Thursday, September 29, 2011

This is no time to give up on the euro

by Oliver Kamm

New Statesman

September 29, 2011

All the signs of the eurozone crisis are that quite soon there will be just two currencies still in operation in western and central Europe — the euro and sterling. But Labour hasn’t twigged.

British political divisions on Europe have, for half a century, run long and deep. Opinion within the coalition parties, however, is coalescing around a hardline position as the eurozone crisis intensifies. David Cameron muses that powers ceded to Brussels should be reclaimed. Nick Clegg declares that, had Britain adopted his party's policy a decade ago and joined the euro, it would have been a "huge, huge error". Yet Labour under Ed Miliband and Ed Balls appears to have little to say on Europe, other than to insinuate that Euroscepticism is a consensus view.

Labour's reticence is economically misguided and politically pusillanimous. There were design flaws in the euro that were predictable and need to be remedied rapidly: that much is clear. Yet the notion that the necessary reforms will lead to a European superstate and that Britain should redefine its constitutional position with the EU is absurd and damaging. There are big economic costs to the Conservatives' dogmatism and the Lib Dems' failure to restrain it.

The crisis of the euro is severe but there is no reason that it should be terminal. Right-wing pundits who see in it the collapse of the integrationist scheme are, like the old militant seers of the collapse of capitalism, letting ideology run ahead of reason. Monetary union is not the cause of the crisis. Done properly, it may help insulate member states from disruptive volatility in the international capital markets.


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