European Affairs

Yes, but no one seriously believes it. We are all in favour of mother and apple pie, but we do not always pursue that, do we? The fact that we were out of the euro and able to depreciate our currency gave a little protection to our industry during this appalling crisis. That showed the wisdom of our Prime Minister in keeping us out of the euro all those years ago. The Swedes have had a similar experience: they sensibly voted not to enter the euro and had a referendum as well. There are, however, serious economic stresses inside the EU with the arrangement that it attempted to impose. The Greeks are at the sharp end of all this. They look likely to default on their borrowing and are in a very serious economic situation. The EU is unlikely to bail them out because it does not want to create what it calls a moral hazard—if one country gets bailed out, all the others will want to be bailed out. It can help one, if it is the only one, but we know that there are others. If it bails out Greece, why not bail out Ireland and some of the Baltic states? Clearly, therefore, Greece will not be bailed out. Greece has enormous problems, and the logical thing to do—were I a Greek, I would be saying this—is to withdraw from the euro, recreate its national currency, depreciate it and then reconstruct what has been damaged internally. If that happens, other countries might do the same. I suggested to Irish politicians—in a friendly way—that that would be a logical thing for them to do. Ireland's natural partner economy is the United Kingdom, but the Irish have terrible problems because they are stuck in the euro up there. They blame us, saying, "It's your fault because you devalued," but if they had not gone into the euro, they would have been able to do the same thing as others. There are also many countries in eastern Europe that are thinking twice about whether it was wise to have that economic model imposed on them. If they had kept their own currencies and gone for a balanced, social democratic, managed economy, they might have done better than by making the transition from a centralised, communist economy to extreme free market neo-liberalism. That has caused those countries all sorts of problems. If I were from one of those countries, I would certainly be arguing for a more managed economy and for those countries' currencies, saying, "Let's get a competitive value for our currency against others and work to build the economy on a sound basis for the longer term."