Dominic Lawson: If the euro goes under, we should leave the EU

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The Prime Minister may be away on holiday, but that does not mean his staff are unable to answer letters on his behalf.

Thus it is that over the weekend a Conservative party activist, Anita Segar, was able to reveal that she had just received a reply from 10 Downing Street, telling her why the PM would not satisfy her desire for a referendum on the future of Britain's membership of the EU.

In making such a request Ms Segar was endorsing the majority view among the population as a whole. On the most recent opinion polling evidence, almost twice as many Britons would vote to leave as those prepared to vote "yes" to staying in, if such a plebiscite were held today. However, the Prime Minister's political private secretary, Laurence Mann, wrote to Ms Segar that while "we understand the strength of feelings of some who would prefer us to not be in the EU... there is one argument in particular, against holding such a referendum that we find irrefutably powerful, namely that most people in our country want to say neither "yes" to everything from the EU, nor "no" to everything."

This is a false dichotomy, implicitly based on the supposition that outside the EU the UK would not be able to emulate Norway, which has tariff-free access to the European single market – apart from agriculture and fisheries. These, of course, are the two aspects of the original deal which the vast majority of Britons would be most delighted to leave behind: the Common Agricultural Policy adds an estimated £1,200 to the average British family's annual food bill, and outside the Common Fisheries Policy, Britain would have the right to regain control of about 65 per cent of the North Sea's stocks.

In his letter, Mr Mann also warned Ms Segal not "to lose sight of the EU's very useful work, such as ensuring all the nations of Europe are equipped to face the biggest challenges of the 21st century: global competitiveness, global warming and global poverty". Who knows, perhaps it is possible the Prime Minister thinks the public finds such guff plausible. I suspect that most would be able to work out that the regulatory burdens emanating from Brussels have made European countries (including this one) less rather than more globally competitive; that the EU's hubristic climate-change policies will only increase that loss of industrial competitiveness; and that we are capable as a nation of apportioning our own aid budget, without the assistance of additional bureaucrats within the European Commission – whose auditors, let's not forget, have been unable for the past 16 years to sign off on the EU's unfathomably murky accounts.

One EU policy which has undeniably made the British economy more competitive is the open border for immigration within the Union. The influx of East European workers has acted as a brake on wage inflation in this country and helped keep the wheels of commerce moving; yet it is interesting that Mr Mann did not mention this benefit in his letter to Ms Segar – because the PM's office knows that this is a most unpopular aspect of our EU membership.

All these arguments are suddenly of pressing pertinence, because the whole future of the EU is in question, for the first time since its inception. Angela Merkel recently declared that the EU itself would be "unimaginable" without the euro – and yet the euro's destruction is now a distinct possibility. I had thought this rather an apocalyptic remark by the usually understated German Chancellor; but when I said so to the Treasury Chief Secretary, Danny Alexander, that adamantine enthusiast for the EU told me he shared her opinion that if the euro ceased to be and the constituent members reverted to their original national currencies, then the EU itself would lose such self-confidence as an entity that it would become entirely rudderless.

In fact, as Labour's former Europe Minister Denis MacShane pointed out in some despair on these pages three days ago, rudderless is a reasonably accurate description of the current state of affairs in the EU: "No organisation in the world can be run with 27 executive chiefs." The problem is that in order to salvage the euro, it will be necessary for countries such as Spain, Italy and Greece effectively to hand over their fiscal policy to the only European country with the balance sheet to guarantee their debts – Germany; and even if the voters of those southern European nations are prepared to accept such a drastic loss of democratic control over their own affairs, it seems most unlikely that German voters have any desire to put an estimated 25 per cent of their GDP at the disposal of the delinquent euro members – however much they enjoy holidaying in Italy or Spain.

This denouement, or something very like it, was in fact anticipated by the young George Osborne, when he was working in the private office of the then Tory leader, William Hague. Osborne had drafted the 1998 speech in which Hague had warned that the single european currency under extreme financial pressure could end up with its members being "trapped in the economic equivalent of a burning building with no exits... my fear is that the creation of a single currency will take european political union well beyond its acceptable limits. The effect of imposing a one-size-fits-all single interest rate on a set of different economies with different cycles, structures and circumstances could be disastrous."

That speech, derided by so many at the time as outrageous alarmism, now seems profoundly prescient. Yet Mr Hague, in his present incarnation as Foreign Secretary, will not refer to it; and Chancellor Osborne urges the members of the euro to do all they can to maintain the currency, at the loss of national fiscal sovereignty which he would never accept for the citizens of this country. In part this is because these long-time eurosceptics are understandably concerned at the consequences for Britain if the euro entered terminal meltdown.

It is also because they find themselves in coalition with a party which still officially believes the euro is so wonderful that we should want to join it. That, however, is not a point which the Prime Minister's office felt brave enough to mention to Anita Segar.