The EU's greatest achievement


"The EU's greatest achievement is the Euro", said Michael Portillo on the BBC's This Week programme last Thursday.

No, Michael, it isn't. It is the EU's worst mistake.

As Yanis Varoufakis entertainingly explains in an interesting lecture published in the Australian Journal of Political Economy, the creation of the Euro led inexorably to the buildup of unsustainable debt - both private and public - in the Eurozone periphery countries:
The problem is that creating a monetary union is a little bit like invading Russia. At first, there is rapid progress, as the French troops, Napoleon or the Wehrmacht found when they stormed the country, taking large tracts of land without much resistance. Then slowly, as the heavy winter sets in, the Cossacks and the Russian partisans start blowing up your convoys. Eventually you end up with blood on the snow and a hasty retreat. Recall the 1920s – after the Great War the Gold standard had created ‘the Roaring 20s’. Similarly, when Mexico and Argentina pegged their currency one to one on the US dollar, there was a flood of capital coming from the major surplus country - the United States - into Mexico and Argentina, creating the feeling of triumph, growth and investment. It was exactly the same in the Eurozone.
Every one of the examples Varoufakis gives ended in disaster. Blood on the snow, and a hasty retreat. A debt deflationary collapse, and a protracted depression. A sudden stop, followed by debt default and painful restructuring. The European dimension of the 2007-8 financial crisis and the Eurozone sovereign debt crisis (which are the same crisis, really), followed by the Great European Depression.

The inevitable response of the European elite to the problems caused by the Euro is to force economic convergence by fair means or foul, and to call for "deeper integration". But as the Eurozone contracts down in an attempt to heal its wounds, causing suffering across the periphery and rising anger among austerity-hit populations, it becomes ever more inward-looking and defensive. And the growing dominance of the Eurozone in EU policymaking - inevitable, because the focus of European elites is on repairing the damage caused by the Euro crisis - alienates countries that are not members of the Euro. The largest of these, by far, is the United Kingdom.

I don't think the European elites realise how hurt and angry many people in the UK feel about their behaviour. But I have become aware of it in the debate preceding the UK referendum on EU membership. There is a shortage of rational discussion, and many of the comments are personal and nasty. Emotion, not sense, is ruling the roost.

But why are people so angry, and so despairing? There are many reasons, but a common theme appears to be the feeling that Britain is losing control of its own affairs. "Take Control" is the slogan of the Leave campaign. It resonates with many.

My own father has been a lifelong supporter of the European Community. In 1975 he campaigned for the UK to remain in what was then known as the European Economic Community (EEC). But now, he intends to vote to leave.

I asked him why. "It's the Euro," he said. "Britain will never join the Euro. But unless we do, we will be sidelined in European policymaking. Our voice will not be heard, because the Eurozone will dominate. We will inevitably have policies imposed on us that we do not want. We have no choice but to leave if we wish to retain any real control of our own affairs."

I have heard this now from many people. A belief that democratic policymaking - flawed though it is - is being slowly replaced with decisions by an unelected, bureaucratic elite which is only interested in furthering the creation of a United States of Europe against the wishes of the common people. And a growing sense that the UK's voice in Europe is fading as the Eurozone becomes ever more important.

And yet, when I attended the European Summit last week, this was not what I heard. Much of the conversation at the summit was about Brexit, of course. The participants seemed genuinely bemused by it, and distressed that the UK might choose to leave.

Kristalina Georgieva of Bulgaria observed that the UK's voice was - and still is - extremely significant. The UK has often been crucial in forcing through necessary reforms. If it leaves, the UK will be sorely missed.

But of course, she would say that. The UK was instrumental in obtaining the commitment to EU enlargement that enabled her country to join. And not just her country, but others - including the Czech Republic, which hosted the European Summit.

Prague, the capital of the Czech Republic, is a wonderful place. It is, in many respects, the historic heart of Europe. And it is a lively, modern, cosmopolitan European city. Yet when I was young, the Czech Republic was behind the monstrosity known as the Iron Curtain, a pariah country uncomfortably allied to the Cold War "enemy" - the USSR. Even after the dissolution of the USSR in 1991, the Czech Republic, like other former Iron Curtain countries, stayed out in the cold. It separated bloodlessly from Slovakia in 1993 and suffered economic distress in the Russian crisis of 1998. It did not join the EU until 2004. It could not, because the EU did not until then agree to admit the former Iron Curtain countries.

After the creation of the Euro in 1999, many in Western Europe wanted deeper integration of the existing members around the single currency, rather than widening of the EU to admit (among others) former Iron Curtain countries. The UK at that time was under considerable pressure to join the Euro. But the UK never wanted a deeply integrated EU, and it did not want to join the Euro. So it fought for widening, not deepening, of the union.

Eventually, the EU agreed. Ten countries, most of them former Iron Curtain countries, joined the EU in 2004. Two more - Bulgaria and Romania - followed in 2007. The EU today encompasses almost the whole of Europe from the Atlantic Ocean to the border of the old Russian empire.* Even some countries (Ukraine, Moldova) that were historically part of the Russian empire have asked to join.

This, not the Euro, is the EU's greatest achievement. Admitting the former Iron Curtain countries to the EU has brought together the sundered parts of Europe and helped to heal the deep wounds left by the Cold War. The UK should be proud of its part in this remarkable example of cooperation for a far-reaching common good.

But sadly, many in the UK have forgotten about this. Enlargement of the EU resulted in large migration flows from East to West, flows for which the EU, with its open borders and commitment to unrestricted movement of people, was ill-prepared. And the years of stagnation and austerity since the financial crisis have caused growing worry about immigration. Migrants from the EU are blamed for falling wages, insufficient school places, failures in the health service, choked transport systems, shortage of housing. Most of this is unfair - the evidence is that migrants have little adverse effect on any of these, and their contribution is a net benefit to the UK. But it is easier to blame "them" than admit that the real problem is the UK government's history of under-investment and its determination to impose on its population the cost of the banking crisis.

More recently, terrorist threats and the EU's abject failure to deal adequately with massive flows of refugees from the turmoil in the Middle East have increased the fear factor. Now, there is a loud clamour for the borders to be closed and immigration severely restricted.

Few would disagree that large unstable flows of people are a considerable problem. The Schengen agreement which ensures open borders is already effectively suspended in many EU countries due to intolerable pressure on domestic resources from refugees and migrants. The UK, which is not a signatory to Schengen, wants to be able to restrict the right of people from other EU countries to come to its country to live and work. One of the "four freedoms" of the EU, freedom of movement of people, is under attack.

Another of the "four freedoms", the free movement of capital, is also under attack. Large uncontrolled flows of capital are like floods. They sweep away everything in their path, leaving disaster in their wake. The EU was just as unprepared for the enormous capital movements arising from the creation of the Euro and the financial crisis as it was for the enormous migration flows arising from EU enlargement and the refugee crisis. Two countries in the EU and one in EFTA have had to impose outright capital controls to stop capital flight. More subtly, macroprudential measures imposed on banks since the financial crisis amount to a type of capital control, discouraging cross-border lending funded by short-term cross-border wholesale borrowing. Balkanisation of the banking system has made it safer, but it has also made it less effective. The protracted depression in part of the Eurozone is to a considerable extent due to severe restriction of bank lending.

Restriction of capital flows and the migration of people both have consequences for trade. For there to be trade at all, capital must flow: capital controls severely interfere with cross-border trade, as Iceland could tell you. And where capital flows, people inevitably follow, since capital investment generates jobs, and people generally migrate in search of work. Production and trade are both enhanced by the free movement of capital and people.

Restricting the movement of capital restricts both trade and migration: but the restriction operates in the other direction too. Where trade is restricted, capital will not be invested: and when people are prevented from migrating to certain places, those places eventually suffer investment failure as capital moves to places with an unrestricted supply of people to fill the jobs created. At its most extreme, restricting the movement of capital, people goods and services is autarky: and as North Korea shows, autarky impoverishes.

So there is a conundrum. The EU's "four freedoms" are theoretically beneficial to the peoples of Europe. But we now know that complete freedom of movement of capital and people can be destructive. How should the EU re-frame its "freedoms" to ensure that member states can protect themselves when necessary, while benefiting in general from those freedoms? The "safety brake" in David Cameron's "deal" is nowhere near adequate: it is not yet ratified, and since it would only apply to the UK it seems likely that it would be challenged on legal grounds.

"Freedom" is not really freedom if its effects are destructive to others. The "free movement" of capital, people, goods and services must have limits. If it remains in the EU, the UK would have an important role to play in defining what those limits are and how they would apply in practice.

And the UK has an even more important role to play. A two-speed EU in which non-Euro members are systematically sidelined cannot be sustainable. The UK, as the second largest economy in Europe and by far the largest of the non-Euro countries, should lead the reconstitution of the EU into a multi-currency area in which countries have the right to use their own currency or the Euro as they decide. A sovereign bankruptcy procedure is needed, along with a formal exit procedure for the Euro: the UK, which has been friendly to Greece and other distressed countries throughout the crisis, is well placed to campaign for these. And going further, the UK can help the EU to decide how best to reform the Euro, retaining its important role as an international trade currency while dismantling the straitjacket that it creates for domestic users and for the ECB.

Further integration of the EU is not the right way forward. Ultimately, EU member states will break the bonds that further integration creates, since in the absence of any willingness to share risks and losses, they are far too restrictive. The EU needs to be looser, not tighter: wider, not deeper. It is not yet too late to turn around this particular Titanic. Rather than launching a solo lifeboat, the UK should take the helm.

I hope and pray that the people of Britain recognise the vital role that the UK can have in the essential reforms that the EU must undergo if it is to survive, and vote to Remain. I shall do so.


Image: Prague, photographed by me from the Lobkowicz Castle. 

* There are some exceptions, of course: Switzerland, Norway, Liechtenstein and Iceland have chosen not to join the EU. And the Balkan states Albania, Serbia, Montenegro, FYR Macedonia, Bosnia and Kosovo have not yet been accepted as members, though most of them are candidate countries. The most controversial candidate is Turkey, an Islamic country which borders both Greece and Syria and has an ongoing dispute with EU member Cyprus over the status of the north part of the island of Cyprus. It remains to be seen whether the EU's need of Turkey's assistance in controlling the flow of refugees and migrants will be sufficient for it to be admitted as a member. Consistent with its historic support of enlargement, the UK is supporting Turkey's application. However, this might change if the UK government suffered a change of management after a Leave vote.


  1. "The EU needs to be looser, not tighter: wider, not deeper. It is not yet too late to turn around this particular Titanic. Rather than launching a solo lifeboat, the UK should take the helm"

    Utterly impossible. The EZ countries won't allow it. They prefer the iceberg. Brexit in fact is the only way for the UK to establish a leading position on looser/wider EU arrangements

  2. They are not allowed to take the helm. The path is written into treaties that *cannot* be changed without all captains agreeing to change. Lits if these captains would rather drown than admit defeat.

    Best the UK can do is jump into a tugboat and try to drag the Titantic away from its inevitable fate.

    1. That would do. But that isn't what leaving the EU would be.

    2. It is.

      There is no mechanism to stay on board and simultaneously take a different path. The helm is stuck on neoliberal autopilot.
      Your lifeboat implies leaving it to crash. My tugboat implies leaving to rescue it.

    3. By neoliberal you really mean socialist I surmise...

  3. "the UK, which has been friendly to Greece and other distressed countries throughout the crisis, is well placed to campaign for these. And going further, the UK can help the EU to decide how best to reform the Euro..."

    The UK, a friend of Greece? You have got to be joking!

    First of all, the financial services industry in the UK (and the US) has of course been instrumental in creating the financial problems which aggravated Greece's financial position and the Eurocrisis. Starting with advice on how best to hide Greece's deficits (Goldman Sachs) to excessive betting with CDS on a default of Greece. With a loud and sustained chorus for a default in the press, the UK has been at the forefront of rubbishing the Euro and predicting Greece's exit from the Euro, contemptously disregarding the will of the Greek people.

    The UK's government has been painstakingly avoiding any criticism of excessive unemployment in the periphery, but to the contrary applied the same austerity policy in slightly milder form at home. Whenever the UK could dodge out of a responsibility (for providing loans to Greece, for example)the UK skillfully dodged out of any financial commitment. SAme with the refugees landing in Greece. None have arrived in the UK. None of the UK's problem, as they are not part of Schengen agreement!

    I think your suggestion (for the UK to help reform the Euro) will therefore probably be met with the contempt it deserves.

  4. 1) Last time I looked, Goldman Sachs was a US bank.

    2) Rubbishing the Euro is a good thing. It is a rubbish creation with highly destructive consequences. The Greek people have chosen not to leave it for reasons connected with their history and their identity, but that doesn't change the nature of the Euro.

    3) The UK has been persistently critical of the Fiscal Compact applied to Greece and other countries. It did not agree to it and has not implemented it. At present, the UK exceeds the Maastricht Treaty limits for both debt/gdp and deficit by a considerable margin, and (like Greece) is officially in the Excessive Deficit procedure. In 2015, the European Commission came up with a long list of reforms the UK must make to fix its deficit. HMT's response was exceedingly robust, taking the form of "we aren't in the Euro, we didn't sign up to your awful Fiscal Compact, and there is absolutely nothing you can do to force us to comply with your ridiculous demands". More power to them for saying that. If the UK were in the Euro, it would be doing a whole lot more austerity than it has ever done under Osborne.

    4) As the loans to Greece were solely for the purpose of paying its creditors, who were originally French and German banks and are now France and Germany (directly or indirectly), the UK is entirely right not to contribute. I would like to see the UK do more to help Greece to default on its debts, which is its right. But providing money to go straight to creditors - nah.

    5) The EU's abject failure to deal with the refugee crisis is a disgrace. I don't particularly like the UK's behaviour on this. But the UK's disappointing response does not mean it is unfriendly to Greece. To the contrary.

    6) I think you are wrong. On everything.

  5. "... the UK is entirely right not to contribute. I would like to see the UK do more to help Greece to default on its debts, which is its right. But providing money to go straight to creditors - nah. "

    Of course British Banks had exposure to Greece as well, although not as much as French and German banks. And, had the banks (which incidentally took a write-off in the restructuring of the loans) not been rescued, the whole banking system would have been in another crisis. Including the UK banking sector through contagion.

    However, the UK did not take any responsibility in financing that restructuring, neither did the UK government advocate a default.

    Of course the UK is part of the EU deficit procedure, and the EU granted the UK an extension of its timetable to get deficit to 3% of GDP as it would with other countries. Nothing to do with Greece.

    The Troika was responsible for the measures to reduce the deficit in Greece, and the UK government has certainly not criticised the Troika.

    Whereas you might think it is a good idea to rubbish the Euro, and argue for default, the Greeks do not think so and elected a government which does not think so either. Neither does the UK government.

    The UK government stands by on the sidelines, avoids as much as possible any responsibility for financing any assistance to Greece, and therefore piggy-backs on the responsibilities and commitments of the rest of the Eurozone.

    To pretend that this avoidance of responsibility by the UK government is an act of friendship on behalf of Greece is of course fanciful.

    1. French and German banks were the principal lenders to Greece. British banks were much less involved. But all the foreign banks had pretty much dumped their holdings by the time of the PSI. The cost of the PSI was principally borne by Greek banks and Greek pension funds, both of which were bailed out by the Greek state. The 2012 bailout includes more Greek sovereign borrowing specifically for this purpose.

      In what way is a non-Euro country responsible for the carnage caused by the Euro? Britain had no say in how Greece's problems should be handled. You say Brtain "avoided responsibility", but it never had any responsibility for Greece. The U.K. did argue against Grexit.

      I am entitled to hold a negative view of the Euro, whatever the decision of the people of other counties.

      The point about the UK's deficit is to counter your claim that the UK applied Troika-style austerity. It did not. Not by a long way.

      I think you will find my views on Greek default are similar to those of Yanis Varoufakis. Who was, of course, the finance minister of an elected government.

      I note you completely avoid my point that Greek bailout money goes straight to its creditors. It is Ponzi lending to help France and Germany avoid the real costs of bailing out their banks. The right path for Greece is debt default and restructuring. The bailout model is completely toxic and the U.K. is right not to participate.

      "The UK" - not its government - has generally been friendly to Greece throughout the crisis.

    2. "I note you completely avoid my point that Greek bailout money goes straight to its creditors."

      I have not commented on it because it is nonsense. The Greek state was unable to finance its deficit or other liabilities in 2010 from market borrowing. So finance was provided by the Troika. Otherwise the Greek state would have been bust, which at the time nobody wanted, neither the Greeks, nor the Europeans.

      So that allowed bondholders (mainly French and German banks) to trade out of their positions - losing money in the process, selling bonds below par value. So no money went "straight to creditors". Had they held on until 2012 when Greek debt was restructured (when money did go to the creditors), they would have lost about Euro 100bn then (about a quarter of Greek debt at the time and 50% of par value of bonds).

      Varoufakis might have at one stage advocated defaulting in 2010, but in 2015 when he was Finance Minister he diligently paid up on Greek liabilities. He certainly did not threathen or advocate default, but tried to come to a negotiated restructuring.

      Now should the UK have a responsiblity for Greece? Well, roughly about as much money the UK pays net into the EU budget, Greece gets out of the EU budget. The UK should therefore have a view on how that money is best spent. Whether Greece is in the Euro or not is irrelevant.

      If the EU funding is wasted by leaving a quarter of Greece's population unemployed for years on end, which increases immigration to the UK from Greece (undoubtedly) the UK should of course show some responsibility.

    3. No, Matt, it is not nonsense. The Eurozone did not have to bail out French and German banks by propping up the Greek state. It was moral hazard of the worst kind, and it is still being perpetuated. Every time the Eurozone creditors lend Greece more, they are bailing out their banks again, because the losses that those banks SHOULD have taken ended up on the balance sheets of sovereigns in the form of loans to Greece, either directly (bilateral loans) or indirectly (via the EFSF, ESM and ECB). Debt restructuring should have been done in 2010 and the losses imposed on the banks. And if Germany and France chose to bail out those banks, they should have borne the losses themselves rather than dumping them on Greece. I have been saying this now for six years and I have not changed my view.

      Negotiated restructuring is of course far preferable to unilateral default, but it is still default. Varoufakis tried to negotiate an agreed default. The IMF is now trying to negotiate an agreed default.

      The money the UK pays into the EU budget has nothing whatsoever to do with the money that Greece gets out of it. UK money is not hypothecated for Greece. Nor is the UK in any way responsible for the Troika policies that have caused high unemployment in Greece. As I have already pointed out, the UK has no voice in the Troika, since it is not a member of the Eurozone. It is frankly ridiculous 1) to suggest that the UK alone pays Greece 2) to suggest that the UK should bear responsibility for the consequences of policies in which it has no say.

    4. Ok, so the Troika used the pressure of its loans to Greece to allow it to implement macro-economic reform in Greece. Minor concessions (longer maturity dates/lower interest rates) are made in exchange for economic reform in Greece. And banks got rescued as well.

      Greece could at any stage walk away, but chose to implement the Troika reform programme. So Euro is live and well, the heavy internal adjustment worked, contrary what you have been saying for many years. Loads of jobs are being created in the last year in Greece, for example.

      Now, of course UK does not directly pay into Greece budget, but should have some interest/responsibility on how EU funding is used or wasted. As the second biggest payer into the EU budget, the UK should of course throw its weight around a bit more to ensure that Southern periphery unemployment in the EU is brought down.

      As I said, it would help to reduce inward migration to the UK, which is an aim of the UK government.

    5. 1) The internal adjustment has not worked. Nor will it, until the debt is restructured. This is the message that Varoufakis tried to give, and that the IMF is now trying to give. Whether the IMF will succeed where Varoufakis failed remains to be seen. But until the debt is restructured, Greece will not recover.

      2) The conclusion of this post was that the UK should take a more active role in reforming the EU. So thank you for - finally - agreeing with me.

    6. Yes, Frances,
      You are talking nonsense.

    7. Anonymous, is that really the best you can do? Sad.

  6. The EU is institutionally incapable of reform. Look at Cameron's albeit weak attempts to "reform" our relationship with the EU. From their point of view the mere fact that a major contributor country like the UK was considering leaving should have been sufficient impetus for them to shut up and start listening. Did they? Did they buggery. They gave him a few crumbs which are already allowable under existing treaties, patted him on the head and sent him on his way. Because of their hauteur and instransigence the whole rotten edifice is going to fall down around their ears. Did you know that if the EU applied to join itself it would be rejected on the grounds of being insufficiently democratic. That tells you all you need to know. Consider, there are 5 presidents of the EU and NONE of them are elected.

  7. " the real problem is the UK government's history of under-investment "

    Whilst I agree with this, the migrant workers coming here from clearly do not see the UK and under-invested. They are being pushed by a (relative) long term lack of investment in their country of origin. So the investment really needs to go in the other direction otherwise it is a divergent force. Free movement of labour between countries might work between countries of similar economic performance but 50% youth unemployment does not give labour any "freedom".

    1. Danny, the pressure on services here is due to under-investment. The UK's record of private and public sector investment is one of the worst in Europe.

      Having said that, the "brain drain" from poorer EU countries is incredibly harmful TO THEM. The long-term outlook for a country that is constantly losing its young and skilled is very poor. So yes, I completely agree that the "push" factors driving migration must be addressed too. The level of youth unemployment in some EU countries is completely unacceptable, and migration is not a long-term solution.

  8. In 2005, the French had a refendum campaign on the so-called "European constitution". Also the question was different, the campaign and the arguments exchanged were very similar to what I'm hearing today from the UK.
    The French voted no by 55%. Sarkozy decided to accept the Lisbon Treaty nonetheless. In 2012, Hollande was elected president on a clear mandate to change the UE. He was inaugurated on the 15th May of 2012. The same afternoon, he was in Berlin where Merkel said no to everything. He didn't try anything else during his mandate. On the contrary he accepted everything coming from Berlin, Bruxelles and Francfort - be it the punitive treatment of Greece or the new labor law. The great result of this is that he has now less than 15% approval rate (which I don't care) and he let Marine Le Pen appears like a sort of last resort for the distraught working class (which I do care).
    So my questions to my British friends is this: what makes you so sure you can succeed where France failed? (It's an honest question, not a nag) and what if the remain wins and nothing change?

    1. "On the contrary he accepted everything coming from Berlin, Bruxelles and Francfort - be it the punitive treatment of Greece or the new labor law."

      Paranoic nonsense. Hollande had to give in to better arguments. The fact thet French young people are demonstrating for the right to remain unemployed or in precarious jobs is, of course, no great help.

    2. Yes anonymous, France and its 11% of unemployed will be better of once they have the same labour laws who brough Spain's unemployment at 25%. Excellent argument, thank you. However, my question was : why and how a British "yes" could force the UE to reform itself while a French (and Irih, and Greek, etc...) "no" failed?

  9. Varoufakis’s “invading Russia” analogy is hot air. One of the main reasons for Greece’s problems is that Greeks awarded themselves a 50% pay increase in the first decade of the Euro’s existence, while Germans awarded themselves a 10% increase. That Greece has become uncompetitive relative to Germany is no big surprise.

    I skimmed thru Varoufakis’s article, and I’ve no intention of reading it properly because I regard him as a windbag. I couldn’t see any reference to the above difference in pay. But we can’t expect Varoufakis, a Greek, to admit that Greeks themselves are at least partially to blame for their plight. I also couldn’t find any reference to the fact that Greeks fiddled the books so as to get into the EZ.

    1. "Greeks fiddled the books"

      The irony here is that a select few politicians involved in the deal plus Goldman Sachs bankers (and likely some ex-Goldman bankers in the ecb and commission) would have been aware of the dodgy deal while the Greek people and most Greek politicians would have been kept in the dark...... The fact is the numbers were fudged for a few countries and the people orchestrating it were investment bankers in the US plus high ranking EU Eurocrats....... This goes to the heart of why the EU is so dysfunctional.

  10. I recommend complimenting the primarily economic arguments in this article with the political arguments presented in this enormously powerful essay by Ambrose Evans-Pritchard:

    It pains that European countries are unable to produce political elites who could carry on debates like Washington & Adams & Hamilton on one hand (for a more perfect union) and Jefferson & Madison on the other (for drastically curtailing federal power). Today, it seems only natural that Americans opted for independence and formed a nation with a strong federal government. After all, Americans did not have different cultures like Europe does and they had a common purpose because, after all, they were Americans.

    Nothing is further from the historical truth. The 13 colonies were rather like 13 different countries and the then cultural differences between New England and the South beat today's cultural differences between Germany and Greece by far. Only 12 of the 13 states voted for independence (NY abstained) and the cumbersome ratification of the constitution (that NY eventually approved by a small margin was a sheer miracle owing to the genius of Hamilton) made the approval of the Lisbon Treaty look like a piece of cake.

    As much as I doubt that the EU will ever mutate into a US of Europe with a strong federal government, the odds for that happening are significantly greater than the odds were, around 1790, that there would ever be a USA with a strong federal government raising federal taxes in large amounts.

    AEP is making the powerful arguments of the anti-Federalists. He would get Jefferson's praise for that. What we are painfully lacking today is a Hamilton who could project the narrative of a more closer European union. Incidentally, Hamilton won no popularity or democratic prizes for making his invaluable contribution for a more closer union. Actually, he rather undemocratically railroaded the new nation down to a common destiny. Before the masses (and many of his political opponents) realized, Hamilton had established the sort of irreversible nation-building instruments/institutions which made a reversal, short of a revolution, nearly impossible (debt mutualization, federal taxes, central banking, etc.). Pretty much the way EU elites have forced decisions down the throats of the citizens of nation states.

    My gut tells me that it would be economically silly for the UK to brexit. My heart tells me that it would be terribly sad for the EU if it lost the UK as a, arguably the only, force of change from within. My brain tells me that, either way, the Earth will keep turning and the UK will continue to exist.

    If PM Cameron were worth his salt, he would tomorrow have an essay in the Telegraph taking issue with every single argument which AEP has made in his essay.

    1. "If PM Cameron were worth his salt, he would tomorrow have an essay in the Telegraph taking issue with every single argument which AEP has made in his essay."

      And that would not be hard since AEP is a prime purveyor of nonsense.

    2. The Americans *had* to form a union. It was "hang together or hang separately"

      No such dynamic unites Europeans. Hence the current tussle over national versus EU. A tussle that I think can only get worse.

  11. I find you in this post admirably idealist, Frances, but fatally idealist. Your reasons are subtle, but I don't see Britons balancing these types of reason: GB playing the role of championship of the common sense, whereas the rest of EZ applaud. This is not probable. And you know. Yourself have admirably describe the impossibility of this solution in your previous post. The last art. Of AE-P says a lot bout that.
    Nowadays, I admire your argument, in spite that the world is not run by so brilliant and generous ideas. Bonne chance. I'll follow the match from this country absorbed by the black Hole thanks to the EU and the Euro.

  12. I'm going to join the howling chorus of disapproval. I can't believe at this late stage you can be so sanguine about the reform prospects of the EU, and so ideological about the benefits of trade and the operation of markets. In addition to the capital-flow crisis and the immigration crisis, lets add the growing agricultural crisis. Vast tracts of more-or-less sustainable family agriculture is going to the wall right now, unable to compete with a completely insane industrial feedlot system. This human, animal and environmental disaster would have been unthinkable in any sovereign European country, but voila, the people no longer being sovereign, the producers and financiers are free to get on with it.

    These crises have similar features. In each case they're the direct predictable, predicted, and wished-for-by-some outcome of European policies. Europe will minimise and outright deny it's role in their genesis, while proposing lame too-late solutions that serve mainly to further hoover up sovereignty. The believers have sacrificed whole populations and economies to their ideal. What on earth makes you think a bit of rational argument will have any purchase?

    This dangerous madness will continue until the wheels completely fall off. A "leave" vote in Britain would be a start, but will provoke a "now we can integrate like we always intended" backlash from the believers. But you have to start somewhere.

    1. I see your agricultural crisis and raise you the Common Fisheries Policy. A tragedy of the commons of the worst kind.

      I sympathise, Simon, but I still think it would be better to stay in and try to reform the monstrosity than leave it. I was encouraged by what I heard in Prague. They know they have to reform.

    2. If they really felt they were fighting for their lives I'm sure they might come up with something better, but they're not their yet. I was just listening to Enrico Letta on the radio this morning (France Inter, round 8h30), explaining why the Brexit referendum was a product of British specificities, no need to put the same question to continentals! Rather, he proposed, a referendum on the form democratic representation at the EU level. A referendum on the direct election of the president of the commission.

      These characters would obviously like democratic legitimacy for their creation, but as a bolt-on extra. This when 61% of French would vote to leave if they had the opportunity, which they never will. Economists have a optimal-currency-area theories. Why do we hear nothing about optimal-democracy-areas?

      If we waved the magic wand and made Europe genuinely democratic, can you imagine for a second that those institutions could reconcile proud peoples with exactly opposite experiences of the last 20 years? The ones owed tons of money and the others having suffered 'destabilising capital inflows'.

      Ok I'm raving. Everyone who hasn't already should read AEP carefully and slowly. Thank you for your reply, and your terrific, thoughtful blog.

    3. American unification, a model for the believers, prepared the ground for the worst civil war ever. Why on earth would European unification not lead to a similar outcome, quicker, given the already considerable tensions. Good fences make good neighbours. We need countries back.

  13. The UK is invariably one of the most active Member State in the EU affairs at all levels and on almost any issue, always enriching the debate with expert opinions even if critical.

  14. The Eu/Ex experience has opened my eyes into the true nature of capitalism.
    (Its a centralizing highly concentrated and directed whirlwind of destruction)

    For that at least I am grateful.

    National banking units of scarcity management have also revealed themselves as components of the darkness, having lead us on this long garden path to dark possibly life shortening absurdity since the 1600s.

    I sincerely hope some appointed alterboys will not start painting post office boxed green again in the wake of the collapse of the present antihumanist experiment.

    That will be too much for many to stomach.
    Let's have real nationalism (Distribution) or none at all.

    I hope to see the likes of Sutherland and his crew of human farmers smashed and broken on a torture wheel but I fear it's not very likely.
    The scouring will continue until it can go no further.
    Then the emptiness remaining will become more apparent.

  15. Crotty although a mistaken Georgist was correct.
    There can be no question

    I want to see the EU smashed
    Whatever the cost I want to see it in flames.
    Burn burn the demonic house down.

  16. The UK has supported Turkey's application for wider political reasons, but Turkey will never get free movement. It requires all member states to agree, and France and Austria are both committed to referendums on the issue and there are many eastern member states that are implacably opposed, This is a total red herring. On the Euro and Greece: no one forced Greece to join and you can hardly blame the EU for the financial lies its Government told nor its inability to collect basic taxes. I fear this is another example of blaming someone else which is so prevalent e.g far right republicans blame Washington for all their woes, and Scots nats to do the same re Westminster.

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  18. James, your comment has been removed because it does not conform to the comments policy of this blog. You will find the policy on the "About this blog" page.

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  20. A reformed EU isnt on the ballot paper, and id suggest it wont be unless the UK voted Leave on Thursday.

    The EU will not reform unless we vote Out. And not for a moment do i believe even were we to get 55% voting leave, do i think we will be able to leave. We will be sent straight back to the ballot boxes again with a reformed deal (or at least a pretense of a reformed deal).

  21. Sorry but euro is no more the problem than the gun is in the hand of the murderer. People, country ARE responsible fort their debt and nothing else.


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