Books: Currency conundrum

Written By: Denis MacShane
Published: October 25, 2016 Last modified: October 25, 2016

The Euro And Its Threat to The Future Of Europe
by Joseph Stiglitz
Allen Lane £20

The Euro is the one EU project on which the left and right appear to agree. The nationalist right hate the Euro because it is – for good or ill – the most powerful symbol of post-national cooperation and anti-nationalist integration. It is no accident that the biggest funders of Ukip, other anti-European politicians, or anti-EU think tanks like Open Europe (a misnomer if ever there was one) have been foreign exchange trading billionaires or spread-betting multi-billionaires who make their fortune enticing people to speculate on movements in foreign currencies.

The Euro stopped at a stroke the monetary dumping and currency speculation which in the earlier period of European integration blocked progressive politics and brought down governments, including the 1964-1970 Labour government which never recovered from Harold Wilson’s 1967 devaluation. Tory Chancellors also suffered as Nigel Lawson and then Norman Lamont had to be sacrificed to appease the Gods of unfettered currency speculation.

But the strangest aspect of ending this period of uncontrolled capitalist speculation against the real economy is the number of Labour MPs and supporters who blame the Euro for current economic woes. Larry Elliot, the Guardian’s estimable economics editor, wrote a whole book against the Euro as his own contribution to the Brexit debate. Ed Balls, our dancing hero, claims he and Gordon Brown saved Britain from entering the Euro.

This is utter rubbish. John Major promised a Euro referendum before the 1997 election and Tony Blair immediately did likewise. Blair quite rightly never contemplated holding a plebiscite on the Euro. I was at the heart of EU politics 1997-2005 and a Euro referendum was never on anyone’s agenda.

It is an imperfect currency. Greece should have probably kept its drachma, but when Yanis Varoufakis suggested quitting the Euro for the drachma he was immediately fired by the Syriza Prime Minister, Alexis Tsipras. Unlike Varoufakis, who is a Guardian columnist, Tsipras is a real politician. The Greeks no more want to return to the drachma than they want to return to rule by the Ottomans.

The Euro is here to stay. It is a done deal. Yes, it does prevent governments simply borrowing their way out of any current problem by handing on ever-growing debts to their successors. Yes, German right-wing economic orthodoxy needs revision. But calling for a return to old currencies, as Stiglitz does in this deeply conservative book, is like calling for a return to monarchies to solve Europe’s political malaise. There’s no source quoted written other than in English.

This is a book from a well-meaning American progressive seen entirely through the lens of the supremacy of the US dollar, even though it took a century and a murderous mass-slaughter civil war before the US Central Bank, the Fed, was created in 1913.

The European Central Bank is today printing money like Keynes on crack.  But it cannot substitute for the bad policies and failure to support socially progressive reform policies of the dominant ruling centre-right government in the Eurozone.

Already we have seen how the Brexit vote has reduced UK wealth with a 15 per cent devaluation and the pound trading against the dollar at its lowest since 1983. This is heaven for currency speculators but a disaster for the real economy. Stiglitz is right that the Euro is far from perfect. But which currency is? Abolishing it and reverting to the Forex speculators’ dream Europe of every currency competing with every other currency would be the biggest victory for reactionaries this century.

About Denis MacShane

Denis MacShane is a former Europe Minister