The formation of the euro has more than a little in common with
the PIP implants scandal. In both cases, rules were deliberately
broken, dreadful consequences were easily foreseen, and a culture
of wilful blindness and moral negligence prevailed. In both cases,
untold human pain has been caused, with little chance of redress
for the victims. But at least in the case of PIP, someone is being
held responsible. In the case of the euro, not a single politician
has suffered for his negligence.
In the PIP scandal, corners were cut in pursuit of profit. In
the euro scandal, corners were cut in pursuit of a foolish dream of
forced European integration. The grand idea of Kohl and the then
French President, François Mitterrand, was that Germany's identity
would be subsumed into that of the EU. And what has happened?
European disintegration looks more likely than ever, and Germany is
now so powerful that the rest of the eurozone has to bow down
before it.
Kohl and his fellow European architects can't claim that they
weren't warned. They had a dry run at a common currency with the
exchange-rate mechanism. The ERM tied all its currencies together
at a fixed rate to the Deutschmark. In 1992, the system was tested
to destruction when Britain and Italy were forced to leave it,
unable to cope with the interest rates the ERM imposed.
At least, though, the ERM allowed different interest rates for
different members. The even greater sin of the euro was that it
imposed a uniform interest rate for the whole eurozone. That
allowed Greece, Portugal, Spain, Ireland and Italy to borrow at
rates practically as low as Germany. No wonder they built up
mountains of debt. It was a free ride which is now proving
monumentally expensive for the citizens, banks and governments of
Europe and the wider world.
As an excellent programme on Radio 4 yesterday illustrated, the
politicians were culpable on every front. Allan Little, in Europe's
Choice, spoke to a technocrat, Jacques Lafitte, who admitted that
everyone knew the southern European states weren't ready to join a
single currency. But as he put it, there was a "big political
corruptness problem. No one wanted to point a finger at another
member state in case they pointed the finger at you some day."
Joachim Bitterlich, a senior foreign policy adviser to Kohl,
admitted to Little that they bent the rules to allow Italy in.
Italy's debt was around 120 per cent of GDP, when the Maastricht
criteria for membership of the euro stipulated a maximum 60 per
cent. But as ever, politics trumped economics and Italy was
admitted, opening the door to Spain, Portugal and Greece.
In Greece, the figures were cooked as thoroughly as a
charcoal-grilled kebab to make the public finances look as if they
met the criteria. But who can blame the Greeks when the main
drivers of the euro, France and Germany, were so badly behaved? In
2003, both countries spent too much and their budget deficits rose
above the 3 per cent limit. They simply persuaded friendly finance
ministers, including Gordon Brown, to vote for no penalties to be
imposed.
As a result, a policy that was supposed to lead to convergence
did exactly the opposite. Germany got richer, as it exported its
goods to the debt-fuelled periphery countries. They, meanwhile,
became more and more indebted, and less and less competitive. Now
they face years of depression, a generation of worklessness, riots
on the streets and the possible breakdown of democracy.
Kohl's tactics were always to increase European integration in
small steps, hoping the voters wouldn't notice too much, and using
crises as excuses to force the pace. He knew perfectly well that a
monetary union couldn't survive without economic and political
union – and now the first is being used to drive through the second
two, against the interests and wishes of voters.
For whatever eurozone leaders may say today, fiscal pacts are
much harder to enforce between countries than within them. Here,
London and the South-east subsidise northern England, and England
subsidises Scotland. But we've been part of a common nation for 300
years and there are still Scots who don't want to be told what to
do by an English Prime Minister, and English taxpayers who begrudge
stumping up for them.
So imagine how much harder it is for Germans and Greeks. Greece
yesterday refused to accept a German proposal for an EU budget
commissioner to be able to veto its taxes and spending. It resents
the intervention of Horst "the Third" Reichenbach, who heads a
European Commission taskforce for Greece. This isn't surprising
when, in living memory, under German occupation, Greece lost more
than 300,000 Athenian citizens to starvation, tens of thousands
more to Nazi reprisals, and 80 per cent of its Jews to the death
camps. We're hardly talking about England and Scotland, whatever
happened at the Battle of Culloden in 1746. Meanwhile, it's equally
unsurprising that German voters are determined not to play the role
of London and the South-east to the spendthrift Greeks.
This currency union was never going to work unless all its
member states felt as strong a common bond as the English and
Scottish do. Instead Kohl and Mitterrand believed that lashing the
countries together would suffice. It was a stupid idea born of
arrogance and insouciance at the highest levels, and it was never
going to work. It was at least as likely to lead to the dangerous
rise of the far-right – exactly what Kohl was trying to lay to
rest.
Some policy blunders can easily be reversed. This one can't, and
millions of European citizens are now paying Kohl's price in
unemployment, crashing living standards and a desperate future for
their children. Someone must be held responsible for the
predictable catastrophe caused by this grand idea. Mitterrand is
now dead; at the very least, Kohl and his fellow architects should
be disgraced.
m.sieghart@independent.co.uk
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Amol Rajan
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