Could Paddington leave the train?

It seems that the UK debate as to whether to leave the EU, a possibility known as Brexit, pauses only for moments to be thankful that we didn’t join the euro. The latest and somewhat surreal development is that the Institute of Economic Affairs has awarded its Brexit Prize of 100,000 euros (!) to a 30-year old Foreign Office employee, Iain Mansfield, for his outline “blueprint for Britain after the EU”. According to a piece in The Times Diary (TMS) (£) on 11 April, Our Man in Coventry*, William Hague is “said to be furious” about the award and Mansfield has “seemingly since been silenced”, deleting his Twitter account and personal website.

This personal website has in the past touched on the possibility of France leaving the eurozone. For example, last year I posted about an article by Philippe Villin in Le Figaro Magazine which was a spoof of the speech which François Hollande would give when the time came. And back in 2011, I commented on the way that some till receipts in France still show the price that would have been paid in francs. Now I’m beginning to wonder whether the UK debate is being framed in the wrong way. At the end of Tom Stoppard’s play Jumpers, George, a Professor of Moral Philosophy, observes that “… all the observable phenomena associated with the train leaving Paddington could equally well be accounted for by Paddington leaving the train …”. Or, in this case and putting it another way, rather than Britain leaving the EU, what if the EU were to leave the euro?

This is the suggestion being made by François Heisbourg, an énarque like Villin, but writing much more seriously in the current issue of Survival: Global Politics and Strategy, the journal of the IISS (Heisbourg is Chairman of the IISS Council). Last year his book, La Fin du rêve européen (The end of the European dream) was published in France, but so far it has only been translated into Greek! We can probably assume that his article, The EU Without the Euro, conveys the essence of his ideas.

Put crudely, Heisbourg believes that however unpleasant the abandonment of the euro might be, the alternatives are worse:

There would be no need to contemplate an economically risky, technically tricky and politically backward-looking option such as the orderly dismantling of the euro if more promising policies were at hand.

He rules out the creation of fully federal Europe capable of underpinning the euro as politically impossible. On the other hand:

… the actual set of policies currently followed, sometimes described as 'muddling through', [would be] more aptly called 'muddling down' in terms of its effects on growth and mass unemployment.

What he wants to avoid is a disorderly break-up of the euro, better “a deliberate and orderly unravelling of the euro in the framework of a preserved European Union”. His comments on the current situation are interesting:

… there are now two eurozones. One, composed of Germany, Finland and Austria enjoys limited unemployment … an early retum to pre-crisis levels of GDP … and great impatience with efforts by less fortunate states to transfer their liabilities to the EU level. The other eurozone has yet to recover to pre-crisis levels, with mass unemployment and long-term joblessness creating a 'lost generation', and unbelievably patient electorates who have not at the time of writing, voted in latter-day fascists or Bolsheviks. France falls squarely in between these two blocs. In short, muddling down does not look good.

Post-euro, Heisbourg would prefer a return to the European Monetary System with each country having its own currency and aspiring to stable exchange rates, to the alternatives of sub-euro common currencies:

Some have gone further by suggesting, facetiously or in earnest, the creation of a northern euro - a 'neuro' or, worse 'Bis-mark' - eventually balanced by a southern euro, or 'sudo' (as in pseudo'). It is not clear why countries that would have dismantled the euro to recover a degree of monetary autonomy would want to jump into another straitjacket.

Heisbourg sees the challenges in a “return to national currencies [which] would be universally considered a humbling setback” as being political rather than technical. He identifies precedents which support its feasibility and observes that disagreements with the suggestion he first made in La Fin du rêve européen were not mainly based on its technical difficulties. However political support from both Germany and France would be a necessity in his view. Making the best of the consequences of having to walk back from the euro (he quotes Churchill on Dunkirk – ‘wars are not won by evacuations’), he suggests that “the fact of being seen as acting decisively and competently will redound, Dunkirk-style, to the EU’s credit”.

On the subject of the UK, and pertinent to Paddington and the train, Heisbourg thinks that:

This could also be a Union in which traditional British euroscepticism would have fewer reasons to develop into full-blown, exit-prone europhobia. … Although there can be no guarantee that an EU without the euro would eliminate the risk, the probability of a British exit is much higher in all other scenarios. … an EU of which the UK is a member and whose long-term status is no longer in question would be strategically stabilising, not least as a war-shy, balancing-to-Asia United States adopts a more instrumental, tough-love attitude towards NATO and its European neighbours.

He goes on to make some interesting observations about the circumstances of individual nations in the immediate post-euro phase, and regards France as possibly being the most acutely affected in the short term. He concludes by calling for more research and debate, at which point earlier passages in his article are worth revisiting:

… upstream debate could in its academic stages be broad-ranging and systematic, with a view to assessing the most promising political avenues; political decision-making could be careful and deliberate, albeit under the conditions of secrecy called for in monetary affairs; and implementation would have to be sudden and comprehensive.

and

In order to be successful, the demonetisation of the euro and the recreation of national currencies has to occur during the compressed time frame of a longer-than-usual bank holiday, initially with a very small group of institutional actors (no more than the heads of a couple of states and the Chairman of the ECB), before the circle is broadened after the basic decision to unravel the euro has been taken.

Heisbourg’s closing words are that “the preservation of the EU must be [the] primary objective, to which the positive or negative fate of the euro must be subordinated”. Opinions, many much better-informed than mine, will differ about the practicability of adopting his proposal, but I imagine that most would accept his point that a successful implementation would be to the EU’s credit.


*Our Man in ... + Send to Coventry

Lord Lawson of Blaby (and Gers)

Thirty years ago Margaret Thatcher appointed Nigel Lawson as Chancellor of the Exchequer, not such a tricky job when more and more revenue from North Sea oil was rolling in. After six years they fell out because of his enthusiasm for the UK joining the European Exchange Rate Mechanism, a precursor to the euro. Now Lord Lawson of Blaby, he is probably best-known among the general public as the father of the TV cook, Nigella Lawson. In recent years Lord Lawson has gained a reputation as a climate change sceptic.

On 7 May The Times published an article by Lawson, I’ll be voting to quit the EU, which has led to a debate in the UK media sharpened by the rise in UKIP’s popularity over recent months. He anticipates an in-out referendum in 2017:

Meanwhile, the Prime Minister has already embarked on a series of preliminary talks with our EU partners, hoping in due course to be able to renegotiate improved terms for the UK within the Union … He is following faithfully in the footsteps of Harold Wilson almost 40 years ago. The changes that Wilson was able to negotiate were so trivial that I doubt if anyone today can remember what they were. … I have no doubt that any changes that Mr Cameron — or, for that matter, Ed Miliband — is able to secure will be equally inconsequential.

It’s the euro, stupid:

The heart of the matter is that the very nature of the European Union, and of this country’s relationship with it, has fundamentally changed after the coming into being of the European monetary union and the creation of the eurozone, of which — quite rightly — we are not a part. That is why, while I voted “in” in 1975, I shall be voting “out” in 2017. This has nothing to do with being “anti-European”, a particularly bizarre suggestion in my own case, given that my home nowadays is, by choice, in France — indeed, in la France profonde — from where I commute weekly to work in England.  

… the coming into being of monetary union — and there can be no doubt of the determination of the leaders of Europe to persist with it at all costs — has fundamentally changed the nature of the European Union and of non- eurozone Britain’s relationship with it.  

… So the case for exit is clear. But would there be a heavy economic cost, making this unwise? There would indeed be some economic cost, partly transitional and partly as a result of the loss of the modest advantages of being within the single market. But in my judgment the economic gains would substantially outweigh the costs. The only gain that can be clearly quantified is that we would no longer pay our annual membership fee of some £8 billion.

And there is the City:

Moreover, there is one area of regulation of particular importance to the UK, where the EU regulatory cost threatens to be even greater than it is already, and that is the area of banking and financial services more generally. Despite the banking disasters of 2007-08, London remains a far more important financial centre than the rest of Europe put together. It is one of the few major industries, with substantial growth prospects, where this country is indisputably a world-class player.  

However, after the recent banking meltdown, the EU is currently engaged in a frenzy of regulatory activism, of which the foolish and damaging financial transactions tax, imposed against strong UK opposition, is only one example. In part this is motivated by a jealous desire to cut London down to size, in part by well-intentioned ignorance.  

… Those who claim that to leave the EU would damage the City are the very same as those who in the past confidently predicted, with a classic failure of understanding, that the City would be gravely damaged if the UK failed to adopt the Euro as its currency.

Anyway:

You do not need to be within the single market to be able to export to the European Union, as we see from the wide range of goods on our shelves every day. The statistics are eloquent. Over the past decade, UK exports to the EU have risen in cash terms by some 40 per cent. Over the same period, exports to the EU from those outside it have risen by 75 per cent.  

… Today too much of British business and industry feels similarly secure in the warm embrace of the European single market and is failing to recognise that today’s great export opportunities lie in the developing world, particularly in Asia. Just as entry into the Common Market half a century ago provided a much needed change of focus, so might leaving the EU, an institution that has achieved its historic purpose and is now past its sell-by date, provide a much-needed change of focus today.

Two days later (9 May) The Times ran an opinion piece, We don’t share Europe’s vision. So I want out, by another former Cabinet Minister, Micheal Portillo, Defence Secretary 20 years ago but now best-known as a presenter of television documentaries, many about train journeys. He had a different view of the outcome of the 2015 election:

Nigel Lawson says that he would vote in a referendum for Britain to leave the European Union. So would I. But I am much less confident than he is that we will get the opportunity to express our will.  

… I don’t agree with Lord Lawson that Labour will feel obliged to pledge a referendum in its [2015] manifesto. ... Mr Miliband would be foolish to promise a referendum, which might turn out badly, costing him his authority mid-term in his first period of office and saddling him with having to withdraw from the EU, a policy that he would neither propose nor support.

Again, it’s the euro:

The euro is a disaster. It has created hardship, unemployment and division on a dangerous scale.  

… The eurozone will be intellectually absorbed by its currency for 20 years. Either the euro will gradually collapse or member states will enter economic and political union. Either way, Britain should be nowhere near, and as the eurozone expends its energy on integration, it will slip further behind the competition from outside Europe.

He concludes:

It’s disingenuous to suggest that this fundamental mismatch [between the UK and Europe] can be resolved by a little renegotiation. It can be settled only when Britain departs the Union or is absorbed. I have no doubt where my vote would go.

Portillo’s article added little to Lawson’s and was even shorter on analysis of the consequences of the UK leaving the EU. As yet I have not seen any of the following being addressed in any depth:

How can the UK “be nowhere near” (a geographic impossibility) if the euro, despite “the determination of the leaders of Europe to persist with it at all costs” is abandoned?

Lawson, according to an article in the London Evening Standard, has a house in the Gers département in SW France. It isn’t clear from his article whether he is a resident of France for tax purposes or, less profoundly, just owns a house there and pays state taxes in the UK where he says he works. If the UK leaves the EU, how would the position of Britons resident in the EU change? What would be the effect on non-resident house-owners with regard to the equivalents of council tax (a question of interest to perhaps 800,000 people)? Would EHIC cards still ensure access to health treatment for visitors to EU countries?

What would be the position of EU nationals currently working (or alternatively, and according to UKIP quite possibly, drawing benefits) in the UK?

One explanation for this flurry of anti-Europeanism from former household names is obvious – the rise of UKIP. That party’s particular appeal seems to be to the over-65s who otherwise might be voting Conservative as they did in the days when Lawson, Portillo and others were prominent Tory politicians.

A New New Franc!

Posts here in the past have raised the possibility of France leaving the Eurozone or the euro’s collapse (eg in 2011 and most recently in 2012) but raising the subject has always seemed more “raving” than “droning”. So I was surprised to see the essay article below in the current issue of Le Figaro Magazine:

“THIS EVENING THE EURO IS DEAD…”
Speech by the President of the Republic

It was written by Philippe Villin, énarque, banker and journalist and, according to Wikipedia, a member of Le Siècle, so a man firmly embodied in the French elite. In his article Villin imagines the speech which François Hollande would give at 11pm on 7 July 2013 announcing this revolution:

Françaises, Français, chers concitoyens, l’euro est mort. A minuit, le nouveau nouveau franc, le NNF, sera notre nouvelle monnaie. …

And he goes on to explain the background to his decision to introduce the NNF* at parity with the euro. It is primarily due to the double problem of French economic competitiveness in the euro – with Germany internally and in US$ terms externally. A ‘euro of the south’ was ruled out as too weak for France and Italy and too strong for the others. France’s euro debts would be repaid in NNF.  Hollande ends with a passage reminiscent of Harold Wilson’s 1967 sterling devaluation “pound in your pocket” speech:

Demain matin, la vie sera normale: transports, téléphone, télévisions fonctionneront, les magasins seront ouverts … les vaches auront donne du lait, le soleil brillera selon Metéo France …**

There is a satirical element to the whole piece, which, incidentally, describes Villin as a staunch supporter of returning to the franc, for example its annotation as “PCC François Hollande” (pour copie conforme being the French equivalent of CC, once known in English as 'carbon copy').

I hope Villin's article gets translated and appears in the UK media.  The NNF may not impossible, but its announcement on 7 July 2013 seems highly unlikely.

* The last new franc (nouveau franc NF) was introduced in January 1960 by revaluation from 100 old francs.

** Tomorrow morning, life will be normal***: transport, telephones, television will work, the shops will open ... the cows will give milk, the sun will shine according to France Metéo …

*** In the presidential election in 2012, Hollande was sold as ‘Monsieur Normale’, in contrast with his predecessor.

With no particular place to go

So near and yet so far: Goering and German top brass regard the
White Cliffs of England from the French coast on 1 July 1940

Max Hastings could never fairly be accused of over-optimism. Writing in today’s Daily Mail he contrasts his family’s recent enjoyable day on a Devon beach with Europe’s being, as he sees it:

… in the early stages of what will probably prove its gravest and most frightening tumult of our lifetimes. Our political leaders have not mentioned this, not told us Europe is up the creek without a paddle, because half of them are in denial about what is going on, and not one has a sensible idea what to do about it.

Turning to where it leaves Britain, he concludes that:

I seldom pity politicians, but ours deserve some sympathy, as almost impotent spectators of unfolding disaster. Since we are not eurozone members, there is little a British Government can usefully do or say.  

… My own strong hunch — and I say this without any pleasure — is that within a decade Britain will find itself outside the European Union. … The bust-up could come quite swiftly if Chancellor Merkel persists with her determination to impose a Europe-wide financial transaction tax to fund the next stage towards eurozone integration. This, in turn, would devastate the City of London.  

… Though our separation from Europe looks increasingly plausible, I do not share the enthusiasm of those of UKIP’s persuasion, who see this as a glorious liberation. The Germans at the conference I attended in April warned repeatedly that we would find life alone, out in mid- Atlantic, remarkably chilly. On this they are probably right. In a world of giant economic blocs, and especially up against China, Britain looks ill-fitted to compete on its own. But what else can we do if a statist, over-regulated, undemocratic and unaccountable Europe remains bent on economic and political suicide in a mindless, obsessive pursuit of the euro-ideal?

An alternative to the metaphorical mid-Atlantic might be to move even closer to the US East Coast; in the extreme, as David Aaronovitch suggested at the end of 2011, “the nations of the United Kingdom become the 51st, 52nd, 53rd and 54th states of what might be known as the United States of America and the East Atlantic.” Though I doubt whether Hastings would find that prospect particularly attractive. In a previous Mail column “Turning our backs on Britain's fallen: How a new generation believes it was just U.S. troops that won World War Two thanks to Hollywood” (as much a précis as a header), he clearly approved of how on the anniversary of D-day:

François Hollande made a gesture of reconciliation with ‘Perfidious Albion’. He became the first ever French president to visit a British cemetery in Normandy.

He concluded that article:

We should learn to value our heritage, as French governments cherish theirs. The Continent today is threatened not by war, but by greater turmoil and dissension than it has known for half a century. Only by knowing and understanding its past history, and our part in it, can we hope to come to terms with its present and future.

A debate on the viability of a “mid-Atlantic” United Kingdom (with or without Scotland) is probably overdue. Are we trapped in the invidious position, primarily in population terms, of being too large to occupy a niche, but too small to be a player? Or are there ways in which the UK could make itself too big to ignore? Perhaps this would be by leveraging our time zone and language advantages. We could also adopt a ‘smart’ and selective policy for immigration which would allow entry to talented and skilled people from anywhere, but particularly Europe if the train wreck anticipated by Hastings actually happens. This could in the short to medium term help overcome the deficiencies of our educational system. The UK could also take advantage of its status as a (relatively) ‘safe haven’ and sell gilts to fund infrastructure such as very high speed broadband and develop the regions to compensate for the over-development of the South East.

20 JULY 2012 - An update to this post is here.

Charting the eurozone’s problems

Last year, believing, like we techies do, that a picture is worth a thousand words and attempting to work out what might happen if the eurozone splintered, I posted a couple of charts of the various combinations of GDP which might result. Now Derek Thompson, who edits The Atlantic’s business coverage, has drawn its readers attention to what he describes as The Funniest Graph I've Ever Seen About Why the Euro Is Totally Doomed:

In Thompson's words:

Here is what this chart shows. Compared across more than 100 factors measured by the World Economic Forum Global Competitiveness Report, from corruption to deficits, JP Morgan analyst Michael Cembalest calculates that the major countries on the euro are more different from each other than basically every random grab bag of nations there is, including: the make-believe reconstituted Ottoman Empire; all the English speaking Eastern and Southern African countries; and all countries on Earth at the 5th parallel north. And here is your tweetable fact: A monetary union might make more sense for every nation starting with the letter "M" than it does for the eurozone.

Thompson has now come up with another of Michael Cembalest’s charts. This one illustrates nicely the eurozone’s weakness of lacking any mechanism for fiscal transfers (ie money raised by the government) to the poorer from the richer areas. In the UK these take place from London and the South East to practically everywhere else; the South West, in particular Cornwall, and the North East being significant beneficiaries. Cembalest’s chart explains how in the US this happens between the rich California-Connecticut-Illinois-New Jersey-New York quintuple and poorer states like Tennessee:

Thompson goes on to explain that:

If similar, seamless transfers existed in the EU, the rich north would have to send to Portugal and Greece at least an additional 30 cents for every dollar they paid in taxes, year after year after year. When you hear commentators say, "the eurozone must begin to transition toward a fiscal union," what they are saying, in human-speak, is that the Europe needs to be more like the United States, with balanced budget laws for its individual members and seamless fiscal transfers from the rich countries to the poor, to protect the indigent, old, and sick, no matter where they reside. The Germans call this sort of thing "a permanent bailout." We just call it "Missouri."

European exchange rates – now and 70 years ago

The BBC website has recently posted a helpful guide, What really caused the eurozone crisis? Although not attributed to a particular author, reading it one starts to hear the unmistakable tones of Robert Peston, the BBC’s Business editor, though surely Stephanie Flanders, the Economics editor was involved. One of the most interesting graphics in the guide shows the trends in the trade balances of the major eurozone economies since the currency union was established in 1999. Germany’s is now nearly 6% of GDP in surplus. After investing huge sums in the modernisation of the former East Germany in the 1990s, Germany seems to have ensured it could put that investment to work. The initial Deutchsmark/euro rate was set at a level low enough to favour the pricing of German exports to the rest of Europe and the world.

Seventy years ago, exchange rates were set in Europe to favour Germany, but in the opposite direction. In 1979 Len Deighton published one of his non-fiction military histories, Blitzkrieg: From the Rise of Hitler to the Fall of Dunkirk. In the concluding section he provided this description of the economic consequences for the French of their defeat in 1940:

German soldiers were provided with occupation marks. The French and Belgian francs and the Dutch florin were pegged artificially low - the French currency about 20 per cent below its true value - and issue banks were forbidden to devalue.
This not only had the effect of draining everything - from champagne to real estate - into German hands at bargain prices, but it prevented German goods leaving Germany, except at bonanza prices. It was a subtle form of plunder …
In addition, each defeated country was made to pay for the maintenance of the German occupation forces. In the summer of 1940 France began paying 400 million francs per day as a 'contribution to her defence against Britain'. …

(p361 Triad/Granada edition 1981)

From 1940 to 1944 the economies of both Vichy France under Pétain and occupied France were ruthlessly exploited so that resources of all kinds could be directed to the Nazi war effort. Insufficient rationed goods of all kinds were available to meet the French domestic demand with inevitable results. For example, the government-set price of butter in 1942 was 43 francs a kilo. On the marché amical (relatives and friends) it sold for 69 francs, and on the black market for 107 francs.

Eventually about 2/3 of the population could not afford to buy the minimum ration diet (1400 calories a day) due to a combination of declining wages and steadily increasing prices. People who had assets like small antiques, porcelain, pictures and so on sold them for what they could get, ultimately to finish up in the occupiers’ hands and be taken back to Germany. Presumably what wasn’t blown to smithereens during the Allied bombing offensive, or sold to the occupying forces in Germany after 1945 is still there. There always seems to me to be a paucity of antiques, antique dealers and so forth in France by comparison with the UK, which avoided Nazi occupation (apart from the Channel Islands). The inadequate nutrition of children, adolescents and women of child-bearing age during the Second World War might explain why, at 6 feet (1.8m), I seem so much taller than most Frenchmen over 50, markedly less so with the under 30s.

The wartime statistics above are taken from The Civilian Experience in German Occupied France, 1940-1944, Meredith Smith , Connecticut College, January 2010; see pages 17 and 24 for the supporting references.

Peter Oborne and the 'Guilty Men'

On 22 September David Cameron told the Canadian Parliament that “… the problems in the Eurozone are now so big that they have begun to threaten the stability of the world economy.” Earlier in the month, George Osborne, according to the Daily Telegraph, had concluded that a replacement for the Lisbon Treaty would:

be in place by 2013, on top of a minor amendment to create a permanent bail-out fund later this year. "I think it is on the cards that there may be a treaty change imposed in the next year or two, beyond what has already been proposed," said the Chancellor. "This would be for the eurozone, this would be to further integrate the eurozone, further strengthen fiscal integration."

Like the other EU states, the UK would have to endorse a new Treaty and the process of doing so could prove challenging for the Coalition. Some Tories would rather that the UK left altogether, while others would expect concessions in our favour in return for agreement. Either approach would dismay most LibDems. It is therefore not entirely surprising that the Centre for Policy Studies (CPS, a right-wing think tank founded in 1974 by Keith Joseph with support from Margaret Thatcher) published on 23 September a report by Peter Oborne and Frances Weaver, Guilty Men, which ‘details how the political class sought to tie the fortunes of the British to the Euro.’ Coincidentally, the next day Lady Thatcher made a rare public appearance at Liam Fox’s 50th birthday party.

Oborne is an incisive journalist who has also made controversial documentaries for Channel 4 Dispatches, including on 4 October last year, Tabloids, Tories and Phone Tapping. His latest, due on 26 September, The Wonderful World of Tony Blair, may also cause a stir.

In Guilty Men Oborne directs his polemic at the institutions which he sees as having pushed British membership of the eurozone.  At the same time they often made unscrupulous attacks on anyone who was opposing what is now clearly seen as a disaster which the UK was lucky to avoid. Particularly in his sights are the BBC, the FT (with some distinguished exceptions among its columnists), and the CBI. He is also unsparing of many of his fellow members of the commentariat, some of whom, like Andrew Rawnsley and David Aaronovitch, are still unashamedly opining on major issues of the day. Oborne is fair enough to allow that ‘there is no question that [Gordon Brown’s] opposition from inside government was an essential factor in keeping Britain out of the single currency.

Oborne and Weaver confine their paper to the euro and avoid the wider issue of the UK’s membership of the EU. But Peter Jay in his lengthy Foreword lays the issue firmly on the table. In particular, he gives vent to some of the most Francophobic remarks that I have read for some time, and which I will quote as a foil to the Francophilia some might think implicit in this blog:

Looking back [in 1945] we felt deep pride in the achievements of the long struggle – from the defeat of the Armada by way of Marlborough’s defeats of Louis XIV’s armies, Chatham’s strategy in India and North America, Nelson’s and Wellington’s defeats of Napoleon and Churchill’s defiance of Hitler – to preserve that independence in the face of threats to create a continent-wide despotism on the European mainland and to impose its power on Britain.
…
I met [the great French diplomat and technocrat, Jean Monnet] at a small lunch in 1952 in Paris hosted by William Hayter of the British Embassy for my father, then a member of the Labour Opposition’s front bench Treasury team. I was 15 and kept my mouth shut, but my ears open. I have never forgotten v what I heard. For, it was the truth about the European strategy which he had devised and sold to French political leaders.
France was humiliated by the fact that its representatives were no longer treated by other nations in the way they once had been. Only super-power diplomats were taken seriously. To recover this prestige and standing France must become a superpower like America and Russia with a continental economy to support a continental industrial production and tax base sufficient to deploy or threaten the military might that alone delivers diplomatic weight.  
Europe must be welded into such an instrument, by implication, though this was not spelt out, to be dominated and guided by the especially civilised leaders and diplomats which France alone could produce
…
It was a direct route back to that world, but under a new flag, that of “Europe” (whether or not Greater France would have been a more candid name). It was Bonapartist, even if with a twentieth century face.
…
To a Euro-nationalist (otherwise a French Third Empire-builder such as Valéry Giscard D’Estaing) to admit Turkey [to the EU] would be a dangerous dilution of the purity and cohesion, and therefore the strength, of Europe as an ethnically, religiously, geographically and culturally homogeneous political actor and as a new power in the world.
…
Despite the accident of the horse-shoe model of the French constituent assembly in 1789 at Louis XVI’s Versailles whence the terms left and right derive, there is absolutely no objective basis for arranging political choice along this one-dimensional spectrum. Still less is there any reason to regard support for “Europe” – more especially a Europe modelled on the Bonapartist tradition – as in any sense a centrist or moderate position.
…
My only complaint was that neither of [the two greatest economic journalists of this time, Sir Samuel Brittan and Martin Wolf at the Financial Times] fully saw that it was the very dysfunctionality of the Euro which was its chief attraction to the Bonapartists. They could safely rely upon it to cause the periodic acute crises which then supplied the political context for the next great leap forward in Eurocentralisation, edging ever closer to one country, be it Third Empire or Fourth Reich, enshrining Monnet’s City on the hill from which French diplomats could go forth with German cheque books in their baggage to strut their hour upon the world stage.

and for the sort of people who have vines as Backgrounds to their blog:

The groups who have most particularly betrayed Britain’s independence and support for a multinational shared management of our real global problems in favour of merging Britain into an old-fashioned power-seeking country called “Europe” have been mainly motivated by muddled thinking and immature sentiment. The number of people who in their early youth just thought of Europe as a nice place for culture, sunshine, wine and skiing and made this the foundation of their view of the political and economic architecture being imposed on the UK is pathetic and shocking.

Ouch – but I don’t really agree with Jay. French politicians of his age (74) - Giscard D’Estaing, amazingly, is 85 - or more or less of the same generation, like Dominique Strauss-Kahn (62) may think as chauvinistically as he alleges, but from my limited knowledge, younger people in France, inside and outside politics, are as aware of the challenges from China, Brazil, India etc as their contemporaries in the UK. What Jay doesn’t address is how countries of the size of France and the UK could fit into the world order, if not as part of a weightier grouping like the EU.  Dominique de Villepin (former French Prime Minister, 57) addresses just that issue in his Notre Vieux Pays, published in France last month. My French isn’t good enough to do it justice, but he obviously realises the challenges posed to the French values by globalisation, de-industrialisation, l’iPad etc – I’m not sure he has any solutions. No mention, as far as I could see, of how les anglais are having to deal with similar problems!

Osborne and Weaver state that ‘The title of this short work – Guilty Men – is drawn from the book written in the summer of 1940 as Britain awaited Nazi attack in the wake of Dunkirk. The intention of that famous book was to call to account the architects of the policy of appeasement who had betrayed the people of Czechoslovakia at Munich in 1938.'

Their analogy is possibly a little over the top. The UK may have mistakenly pursued appeasement in the 1930s but we didn’t join the euro in the 2000s.  The indicted in the first Guilty Men included Baldwin and Chamberlain, but as Prime Minister and Chancellor of the Exchequer in the 1930s they were instigators, albeit reluctantly, of the rearmament programmes which began in 1934 (touched on in my ‘aerodrome’ post in August).  Historians will probably debate for ever whether Chamberlain (by then Prime Minister) was right to make an agreement with Hitler at Munich.  One uncertainty seems to be the extent to which the UK would have been able to rely on France, in particular its army in confronting the Nazis in 1938.  The French military capabilities on air and land were little improved by 1940, whereas the RAF had been substantially strengthened in the same period.

Still, Osborne has a history degree so presumably is confident about the grounds for the parallel he is making.  The matrix diagrams below try to show how difficult it is, however the columns and rows are arranged, to draw coherent comparisons between Mosley and New Europe (as was attempted - see Oborne and Weaver, page 22) or for the Europhobes to lay claim to Churchill as one of theirs.

Euro Breakup – an aide-mémoire

Although the Eurozone coming apart is widely-discussed, understanding the scale is not something I find easy. So here is a first stab at an aide-mémoire, based on the nations' GDPs in 2010, and accepting that the problem is about debts which, in some cases, exceed GDP.

EU GDPs 2010, Millions of euros

The exploding Pie Chart (appropriate for once) divides the total GDP of the 27 EU countries (12,268,996 million euros) into seven elements, corresponding to:

• The UK*
• Nine other countries (BG, CZ, DK, HU, LV, LT, PL, RO, SE) which are not part of the Eurozone ('Rest non-euro')
• ThePIGS, the most problematic economies within the Eurozone (PT, IE, EL, ES)
• The EuroDeutschmark ('EuroDM') is a lumping together of DE (66%) and four economies (AT, BE, LU and NL) (34%) which are closely linked to it.
• The six other members of the Eurozone (CY, ES, FI, MT, SK, SI) ('Rest euro')
• FR
• IT

The Column Chart below presents the GDPs for these seven elements and also the PIIGS (PIGS and IT).

One question which arises is whether, assuming the PIIGS were to leave the Eurozone, the EuroDM would be worth constructing without FR.

*The two-letter country abbreviations are in the table below.

ADDENDUM 23 SEPTEMBER

I first touched on France returning to the franc in a post back in August, and the issue was implicit in what I wrote above. It may be significant that yesterday the French Prime Minister, François Fillon, announced the decision that France should adopt the same age for retirement as Germany, 67, by 2030. This would be the first of various steps towards social convergence:

une convergence progressive de l'organisation économique et sociale de nos deux pays, car c'est la clef de la survie et du développement de la zone euro et du continent européen
a gradual convergence of economic and social organization in both countries because it is the key to survival and development of the euro area and the European continent

The Left have criticised Fillon’s proposal, as they did the earlier rise in the retirement age from 60 to 62.
My opinion, for what it’s worth, is that the “cosy elite”, who run France, currently intend being part of the ‘EuroDM’ above.

Cost of diesel in euros, pounds – and francs!

Last week I bought some diesel fuel (gazole) at a French hypermarket. There are two things which make it a little less boring than most receipts:

Firstly, the price of €1.32 per litre: at the prevailing exchange rate of £1 = €1.13, this was equivalent to about £1.17 when the best price in southern England was around £1.38 – so about 15% cheaper in France. Hypermarket petrol (essence) on the other hand was €1.51, so about £1.34, much as in England. (Any US readers – this is about $8.30 for a US gallon of gasoline, lucky us!). Incidentally, the French government maintains an online database of all retail fuel prices, with a journey planner.

Secondly, like a lot of receipts in France, it explained, pour information naturellement, that the cost in French Francs would have been FF479.44, this being at the rate of 6.559570FF/€ as fixed on 31 December 1998. A useful aide memoire should France ever leave the Eurozone, which may seem unlikely, but France has a medium-term (2013) deficit problem that will be difficult to address, particularly in view of the presidential election timetable and the country’s historic approach to public expenditure. One obvious measure would be to increase the duty on gazole to the level on essence, but it would certainly be unpopular.

Vintage Petrol Pump in SW England

The photograph above is of a vintage petrol pump encountered recently in SW England. I thought it would be interesting to see when the dials had been frozen, and finally came up with enough data to produce the graphs below, as well.  

UK Historic Motor Fuel Prices, p/l and adjusted for inflation

The second graph, which has been adjusted to 2010 price levels using long-run RPI data, is more informative, but still ignores wage inflation, mileage trends, engine efficiency improvements, and so on. The third shows the proportion of the price which the UK government has taken over the years. It seems likely that if the price of oil drops in the near-term, the government will raise fuel tax to keep prices at about current levels and increase revenue.

Percentage of Fuel Price which is Tax

NOTES

Older readers (who will remember having to learn arithmetic for 12 pence to the shilling and 20 shillings to the £) may notice that the pump in the photograph was wrongly set up. 4 gallons at 2/5 would have given a “THIS SALE” of 9/8, not 17/8. Alternatively, 17/8 for 4 gallons would be at a “PER GAL” of 4/5, the price prevailing circa 1953, and equal to 4.85p per litre in cash terms.

The fuel and tax data came from the AA up to 2005 and the UK Petroleum Industries Association thereafter. Petrol is ‘leaded 4*’ up to 1988, unleaded thereafter. Long-run RPI data up to 2003 is from O’Donoghue, Goulding and Allen’s very useful ‘Consumer Price Inflation since 1750’ published by the ONS, with CSO RPI data thereafter.