The monetary union has fused together countries as different as Germany and Italy without forging the institutions necessary to keep the union together. It is a child’s fantasy of a union.
By Roger Bootle and cross-posted from The Daily Telegraph (behind paywall).
As debates have raged about Britain’s future relationship with the EU, little attention has been given to the nature of the entity that we would be leaving or remaining in, or to its future. Better late than never.
What we now call the European Union has never stood still. It emerged out of an innocent sounding agreement to establish the Coal and Steel Community in 1952. Five years later came the Treaty of Rome that established the European Economic Community (EEC). It represented a giant leap (forwards or backwards?). It clearly embodied the objective of reaching a full union of the member countries. The community has been growing like topsy ever since. The EEC became the European Community (EC) and then the European Union (EU). Membership expanded from the original six to the current 28 countries.
Initially, the members of the union enjoyed substantial economic success. In the early years, the EU may have helped, but only marginally. Growth was driven primarily by post-war reconstruction, the shift from agriculture to industry and the global boom.
Apparently unnoticed by the UK’s Europhile establishment both then and now, most countries in the industrialised world enjoyed rapid growth during this period. The outlier was not the EU but rather the UK, held back by self-imposed burdens that were not lifted until the radical Thatcher reforms of the Eighties. Interestingly, once shot of them, the UK started to outperform other EU members.
As time moved on, the EU’s plans became more and more grandiose. The Maastricht treaty, which laid the foundations for the euro, was signed in 1992. Since then, the EU’s relative economic performance has been poor. But the grandiose plans have trundled on.
So do you suppose that the EU will stay as it currently is? It cannot. Put to one side the question of the union’s future geographical expansion, although this is bound to happen. The position of the eurozone makes profound change inevitable. It still has no integrated fiscal and economic policy. The monetary union has fused together countries as different as Germany and Italy without forging the institutions necessary to keep the union together. It is a child’s fantasy of a union. That is precisely why the Bundesbank, Germany’s widely revered central bank, opposed it.
To resolve the contradiction at the heart of it, the European elites have believed that something would turn up – or down. Now it is decision time. Its members must now press on to full fiscal and political union or the union must break up. The euro is one recession away from an existential crisis…