Tonight:
4°c
Back from summer holidays and the anxious wait for the Visa and MasterCard statements begins.
Europe, from rainy Ireland to sun-soaked Greece, has suddenly become frighteningly expensive, as the massive devaluation of the pound against the euro hits home. The jug of sangria, the pottery and wines to bring home now cost us so much more.
The saddest sights in south-west France and on the Spanish Mediterranean costas are British citizens handing back to estate agents the keys of the houses they bought but can no longer afford to keep, as their pounds from back home don't cover the bills.
For more than a decade we have been told that the euro was a terrible idea, while the good old pound sterling would protect the British economy from the wily ways of the Europeans.
Now more and more people are asking why the pound is letting us down - and whether treating it as a shibboleth that cannot be questioned makes sense any more.
All the old arguments against the euro have fallen away. There is no European super-state emerging with its adoption. There is no dictation of economic policy from Brussels.
The EU takes just one per cent of Europe's gross national income to spend on policies agreed by 27 cantankerous, ever-arguing member states.
The other 99 per cent of what European nations earn, make, save, tax and spend stays under national control.
Meanwhile, devaluing the pound was meant to improve exports - but trade figures show Britain's trade balance with euro-zone countries has worsened as the pound slumped.
Each European country is suffering from the agony of the world recession in its own way. The low-tax tiger of Ireland or the housing-bubble Spaniards have been hit.
So have the export-obsessed Germans. But the worst hit major European economy - Britain - is the one outside the euro-zone.
The Left's dislike of the euro was based on the notion that the Maastricht criteria would limit the state's ability to borrow and spend.
Yet France and Italy - and indeed most in the Euro-zone - are ignoring the Maastricht rules as they increase public debt to stave off further business closures.
President Sarkozy is proposing un grand emprunt - a giant loan - to increase French public debt as his way of combating the crisis.
Worse, as we plan for recovery, Britain is hobbled by its hostility to the euro. Take the fate of the City.
It is vital to our economy, and the UK financial sector, warts and all, adds massive value to the EU as a whole.
But our contempt for the euro means that no one listens when Britain protests about regulation from Brussels aimed at weakening the finance sector.
Sending Boris Johnson to plead for the City in Brussels last week was like sending a devout atheist to the Vatican to ask the Pope to change his line on birth control.
All that Europe knows about Boris or David Cameron is that they have spent their entire political lives rubbishing the euro and pouring scorn on the EU.
Labour does little better. In 1997 there were perfectly good technical economic reasons to explain why the pound should not dissolve into the about-to-be-born euro as did the Deutschmark, the French franc and the rest.
But Gordon Brown's famous five economic tests were always a red herring as the sixth test was, and remains, the certainty that the British would say No to the euro in a referendum - unless the case was properly made to them.
That is still the situation today. The kite flown by Peter Mandelson in June about us aiming to join the euro was quickly shot down. But in the end, Britons prefer reality to prejudice. The pound no longer walks tall against the euro.
The euro is not going to collapse because of wide variations in the economic profile of different regions using it any more than the US dollar fails because its external value and the interest rates set by the Fed do not suit Michigan and California at one and same time.
There are other ways of managing such imbalances. If low interest rates heat up housing, then banks could simply require a 10 per cent deposit before issuing mortgages.
Outside the euro, Britain will never be in the driving seat of Europe. We need to be. If the euro were used here as it is without fuss in countries we are close to, including Ireland and the Netherlands, then the next Governor of the European Central Bank could easily be a Brit.
To be sure, British entry into the euro is not even at the starting gate of current political debate. Tony Blair showed some early enthusiasm.
But relentless anti-Euro briefing from Labour's Treasury team after 1997 poisoned the well of rational discussion: it became near impossible to make a case for the merits of a stronger engagement in Europe.
Ministers just gave up making any positive case for the single currency or EU partnership.
It will need forces from outside the political laager to raise again the question of joining the euro.
The leader of one of our top business organisations told me recently that he listened to CEOs pleading for a level playing field in Europe, and for Britain to have more weight when EU financial regulations drawn up by the European Central Bank and the euro-zone finance ministers are discussed.
"I say to them they are making a case for the euro and immediately they blow up and start ranting about politics," he sighed.
For in the end, joining the euro is about politics. Labour forfeited the chance to make the argument.
And history tells us that the party that takes the boldest pro-European moves - that took Britain into Europe, and then agreed the single market sharing of sovereignty and the Maastricht Treaty - is the Conservative Party.
Today, with William Hague, Daniel Hannan and 99 in 100 Tory MPs firmly Eurosceptic, the idea that the Tories might again be a pro-Europe party seems further away than ever.
But if British voters are no longer going to feel like poor relations whenever they holiday in other European countries, then before long someone is going to have to begin making the case that like shillings and pence, the pound may now have had its day.
Denis MacShane is Labour MP for Rotherham and was Minister for Europe, 2001-2005.
Reader views (33)
I dissagree with the US comment. How about a US, or trading block, of the English speaking world North america, Carribean, Africa Southern hemisphere etal... After all we are all countries that are made up of people who escaped Euroland or were ethnicaly cleansed in the first place, who's to say they would not do the same again
- Light Shaft, earnly UK, 01/10/2009 14:43
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McShane writes complete economic rubbish. The UK sells more goods as the pound adjusts down. So the UK benefits from an adjusting currency. It is not locked into the Euro. Also we can set our own interest rate to suit our economy. The economy has been ruined by Brown, McShane and Co, so we need our curency to fall to attract. We avoid the European Central Bank setting one interest rate that is now too high for the UK.
Also overseas buyers are keen to buy assets in the UK and invest money into the UK as the assets are cheaper as the pound adjusts. So having a UK seperate currency is vital for economic success.
The one reason McShane wants to be in the Euro is that he thinks it would bail out the UK, after Labour have ruined the UK economy. Only the UK is a net contributor so we pay in, not get money out.
McShane is an example of the total finacial ignorance that permeates Labour. From McRuin boasting 'I ended boom and bust' precisely as markets were rising at 25% pa. What irony as Mr and Mrs Average saw 2007 as boomtime. Brown 'proved' his delusion of personal divinity plus totally useless economic skill.
Labour are like someone who bought a house in 1997 and remortgaged repeatedly through the boom, spending the money on daily expenditure. Now in massive negative equity they face disaster. They raid future earnings of the private sector and take more loans that increase the amount they have made the UK owe. Worse than useless. Total errors.
- Milton, manchester uk, 24/09/2009 21:33
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EDITED by admin @ 8.45 on September 25 2009
Breach of community guidelines
- John Bell, Nottm, UK, 23/09/2009 20:37
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More complete and utter garbage from that master of pro euro myth peddling Denis MacShane.
Perhaps it is not a surprise that a man with an Irish Mother and Polish Father is such an enthusiast for all things Eurofedarist but he still fails to grasp the basic truth that he is in a small minority in the UK in his quisling views. Both Ireland and Poland have done very well out of their EU & Eurozone membership, after all that is where so much of our tax has gone to, but for the UK there is still nothing at all to gain, and everything to lose, by allowing ourselves to sleepwalk into the Federal Euro Superstate so beloved of the likes of Denis Matyjaszek.
- Matthew, London, UK, 23/09/2009 19:37
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Thank you Denis your contribution has been needed for some time now and it is good to see it in print! Needless to say the head banging sceptics will be attacking you - they have run out of real arguments - and so resort to the rabid nonsense they peddle. The UK is at a major tipping point and the excess borrowing and devaluation of the pound could so easily lead to rampant inflation and the destruction of most of our economy. Thank you for speaking up for common sense and trying to negate the politics.
- Peter Valentine, Leicester, England, 23/09/2009 19:37
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"Today, with William Hague, Daniel Hannan and 99 in 100 Tory MPs firmly Eurosceptic, the idea that the Tories might again be a pro-Europe party seems further away than ever."
Really? I was leaning towards UKIP but the Tories now have my vote. Thanks.
- Kevin T, Beckenham, Kent, 23/09/2009 19:37
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The Labour Government has utterly bankrupted Britain. This country’s national debt is set to rocket to £2.5 trillion (£2,500,000,000,000), some £1 trillion more than the Gross Domestic Product of £1.4 trillion (£1,430,650,000,000).
According to the Office for National Statistics (ONS), “ordinary” Government debt is to top £1 trillion before the end of this year. However, this figure does not taken into account the minimum £1.5 trillion burden inflicted on the public purse by the bank bailouts.
Ironically, the bankrupting of Britain has thrown a spanner in the works of Labour and Tory plans to bring this country into the Euro currency. It is a criterion of admission to the currency that a country’s debt should not exceed 60 percent of that country’s GDP.
- Bert, som, 23/09/2009 19:37
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Moron McShane...UK exports have slumped as pound has fallen against the Euro...Truly an incredible comment! Oxymoron? Or Just moron? Weak currency boost exports? Fact is UK is major earner of invisibles... these relate to markets not goods. Europe turns inwards in hard times, always has. The UK is better to look to China and India than moribund Europe for growth, Europe, like its population is circling the drain, getting old, God's waiting room. The bright young things are going abroad to seek their fortune, it was ever thus!
- James Macleod Ritchie, Oyster Bay Cove, 23/09/2009 19:37
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Spot on Mr McShane
Time we asked what the devaluation of sterling has brought us
Time we asked why, despite having our own currency,
we have entered recession before anyone else,
and are out of it after anyone else
BNP/UKIP sympathisers have nothing to offer but poverty, permanenent recession, and mass-unemployment
Let them join the dole queue whilst they drape themselves into archaic rhetoric about Little England
Why is it this country has worse public health, worse transport, worse pensions, worse everything than the rest of Europe?
Dump Sterling, dump Westminster, and join a federal Europe now
We are clearly incapable of managing our own affairs
Let the EU do it for us and make MPs redundant
A
- Alan, Islington, Europe, 23/09/2009 19:37
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WE don't want the Euro, Mr McShane, we don't want your party to be in government and a great many of us either don't want to be in the EUromonster at all, or would at least like some say in the matter.
Our EU contibution (the one that they DO admit to) is going up by 62% next year. This is because part of the rebate that was hard fought for by Thatcher was signed away by the last vainglorious traitor to occupy Downing Street. The deal was that we would give up some of our rebate in exchange for wholesale reform of the Common Agricultural Policy, which disadavantages British farmers in favour of those on the continent.
We are pumping more money into this socialist monstrosity, but there has been no significant change to the CAP.
There is no advantage to Britain, as a net contributor (the EU and its overbearing regulation costs us £140 million per day), remaining in this most corrupt of political cabals. The only people that benefit are the political classes and their wealthy sponsors.
- Keith Lonsdale, Doncaster, 23/09/2009 19:37
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Once again,
Mr McShane
is on top form again.
He tells a lie
hopes we will not spy
he's speaking rubbish again.
- Madasafish, Stoke on trent, UK, 23/09/2009 19:37
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We are clearly incapable of managing our own affairs
Alan, Islington, Europe
Yes you are Alan so get your friend Brown to go to the country (preferably Scotland for ever)
- Minnie Ovens, London, UK, 23/09/2009 19:37
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Well, yes, we really should join up forthwith if it's really the case that Mr McShane and his colleagues are suffering a slight depredation in the exchange rate for their (one way or the other) taxpayer-funded jollies and a bottle of ouzo costs several drachmas more than before. Nor can I think of any better reasons of state for joining the euro than to help out the costa expats, can you?
- Notta Mandelson, N London, 23/09/2009 19:37
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What a totally idiotic article. Doesn't he know that because we kept the pound our exports are much cheaper now. Look at Ireland - it is bankrupt because of the euro, they are paralysed and unable to adapt to the financial crisis; interest rates set (not in Ireland's interests but in Germany's). We had the worse debt in the world going into this crisis, it is amazing that we have not had our credit rating reduced - watch this space.
- Vanessa, London, 23/09/2009 19:37
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Pipe down, MacShane, nobody listens to your threadbare line of Euro guff anymore.
- Ted, London, 23/09/2009 19:37
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Anyone with half a brain can see that we have only two economic choices in the long run: either we properly hitch our star to Europe: adopt the Euro, join Schengen and end all our stupid opt-outs, or become an economic satellite of the United States.
Much as like the Americans (I've married one), I can't see that option working for us, and with Europe, we do get a say. Dennis McShane is dead right to say our voice will be heard much louder if we agree to play by the same rules as everybody else.
- Roy, England, 23/09/2009 19:37
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hes after a non-job in eu. leave europe before the inevitable occurs.
- Terry Sullivan, morden england, 23/09/2009 19:37
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What colour is the sky on your planet? Oh yes, red.
- Ken, Bexleyheath, 23/09/2009 19:37
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All the arguments advanced are those of an economic illiterate, using simplistic "examples" to prove a case. Unfortunately Labour has misused the twin levers of economic control, both monetary and fiscal, and in particular by borrowing in the good times necessitating quantative easing in the bad. The fact an idiot (I use this word carefully- remember the gold sales?) was Chancellor does not reduce the truth that having the control of the levers is better than not. The current recession Gordon Brown has made much worse whether it started in the US or not.
- William, Montenegro, 23/09/2009 19:37
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It may be in the interests of your country for the UK to join the Euro but not in the interests of the UK.The choice is living in a liberal democracy or as part of a Federal State which the E.U is becoming. Europe has no history of democracy .Most of the States have only one or two generations with any experience of democracy as we understand it in the anglosphere.
If the Irish vote No to Lisbon then even the Conservatives will find it hard to wriggle out of a referendum—what if the British reject Lisbon by a huge majority?
- James J, London, 23/09/2009 19:37
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McShane is just peddling the same old euro-tosh Heath used to cough up in the 1960s. The British people were conned then I don't think they will be conned again which is why Brown and Cameron won't hold a referendum.
- John, East Grinstead, UK, 23/09/2009 19:37
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Mr Moron McShane.
Do you want the dear old UK to fess up yet more cash for the bomb tthat is about to go off in Eastern Europe?
This toxic waste dump which was bailed out in 1998 has never really progressed apart from building piles of utterly useless real estate at London prices to service an economy which has Communist controls on labor controls and taxes whilst India and China powrr ahead? Are you insane? Say what you like about America but I live here and people are not delusional, they are looking at India and China for growth, Eastern Europe with its baggage is a complete waste od space!
- James Macleod Ritchie, Oyster Bay Cove, 23/09/2009 19:37
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Denis,
It really takes the biscuit that economically illiterate fools like you are given the column space! No mention of the unemployment problems faced by the PIGS because they are unable to devalue their currencies to make themselves more competitive [or the absence of any commentary on the inability of these countries to get to grips with there public sector rigidities] ~ only poor old Denis having to pay a bit more for his Sangria, boohoo! Fool.
- Keith, Bath, 23/09/2009 19:37
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Forget about the Euro. Just give us back our country and our free speech.
- George, Cambridge UK, 23/09/2009 19:37
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"For in the end, joining the euro is about politics."
I totally agree. So everything you have said as regards economics is just rubbish. Had we had the Euro, we would be in even worse situation than we are now: an even bigger property boom and bust due to extremely low interest rates and no way of helping our exporters or tourist industry. We would be locked in, suffering an even more vicious downturn than we are now - just look at Italy, Ireland and Spain.
As for the political dimension, that is pure poison. Who wants even more control from ever more distant, unaccountable foreign politicians. Our own are bad enough!
- Robert C, UK, happily not in the Eurozone, 23/09/2009 19:37
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What a waste of space this man is. The only reason we are in the state we are in is because he and his party do not believe in democracy.
Europe is about consolidating and securing the Political Class as natural leaders of the people.
Europe is about granting people rights; democracy is about the people giving their elected representatives rights.
Europe is about the Political Class securing its position by using taxpayers funds for its electioneering; democracy is about an equal footing for all to choose who represents them.
- Ian, Reading, England, 23/09/2009 19:37
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I agree with Denis MacShane.
- Steve Green, London, 23/09/2009 19:37
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"There is no dictation of economic policy from Brussels."
Mr MacShane: are you lying to us here or just stupid? The Euro is run by the ECB - in FRANKFURT. And to say that they are not dictating economic policy is absurd - with respect to interest rates, that's what it was mandated to do!
The only valid debate regarding the Euro is: do we want to outsource our interest rate policy to FRANKFURT? Sure it is pooled sovereignty - but that normally results in a lowest-common denominator decision (which is normally to do nothing). And the fact UK holidaymakers suffered in Europe this year is part of the cure - a weak pound generates import substitution (read: holidaying in the UK) and export competitiveness (read: attracting tourists to the UK). It really doesn't take a genius.
If this is the calibre of person we rely on in Parliament, God help us.
- Milton Not Keynes, London, 23/09/2009 19:37
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Total guff McShane.
The only reason we have an exchange rate so low, is because your government's policies destroyed our economy. The rest of the world showed their total lack of confidence in Labour and voted with their cash, dumping the pound.
Wake up man.
- Dave Davies, Basingstoke, Hants, 23/09/2009 19:37
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Who is Dennis MacShane?
- Toby Webster, Ongar, England, 23/09/2009 19:37
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"Back from summer holidays and the anxious wait for the Visa and MasterCard statements begins."
Presumably ours not yours Denis, surely - your summer hols dont end until er when is it ? oh mid October..
very kind of you to worry about our wellbeing in the meantime. There was I thinking all you parliamentary types needed the long break to concentrate on the DIY , gardening, and all those other time consuming odd jobs that just cant get done when the house is sitting, and especially when so many of you have two (or even more) homes to look after.
oh sorry I forgot you can all claim expenses for that sort of thing.
- Chris, Bedford UK, 23/09/2009 19:37
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Short answer: No
Long answer: When many Latin American countries went for 'Dollarisation' - adopting the US Dollar for their currency - they suffered the most when the economic crises hit the region in the late 90s. The British Pound, even having suffered during this recession, is still a stronger currency than most. McShane can wish all he likes about joining the Euro, but not without a referendum first. And not on your nelly either.
- Mrmugambo, London, England, 23/09/2009 19:37
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Oh,yes,join the merry Eurozone where everything is lovely....get a life.There are problems,serious problems with alot of the economys in the Eurozone that have yet to come to a head.
Some countries are doing just fine but some are in deep doo-doo.Eastern Europe has borrowed $1.7 trillion...put that in perspective...US sub prime loses are estimated at $400 million.Those countries borrowed from Eurozone banks,so is the Eurozone safe......not to me at present.
- Grumpy As Hell, wimbledon, 23/09/2009 19:37
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