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Fox on Friday: If the EU is so good for our economy, why does it perform so appallingly?

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One of the arguments most regularly used by those who want to keep us under the influence of Brussels is that being in the European Union is key to our economic wellbeing. We have heard it from the Governor of the Bank of England to the CBI and the Treasury. Logically, if it is the EU that is the key element in our economic success, then that same benefit must be replicated across other member states. The facts, however, paint a very different picture from the rhetoric of the Remain campaign.

Of the countries in the OECD, 16 of the 20 with the highest unemployment  rates are in the European Union. Of the 10 OECD countries with the highest unemployment, only one is not in in the European Union. Unemployment averages 6.5 per cent in the OECD; 8.9 per cent in the EU; and 10.3 per cent in the Eurozone. Britain’s unemployment is just over 5 per cent. If the EU is so good and so key for economic wellbeing, why is it failing almost every other country in the EU?. One of the reasons is the failure of the euro – the most sacred and central element of the European Project.

The euro was always a flawed venture.

It is a centralising political project masquerading as an economic one, and since its inception rules have been regularly ignored, creating new cracks in its already inherently flawed architecture. Such was the rush to join that no exit mechanism was devised, with the consequence that no one has any idea how to get out in a crisis.

There were two intellectually defensible models for the euro. The first was to be honest and say that it was such an important element of Ever Closer Union that everything possible had to be done to make it succeed. Some saw this as analogous to the American experience after the civil war. With the abolition of the Confederate currency, a hugely difficult operation, the states’ debts were consolidated into the federal debt for the first time and free fiscal transfers were enabled between the federal and state governments if required. This process proved impossible in Europe because of the huge disparity between countries’ debt levels and the unwillingness of sovereign states to bail out other sovereign states.

The second model was a purely economic one. Currency union was to be available to those economically similar nations which could meet strict criteria for entry and maintain sufficient fiscal discipline to be allowed a say in the central bank.

In the end neither model was followed; instead an unstable and unworkable hybrid emerged. Not only were countries who failed to meet the convergence criteria allowed to join anyway, but a lack of fiscal discipline subsequently meant that many countries, including at times France and Germany, broke through the barriers that were supposed to keep the currency on the rails.

Little wonder that some states operated in the apparent belief that whatever they did a financial solution would be found for them from outside. Yet, ironically, when bailouts have become necessary, largely funded by German taxpayers, Berlin’s stance has been interpreted in some quarters to mean that Germany is willing to tolerate any level of austerity in any other country apart from Germany in order to make the project succeed. The resultant resentment is a recipe for instability and the revival of nationalism in Europe. The idea of austerity being forced upon smaller nations by Berlin has too much historical resonance to succeed without fostering potentially dangerous political backlashes on both left and right.

On top of the political dangers, the human costs are immense. Across the Continent, millions of young Europeans have been deprived of economic opportunity and hope. High, long-term youth unemployment is the price the bureaucrats in Brussels have been all too willing to pay for their precious single currency.

A generation has been readily sacrificed on the altar of the euro – and for what? The answer is the vanity and pride of those who will stop at nothing to achieve their vision of a European state. What’s worse we pay for its failure through our budgetary contribution. The more our economy grows in relation to the disastrous Eurozone, the more our contribution goes up. The EU is not a key element of our economic success but a threat on our doorstep.

 

(Image: Ozzy Delaney)

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Liam Fox
Liam Fox
Dr Liam Fox is the Conservative MP for North Somerset and former Defence Secretary.

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