak German, and British newspapers’ coverage of Germany is mostly stuck in 1939-45,. I don’t hear that message. It is always easier to castigate foreigners.

It’s also easier to try and tax them. Barroso appears not to notice that any Tobin tax on financial transactions – many of them as speculative and pointless as Miliband probably thinks – would have to be global if it is to work.

At 0.1% – or even 0.01%, the volumes of trades are so huge – the tax take would be huge. The US opposes it, and so do many emerging markets. So it won’t go far.

Inside Europe, 80% of this kind of business is done in Britain – its own equivalent of the German engineering industry – and we should have been more effective in stopping Barroso going off at half cock, so we’d be paying most of the bill. It therefore won’t happen. If it gets that far, Britain will veto it, as Osborne confirmed, and the eurozone will be left trying out its own experiment.

Wiser heads than me say it’s technically doable, but not one of Professor Tobin’s best ideas. There are better ways to raise the industry’s taxes – a financial version of VAT, perhaps? – and it would drive high frequency trading business offshore and even do more harm than good.

Never mind, here’s a chance to find out. If the Barroso plan to make the marginalised EU commission (remember what a bogeyman it was once supposed to be?) more relevant again ever gets off the ground via a Tobin tax, we’ll see who’s right. Europe isn’t always wrong: VAT is a very efficient tax, which many Americans wish they had too.

Meanwhile, Germany and China are the world’s biggest net creditors in terms of trade balances. Next week, the US Senate, which can often be relied on to be daft, votes on tariff barriers designed to punish China for artificially constraining the value of the renminbi to keep its exports cheap.

At a stretch, you could argue the euro serves the same useful function for the German mark, dragging it down.

Not that we should complain too loudly, since we stayed out of the eurozone (three cheers for that man Brown) and have been allowed to devalue our currency since the financial crisis by about 20%, without complaint from the neighbours.

There are always limits to solidarity in all human institutions, but it’s a good principle, often underpinning enlightened self-interest too. The eurosceptic Vulcanites and conspiracy theorists like Pundit Pete might care to remember it more often than appears to be the case.

Be careful what you wish for: it may come to pass. © 2011 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds