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 The black and blue dress: Makers considering a white and gold version
- 2 Husband and wife die holding hands within hours of each other after 67 years of marriage
- 3 What color is The Dress, white and gold or blue and black? An eyewitness gives a definitive answer
- 5 Fearne Cotton quits Radio 1 after ten years for 'family and new adventures'
New theory could prove how life began and disprove God
Half of Ukip voters say they are prejudiced against people of other races
'Cash for access' scandal: Sir Malcolm Rifkind says 'unrealistic' for MPs to live on £67,000 salary
This is what it's like to be dead, according to a guy who died for a bit
'Jihadi John': CAGE representative storms off Sky News accusing Kay Burley of Islamophobia
Aqsa Mahmood branded a 'disgrace' by her parents after claims she recruited three UK girls flying to Middle East
salary equal to £40K pro-rata: Sauce Recruitment: Are you available to start a...
£35000 - £40000 per annum: Ashdown Group: Creative Front-End Developer - Claph...
£18000 - £24000 per annum: Recruitment Genius: The role in this successful eco...
£28000 - £30000 per annum: Ashdown Group: QA Tester - London - £30,000 QA Tes...