Europe isn't working PDF
Preview Europe isn't working
EUROPE ISN’T WORKING LARRY ELLIOTT AND DAN ATKINSON EUROPE ISN’T WORKING i ii EUROP E ISN’T WO RKING LARRY ELLIOTT AND DAN ATKINSON YALE UNIVERSITY PRESS NEW HAVEN AND LONDON iii Page 29, ‘Rat Trap’, written by Bob Geldof, lyrics reproduced by kind permis- sion of Mute Song Limited. Page 115, Dennis O’Driscoll, ‘The Celtic Tiger’, Weather Permitting, Carcanet Press Ltd, 1999, is used with permission. Copyright © 2016 Larry Elliott and Dan Atkinson All rights reserved. This book may not be reproduced in whole or in part, in any form (beyond that copying permitted by Sections 107 and 108 of the U.S. Copyright Law and except by reviewers for the public press) without written permission from the publishers. For information about this and other Yale University Press publications, please contact: U.S. Office: [email protected] yalebooks.com Europe Office: [email protected] yalebooks.co.uk Typeset in Minion Pro by IDSUK (DataConnection) Ltd Printed in Great Britain by TJ International Ltd, Padstow, Cornwall Library of Congress Control Number: 2016937705 ISBN 978-0-300-22192-3 A catalogue record for this book is available from the British Library. 10 9 8 7 6 5 4 3 2 1 iv CONTENTS Preface vi 1 The real thing: A tale of two product launches 1 2 ‘ A burning building with no exits’: Designing a 29 euro inferno 3 The French vice: Gold, the euro and a peculiar 59 taste for monetary discipline 4 No end of a lesson: Schools of thought collide 87 in the Eurozone 5 Ire and ice: Two crises in a cruel sea 115 6 A bullet dodged: How Gordon Brown, 145 Ed Balls and the man in the white coat saved Britain from a euro nightmare 7 The Sisyphus effect: Greece’s tormented 174 euro-odyssey 8 The Italian job 201 9 Kicking the can: The Eurozone’s never-ending crisis 229 10 The end of the affair: Why the left is falling out 257 of love with the euro Endnotes 285 Index 297 v PREFACE Actors have parts they secretly want to play. Rock musicians have records that for some reason remain unmade. Authors have ideas that gnaw away at them but take years to find their way onto the page. Our equivalent is Europe Isn’t Working. This is the fifth book we have jointly written since 1998, but it is the one we have always wanted to write since we first worked together as reporters at the Press Association in 1986. It was a different world back then: filing copy on typewriters rather than computers (the latter still, then, a few months in the future); finan- cial news from the rest of the world arriving by means of wire machines; reporters needing to find a public telephone box to speak to the news desk. Europe, too, looked different three decades ago. Berlin was still a divided city in a disunited Germany; attempts to create a single European market were just underway; the notion of a single currency was in its infancy. There were twelve members of the European Community against the twenty-eight members of today’s European Union. On the surface, the issue of ‘Europe’ had been off the boil in the UK for some time. The country had voted eleven years earlier to remain a member and had declined the offer of withdrawal (this time without a referendum) from Michael Foot’s Labour Party in the vi PREFACE vii 1983 election. The big issue on the continent in the first half of the 1980s had been defence, specifically nuclear confrontation with the Soviet bloc, a matter in which the European Community had no real standing. But beneath the surface, British attitudes towards Europe were in a state of flux. Under Margaret Thatcher, the Conservative Party, which had traditionally been the more pro-European of the UK’s two main parties, was becoming sceptical. The Labour Party, until then more cautious about the benefits of closer ties with the European Economic Community, was moving in the other direction. In reality, both parties were split over Europe. The Conservatives had enthusiasts such as Michael Heseltine and Kenneth Clarke. Nigel Lawson, who has been prominent in the recent campaign for Britain to leave the European Union, was then, as chancellor of the exchequer, prepared to peg the value of the pound to that of the West German mark in the hope that it would help to control inflation. The Labour leader Neil Kinnock was warming to the idea of Europe, as were a number of prominent trade union general secre- taries. But many on the left remained suspicious, either because of what they saw as an inbuilt bias towards deflationary economic policies, or because they thought creating a single European economic space complete with its own money and its own central bank offered more to the owners of multinational corporations than to the people who worked for them. Then, as now, we were in the second camp. We were with the Bryan Goulds, the Peter Shores, the Tony Benns and the Jeremy Corbyns, who doubted whether the claims made for ever closer integration were all they cracked up to be. We were working together on the Guardian by the time Britain formally tied itself to the German mark in 1990 through the Exchange Rate Mechanism (ERM), and were pretty much alone in thinking it a rotten idea. Similarly, when the rest of the paper’s staff saw departure from the ERM as a day of disaster, we saw Black Wednesday as a moment of liberation. viii PREFACE It was curious to us that, in Britain, most of the running against the Maastricht Treaty that paved the way for the single currency was made by Conservative Eurosceptics. When we came to write our first book together in 1998, the birth of the single currency was little more than a year away. In retrospect, it might have been better had we written The Euro Won’t Work rather than The Age of Insecurity, in which we devoted a chapter of the book to the problems we foresaw for monetary union. Still, better late than never. There are those on the left who feel uneasy about voicing their concerns about the euro, in the main because of the political company they have to keep. This book explains why those misgivings are unnecessary. The single currency was not, is not, and never will be a progressive project. Over the following ten chapters, we trace the origins of monetary union to the gold standard, track its development during the design stage in the late 1980s and 1990s, and then compare the euro in theory against the euro in practice. Some commentators have been surprised by the failure of the single currency to live up to its advanced billing. We are not. We always thought it would end this way. We could begin our story in any one of the nineteen countries that currently use the single currency but have chosen not to do so. Our tale starts not in Europe at all, but in Atlanta, Georgia. Larry Elliott and Dan Atkinson London, March 2016 CHAPTER 1 THE REAL THING A tale of two product launches All wonder is the effect of novelty on ignorance. Samuel Johnson 23 April 1985 was a momentous day in the life of the Coca-Cola Company. It had been ninety-nine years since the first glass of Coke was poured in a drugstore in Atlanta, Georgia, and they had been good ones for a company that in its first year sold an average of just nine drinks a day at five cents each. Sixty years later, Coca-Cola was the world leader in soft drinks. For almost two decades after the former Confederate colonel John Pemberton first marketed the drink, Coke was laced with a kick: cocaine extracted from coca leaves. In 1903 the hard drug was removed from the formula, but over the course of the first half of the twentieth century Americans became more and more addicted to Coke and it established itself as the market leader – so much so that by the end of the Second World War it had cornered three-fifths of the US market. In its way, Coke’s rise to its zenith mirrored that of the US in the late nineteenth and early twentieth centuries, when it first chal- lenged and then comfortably overtook Great Britain to become the world’s biggest and richest economy. By the early 1980s, there was a darker mood. The 1970s had been a chastening decade. It had begun with Washington’s admission that the dollar was no longer 1
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