Dominic Lawson: Even now, Tony Blair won't admit that the eurosceptics were right

There is no popular demand whatsoever for a European political union

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Tony Blair has a nerve. Well, that's hardly news. All the same, my jaw dropped several inches when seeing him tell the BBC's Andrew Marr that the euro could well be doomed because of the extreme difficulty of keeping "states at very different stages of [economic] development within a single currency zone".

Er... yes, ex-Prime Minister. This is precisely what we so-called eurosceptics warned of when Europe's single currency was set up – and you (along with most of the rest of the political and economic establishment) ignored or dismissed this simple point. True, Gordon Brown as Chancellor thwarted the plan to take Britain into this misconceived venture – although I've never been sure to what extent Brown's objections were based on pure economic logic, rather than his custom of blocking whatever it was that Blair most wanted.

Anyway, Blair went on to tell the BBC's Sunday morning viewers that the only solution to the mess was "a grand plan" for full European integration – and graciously hinted that he was still available to become President of such a superstate. Don't call us, Tony, we'll call you. This is the point: there is no popular demand whatsoever for a European political union, and absent from Blair's "grand plan" was any reference to that great inconvenience known as democracy.

This is especially relevant to the demands now being placed on Germany. Blair declared that the only thing that would "save the euro" was if Germany "commits its economy fully to the single currency... treating the debts of one as the debts of all". If I were a German taxpayer, or indeed pensioner, I would immediately see precisely the opposite: not that all would be assuming the debt of one defaulting member (Greece, in the first instance); but that the one (Germany) is being called on to underwrite the debts of all.

There are only two problems with the solution offered by Blair. The first is that the Germans won't do it; the second is that they can't do it. With its remarkably low birth rate and a declining labour force, no doctor would hazard a prognosis for the German economy as the infinite cash machine of the wider European economy. Moreover, the German national balance sheet is not immaculate: its total debts, both private and public, equate to over 240 per cent of its Gross Domestic Product.

The difference between Germany and many of the other eurozone economies lies elsewhere: it is much more competitive, the result of immensely difficult labour market reforms. Similar reforms are the only path to economic wellbeing in countries such as Italy, Spain and Greece – not some magical waving of a political wand at a meeting in Brussels; and I'm afraid that German politicians, from Angela Merkel downwards, are completely justified in believing that continual bailing out or subsidisation of the southern Mediterranean economies will only have the effect of making such reforms still less likely.

It is true that if Germany were to do as Blair so fashionably demands, and agrees to stand behind a guarantee of all European Union debts, there would be a temporary check to the collapse of credit ratings in the weaker economies; but this is where, even if the economics of bond market manipulation make short-term sense, the national politics of a sovereign nation will not allow it.

The only reason Germany was able to give up the Deutschmark was that it guaranteed its electorate that within the euro there would never be major fiscal transfers from richer countries to poorer ones, or bailouts of governments that ran into difficulties – and definitely no central banking lender of last resort. These may have been unrealistic promises – but they were made and they were believed. They are also guaranteed by the German Constitutional Court, which has repeatedly indicated it will not allow these safeguards to be broken.

British pundits tend to dismiss such matters as niceties and imply that it is simply a question of Angela Merkel deciding what to do. Yet she is not a dictator who could simply impose such a decision on a supine and acquiescent people and parliament. As David Cameron should especially appreciate, Merkel is running a complex coalition. A vital part of it is the Christian Social Union, the sister party to Merkel's own Christian Democrats and which provides three of the German government's ministers. Last week, the head of the CSU, Horst Seehofer, gave an interview to Spiegel which could not have been more explicit in rejecting the proposed "solution" put forward by Blair and others: "We cannot grant new billions in loan guarantees... we would be endangering our economy. I'm a strict opponent of any type of communitisation of debt."

 

Merkel, at least, proposes a long-term movement to a sort of pan-European polity, which would set up the democratic underpinnings of a full fiscal union. Yet Seehofer dismissed even that aspiration. "Anyone who wants to transfer rights of sovereignty to Brussels... will encounter our resistance. The CSU will not support a European federal state and anything that moves in that direction. We don't want a European finance minister, and we don't want a European economics minister" he told Spiegel.

Remember this is from Germany, the country whose political class is probably the most open to the idea of closer European integration. As the President of the Bundesbank, Dr Jens Weidmann, observed in a not-too-subtle dig at those calling for Germany to do the decent thing by the eurozone : "Joint liability can only be introduced at the end of the integration process of a fiscal union and not at the beginning... It is, however, worth noting that the advocates of joint liability are often in those countries which are the most opposed to surrendering their national sovereignty with regard to financial policy decisions."

So while Blair – shamelessly and more than a decade late – tells us that the "single currency's design flaw was that it was motivated by politics, delivered in economics", he seems unable to acknowledge that it has not even succeeded in its own, political, terms. Nor can he admit something still more important: it never will.

d.lawson@independent.co.uk

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