The eurozone countries wish to remain part of a currency union that cannot be sustained without severe fiscal contraction.
By Telegraph View
8:14PM BST 14 May 2012
The main focus in the continuing eurozone drama will shift today from Athens to Berlin, where the German Chancellor, Angela Merkel, will hold her first formal meeting with François Hollande just hours after his official inauguration as French president. This is unlikely to be a meeting of minds. One of Mr Hollande’s campaign pledges was to renegotiate the fiscal pact agreed by eurozone leaders in December to underpin the single currency. Mrs Merkel is adamant that everyone must adhere to the deal. But events seem to be moving against the German leader. Not only in Greece and France but elsewhere in Europe, the public mood is growing hostile to the austere economic measures necessitated by their own profligacy and levels of indebtedness.
This is (yet another) critical moment in European politics. The eurozone countries wish to remain part of a currency union that cannot be sustained without severe fiscal contraction, which they don’t want, or fiscal and political union, on which they won’t agree. There is serious talk of Greece leaving the euro, something the EU would simply not countenance until now, when it has no choice. This may be the right answer; but it is fanciful to believe that a managed exit for Greece will stop the contagion spreading to other eurozone countries, such as Spain.
What is the UK’s position in this calamity to be? There are rumours that British taxpayers could be liable both for a substantial additional sum payable to the European Central Bank, which would be unconscionable, and for a contribution to an aid package to help Greece cope with the impact of devaluation and the flight of capital. As Alistair Darling, the former Chancellor, said at the weekend: “Anyone who thinks that Greece leaving the euro is the easy fix is kidding themselves.”
Since this country stayed out of the euro precisely because many people – principally Conservatives – foresaw just such a disaster, we are not obliged to contribute anything towards clearing up the mess. However, because we are so bound up with the EU economy, we cannot escape the “massive impact” predicted by Vince Cable. What is important now is for the Government to act in our national interests, no matter what that entails. David Cameron has on occasions set out a rhetorical position on Europe that he could not hold. For instance, after pledging that no extra money would go to the euro through the IMF backdoor, the Government has now promised an extra £10 billion ostensibly to boost global economic confidence. This time, as we watch the two leading EU powers grapple with a catastrophe not of our devising, we would be wise to rule nothing in – or out.
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