Probably a headline you think you’ll never see, but Michael Heseltine thinks otherwise – and I think he’s right, and here’s why.
The Germans have too much to lose if the Euro goes belly up. They totally understand that they’ve done extremely well out of the Euro. Life would be very different indeed if they still had their long-lamented Deutchmark. But just because the Eurozone is in crisis does not mean they’re going to roll over and stuff the coffers of the ECB. There is no way they’re going to agree that billions of Euros should be dispensed to the likes of Italy and Spain just because their borrowing costs have hit the roof and pressure from the markets – and they are right not to do so.
Germany isn’t quite so spooked by ‘the markets’ as the rest of the Eurozone appears to be. It’s quite prepared to play the long game, despite the dangers. It doesn’t see why it should support Eurozone countries whose financial disciplines are lax and where political expediency has encouraged the growth of huge and unsupportable public sectors. It’s all too easy to conjure up public sector jobs to keep unemployment down and the votes rolling in, but much more difficult to generate real growth. Political expediency has just run out of road.
But why wasn’t all this addressed before the single currency was introduced? The answer’s simple. There is no way any potential Eurozone member would (or could) have signed up to the disciplines and rules required, and that are now being demanded by Germany – fiscal union by any other name. It was politically impossible. Fiscal union was not even on the original agenda.
But the advent of the Eurozone crisis, whatever its cause, now means that fiscal union is now very much on the agenda. It has to be. And the reality is that the Eurozone crisis is a crisis that needed to happen. Out of this crisis will come necessary and long-lasting change. What will eventually emerge from the ashes is very likely to be a fiscal union and a healthy Euro.
With a strong Euro and trust restored in the Eurozone, where does this leave Britain? The answer is – out on a limb and marginalised. In these new circumstances there is little chance that London will be able to maintain its position as the financial centre of Europe. That will move to Frankfurt. All focus will be on the Euro and Eurozone countries, not on quaint old Britain and sterling. ‘Financial services’ will contribute less and less to the economy, and with no vibrant manufacturing sector to rely upon, we’re going to find life very difficult indeed.
There’s going to be a very heavy price to pay for years of constructive ambiguity as practiced by David Cameron and his band of eurosceptic ‘Little Englanders’. Unless of course…unless we come to our senses and join the Euro. It might just happen.