Saturday, 23 September 2017

Battered Penguin - The Lost Continent by Gavin Hewitt

(Yes, I know it is only a Penguin substitute - Hodder, to be precise)

I am still reeling from the strange experience of deciding - somewhat from a sense of duty - to read a book about the euro and finding myself absolutely glued by it from beginning to end. The book's author, Gavin Hewitt, who was BBC correspondent in Brussels, tells the story of an elite so intent on realising a dream of unity that they ended up threatening the social fabric of a continent, ruining the lives of a generation and stripping nations of sovereignty and true democracy.

The euro emerged, according to Hewitt, from German unification, (although monetary union had been dreamt of long before):

"The German chancellor understood a price would have to be paid for German reunification ... by Berlin committing to a closer European Union", Hewitt tells us, continuing, "There was already a blueprint for the next stage of European integration. It was economic and monetary union with a shared currency."

In 1991, Mitterrand and Kohl committed themselves to this at Maastricht, ignoring the doubts of the Bundesbank about "whether a monetary union with a European central bank setting interest rates could survive."

The bank had major questions about whether setting up a monetary union without political union could work. But, while there were warnings not just about the differences between economies but between cultures, while political union wasn't feasible - because the people of Europe had no desire for it, "European statesman", according to Hewitt, "brushed such objections away".  Herman van Rompuy, then president of the European Council, admitted that:

"The euro was not created because there was an economic necessity, not at all. The euro was created as a major step in European integration".

I am not suggesting it was intentional, but what actually happened as a result of Europe's leaders pursuing their abstract dream, their desire for "integration" at any cost - (and what is it, apart from the amassing of power for certain people and institutions in Brussels that is so great about this concept; no one ever explains this with clarity - and spare me the argument that union has stopped European wars: which ones, where?) - was that membership of the eurozone resulted in individual nations being bullied and forced towards unasked for political union. As their economies failed and outside bodies forced them into bailout, the price became their own economic sovereignty.

The general consensus, of course, is to say that countries like Greece and Spain and Ireland overspent and behaved stupidly and had to suffer the consequences. This is the German line, but, as Hewitt tells it, "from the beginning of monetary union there had been deception. Figures were massaged to allow countries like Greece to join; later, rules were bent to allow countries like France and Germany to run up large deficits. Objections were ignored. Critics ... were dismissed as being anti-European."

Furthermore, despite the moralistic attitude of Merkel and her government, ("Member states face many years of work to atone for past sins", she declared in 2011, talking about countries other than her own), Germany did very well indeed out of those so-called "sins". It is surely no coincidence that in 2010, "just as Europe was struggling with its debt crisis, the value of German exports rose by nearly 20 per cent in a year." While an argument could be made that government and business are separate, the success of Merkel's government depended on the country's role as an economic powerhouse, and that depended on the shovelling of money and goods to other members of the eurozone, who would later be ruined by this very process.

German banks were only too willing to lend:

"[In Ireland] they invested over 200 billion euros, fuelling the appetites of the Irish developers. The governor of the Central Bank of Ireland, Patrick Honohan, said afterwards that foreign borrowing had financed the bubble".

In Spain:

"German officials who later would demand austerity had remained silent when German banks were lending the Spanish money; as they grew richer, the Spanish were importing more and more German luxury goods. The American economist, Adam Posen, said, 'It was as if Germany had been running a scheme in its own interest'."

German business - and by extension the German government, which profited in popularity from business's success - have the same responsibility, in my view, as the drug dealer who does not use but happily supplies the addict. Atoning for sins, if we are to deal in such language, is something that all sides should be involved in.

The economist Luis Garicano observed that "the euro has converted developed countries into developing ones", the Nobel economics laureate Paul Krugmann said Europe's leaders engaged in "magical thinking" about the euro, continuing, "the real story behind the euro-mess lies not in the profligacy of politicians but in the arrogance of elites, specifically the policy elites who pushed Europe into adopting a single currency well before the continent was ready for such a experiment". Europe's elite ploughed on regardless, "caught up in the romance of their ambition".  They "believed that destiny lay in building an ever-closer European Union" and were prepared to ditch economic sanity in the pursuit of that. While "on 3 May 1998, the European Commission judged that Greece had not met the criteria for joining ... the following year, the officials dropped their objections" despite the fact that, for instance, "the Greek state railway .. accounts were impenetrable. The suspicion was that there were more employees than passengers. A former minister, Stefanos Manos, said publicly at the time that it would be cheaper to send everyone by taxi." This was an irresponsibile decision on the part of the European Commission - and it ended up causing damage to the lives of many, many Greeks.

In short, Hewitt's contention is that, "Europe's leaders had embarked on the giant undertaking [monetary union] ... knowing that it was flawed." As one economist quoted by Hewitt said, the currency "offered every facility to a country to get into trouble"". When this happened, rather than admitting the mistake, Europe fought "to save its currency and, in its determination to protect its dream, was prepared to compromise democracy." Austerity was forced on countries - almost exclusively at the insistence of Merkel and Germany, (who were very ready to take the moral high ground and cast themselves as the exemplary workers of Europe, a concept, if ever believable, now thoroughly undermined by the diesel scandal in the German car industry). Leaving aside questions about how moral or high the moral high ground actually was that Merkel and Germany appeared to think they were occupying as they handed out their medicine, as George Soros pointed out, Germany's remedy was "the wrong remedy; you cannot reduce the debt burden by shrinking the economy, only by growing your way out of it."

In the process of protecting "its dream", unelected officials in Brussels, as Hewitt describes in horrifying, enraging detail, trapped and bullied the democratically elected governments of Ireland, Spain, Greece, Cyprus and Portugal, finally forcing each one to give up the right to control their own economies. This was done almost entirely at the behest of Merkel's goverment - Sarkozy tried to restrain her to some extent; her mentor Kohl reportedly said of her insistence on extreme austerity vis a vis the Greeks, "'She is ruining my Europe' … He wanted her to show solidarity and … to stick with the Greeks, 'even if it costs us something.'" But time and again Merkel's flawed judgment won out, a sobering thought, when contemplating the almost inevitable result of the coming German election.

Meanwhile, the struggle to save the euro and by implication "the European project [was] delivering more power to Brussels" Hewitt explains, adding "In the year of austerity, its European quarter [was] cluttered with cranes. It [had] expanded regardless, despite the hard times elsewhere. The EU believes in itself and its manifest destiny."

Hewitt's section on the relationship between Britain and Brussels delineates some of the inherent problems the UK faces. He describes the refusal of Brussels officials to understand Alistair Darling's position when he attended a eurozone bailout meeting, just after an election, in the interim period before his successor, George Osborne was sworn in; his inability to guarantee anything was seen as the British yet again being difficult, and, it seems to me, reveals the recurring disdain for democracy that so much of the book seems to highlight among the Brussels elite.

Hewitt quotes a fascinating analysis of the UK's position vis a vis Europe, from Roy Jenkins:

"There are only two coherent British attitudes to Europe. One is to participate fully, and to endeavour to exercise as much influence and gain as much benefit as possible from the inside. The other is to recognise that Britain's history, national psychology and political culture may be such that we can never be anything but a foot-dragging and constantly complaining member and that it would be better, and would certainly produce less friction, to accept this and to move towards an orderly, and if possible, reasonably amicable separation."

Hewitt also claims that on D-Day Churchill turned to de Gaulle and said, "Every time Britain has to decide between Europe and the open sea, it is always the open sea that we will choose", and on another occasion, (possibly not in the presence of de Gaulle) "We are with Europe but not of it. We are linked but not compromised. We are interested and associated but not absorbed." In passing, Hewitt also mentions that Harold MacMillan predicted, it seems to me very accurately, that the European Union would be "a boastful, powerful 'Empire of Charlemagne', now under French, but later bound to come under German control."

One aspect of the euro story that Hewitt does not cover is the approach of Denmark. That country's no vote to Maastricht shocked Brussels, and the Danish attitude towards the euro should be a part of any story of its development. I think Hewitt was writing before Juncker came to power and so it is not a criticism to say that he does not mention the supreme irony - and one of the biggest mistakes on the part of the European establishment, in terms of public relations - which is that Juncker is now the spokesman for the European dream of federalism, while also being the architect of a supremely immoral taxation system that has made his country immensely rich at the expense of the other members of the European Union. What commitment to the cause of unity against the nation state his actions have displayed.

All in all, this book has been a relief and a revelation. I now fear Brexit, because I see what a sinister monolith the European project is - and, in that context, there is a particularly ominous moment in the narrative when the Prime Minister of Spain expresses confidence that the EU will not crush his country, because its economy is too big and too important, and is promptly crushed; this suggests that the UK's hopes that its clout will count for something are sadly misplaced; indeed the book's whole narrative of fanatical dedication to an idea at the expense of people is a lesson from which the British should be able to draw some worrying conclusions.

However, I am now also wholeheartedly glad that Brexit is happening. Being part of the appalling racket that is the Brussels project, led as Macmillan predicted by Germany, particularly while Germany's leader is Merkel - her judgment emerges in the story time and time again as flawed and her stubborn insistence on her own strategies being followed has led to recession and countless wasted lives - is utterly repugnant. 

Near the end of the book Hewitt poses some questions, the answers to which may elucidate whether or not Britain will find that it has been wise as well as right in seeking to leave this dreadful organisation:

"Does power and influence derive from large organisations or does it, at root, come from economic success? Does the desire to centralise, to harmonise, to regulate, suit the digital age that empowers the nimble, the creative and the innovator?"

He concludes with some discussion of the EU's future plans and some worrying observations about democracy in the area. As this paragraph was written in 2013 and yet quite a bit of the part of it dealing with EU plans seems to mirror Juncker's speech this week, one can only applaud his prescience:

"The Germans are discussing a federal system for Europe much as they operate in Germany. There are position papers that envisage a directly elected president of the commission served by two chambers – the European Parliament and the Council of Ministers … the problem for Europe is that if it cannot sketch out where it is heading and level with its people, then loyalty will be begrudging at best. The risk is that Europe becomes absorbed in itself, in its own grand projects and its own institutions … The euro was one of the foundation stones of integration but proved to be flawed in design. Yoking together such different economies was an act of hubris.... Economic and monetary union, so far, has not delivered stability but division … the remedy, designed in Germany, has been austerity and reform. Countries have been consigned to recession as they struggled to become competitive with the powerhouse of Germany. The levels of unemployment have not been seen since the thirties … In the meantime, the social fabric weakens … As leaders have scrambled to shore up the euro, they have, at times, appeared careless of democracy … Democracy works best when the lines between the decision-makers and the governed are short and transparent. Most people would agree that democratic control over tax and spending is one of the hallmarks of a democratic society, but what happens if that budget is determined by European officials? Who does the voter hold responsible? … A new model of government is emerging in Europe, but democratic accountability is lagging far behind."

I should add that there were a couple of very intriguing details that I would never have known without reading the book:

1. Christine Lagarde was once a champion synchronised swimmer.

2. Angela Merkel's party used the Rolling Stones song "Angie" at campaign events, which I find mystifyingly odd.

In addition, Hewitt's description of the fall of Berlusconi may well provide a blueprint for the fall of Trump one of these days. But Berlusconi is a bit like The Office - his was the original European series, with Trump the American remake. 

Finally, if nothing else, this book should be required reading for all aspirant nations, such as Romania and Croatia, who still believe they would like to part of the eurozone. My advice to them, on the strength of The Lost Continent, is: Beware.

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