Letter: Monetary union will allow fiscal foolishness
Tuesday 14 February 1995
Sir: What Kenneth Clarke, your newspaper ("The great EMU debate", 9 February) and other advocates of a single European currency without increased political integration have yet to explain is how, in practice, individual EU governments will be constrained to pursue responsible fiscal policies.
Why should any member government in a single currency environment court unpopularity by raising taxes, when funds can be raised with relative impunity on the capital markets? True, there will still be an upward effect on ecu interest rates, but the impact at home will be proportionately less because the increased borrowing is now drawn from a larger pool. In effect, the misery is being spread around and indeed exported to those member states following more prudent fiscal policies. These will be rewarded for their European solidarity by experiencing levels of unemployment together than would otherwise be the case. A more certain recipe for resentment arising between the member states can scarcely be imagined.
It is difficult to avoid the conclusion that international tension arising this way can be avoided only if the introduction of a single currency goes hand in hand with the transfer to a supranational body of control of fiscal policy throughout the EU. The advocates of a single currency should be honest enough to admit that this will be the necessary accompaniment of what they are proposing.
- 1 Apple has installed security backdoors on 600m iPhones and iPads, claims security researcher
- 2 UK pirates will get four warning letters a year
- 4 Is Gideon Levy the most hated man in Israel or just the most heroic?
- 5 Israel-Gaza conflict: Deadly flechette shells 'used by Israeli military in Gaza Strip’
Malaysia Airlines flight MH17 crash: 'Nine Britons, 23 Americans and 80 children' feared dead after Boeing passenger jet is 'shot down' near Ukraine-Russia border
Malaysia Airlines MH17 crash: Vladimir Putin is given 'one last chance' to end hostilities in Ukraine
The 'scroungers’ fight back: The welfare claimants battling to alter stereotypes
The truth about conspiracy theories is that some require considering
Malaysia Airlines MH17 crash: Ukrainian military jet was flying close to passenger plane before it was shot down, says Russian officer
Malaysia Airlines MH17 crash: victims’ bodies bundled in black bags and loaded onto trains
Competitive: The Green Recruitment Company: Job Title: Scheme Manager (BREEAM)...
Flexible, depending on experience: The Green Recruitment Company: Job Title: T...
£850 - £950 per day: Orgtel: Programme Director - Conduct Risk - Banking - £85...
£100 - £110 per day: Orgtel: Project Coordinator/Order Entry Hampshire