David Blake is the author of this essay which was written for Briefings for Brexit. We republish this essay here with their kind permission. Part I was published here yesterday.
… by taking control of your currency and your taxes
Twenty years ago, on 1 January 1999, the euro was introduced. It is the common currency of the 19 members of the eurozone. Jean-Claude Juncker celebrated the twentieth anniversary thus: ‘For 20 years, the euro has delivered prosperity and protection to our citizens. It has become a symbol of unity, sovereignty, and stability’. But this is the view from Brussels which now owns the ‘sovereignty’ of the euro.
The experience was rather different in the eurozone member states. The euro was introduced across a group of countries whose economies were so disparate that the operation of a single monetary policy with a single eurozone interest rate was inevitably going to lead to a pattern of booms and busts in the peripheral states when the interest rate is set to meet the needs of core economies, such as Germany. In addition, the way in which exchange rates were fixed at the start of monetary union resulted in Germany joining at too low an exchange rate, while the peripheral countries joined at too high an exchange rate.
This inevitably led to the mainly northern members of the eurozone, especially Germany, building up large trade surpluses and the southern members, such as Italy and Spain, building up corresponding deficits. This, in turn, has encouraged capital flight from Italy and Spain to Germany by savers fearful of the solvency of their banks. All these transactions take place via Target2, the eurozone payments system, and create liabilities for the deficit countries. At the end of 2018, Italy and Spain owed around €500bn and €400bn, respectively, which they can never pay back, and Germany was owed more than €900bn, which it will never recover.
Tyler Durden argues that ‘the euro project [has] been an economic disaster for all participants, including Germany, which will eventually be forced to write off the hard-earned savings she has lent to other eurozone members [viaTarget2]. We know, with absolute certainty, that the euro will self-destruct and the eurozone will disintegrate’.
Even the europhile London School of Economics admits that ‘The euro crisis, which first peaked in 2010 and continues to haunt the eurozone today, has been the most serious economic crisis in the history of the European Union. In fact, taken together, the global financial crisis and the eurozone crisis have by now caused more lasting economic damage in parts of Europe than the Great Depression of the 1930s. The economic crisis has also turned into a serious political crisis, as conflict among and within EU member states about how to resolve the crisis threatens both European integration and domestic stability’.
But none of this matters to Juncker who positively welcomes crises as a way of grabbing more power. He is, after all, only following in the footsteps of his hero Monnet who also said: ‘I have always believed that Europe would be built through crises, and that it would be the sum of their solutions. But the solutions had to be proposed and applied’.
Then there is tax. Another key aspect of ‘sovereignty’ is the power to collect taxes. The EC wants to take away the national vetoes on tax policy. The putative reason is to close off tax avoidance schemes by major multinationals, which has had the consequence that ‘EU growth and competitiveness, as well as fiscal fairness, have been blocked as a result’. But the real reason is more consolidation of power by Brussels over member states.
The EC has even managed to factor tax into the Brexit negotiations. As Professor David Collins points out, the Withdrawal Agreement hands over UK Tax Policy to the EC. For, example, the power to give tax breaks to startups or key sectors of the economy would need to be approved by Brussels.
It is now far too late for member states to object
Now you would have thought that the member states would not simply take all this lying down. Occasionally, you get a protest, usually from the Danes, who are almost as eurosceptic as the Brits. You’ll periodically get newspaper headlines from the Danish prime minister like this: ‘“The EU has TOO MUCH power!” Danish PM warns of ANOTHER Brexit unless Brussels changes’: ‘The Danish Prime Minister… warned Brussels to learn lessons from the Brexit vote, …warned of the growing levels of eurosceptism in Denmark, …and [urged Brussels to give up its] grand ideas of the United States of Europe’. But this falls on deaf ears in Brussels. There is going to be a United States of Europe – it’s written into the Lisbon Treaty. The Danes are fortunate enough not to be in the eurozone, but the EC knows full well that once they control your currency and taxation, there is no way of escape.
The Brussels bureaucrats have not given up on Britain either. As Leo McKinstry argues: ‘In their narrative, Brexit is portrayed as an inherently foolish project that was always certain to create a political mess. According to them, the only solution is to abandon withdrawal and submit once more to rule by Brussels’. But he then goes on to point out: ‘Such a move would not only subvert the outcome of the 2016 referendum, it would also shackle us to a failing institution that is dismally run, ideologically fixated, profoundly undemocratic and increasingly unpopular. The Brexit difficulties of the British Government pale beside the colossal, self-inflicted problems of the Brussels federal empire’.
The European Commission is slowly strangulating Europe – and it doesn’t give a damn
Italian Deputy Premier Matteo Salvini has said that: ‘People like Juncker have ruined Europe and our country… [and the euro] is ‘crime against humanity’. But Juncker doesn’t give a damn that he is slowly strangulating Europe. He knows he has Italy and the other eurozone members on their knees before him as supplicants. That’s what ‘ever closer union’ means to him – on your knees in front of him with a begging bowl, just like Oliver Twist.
The father of a friend of mine worked for Imperial Chemical Industries (ICI) at the time of Indian independence at the end of the 1940s when all those district commissioners returned home looking for jobs. They became middle managers in companies such as ICI. This was initially thought to be a smart move, but my friend’s father said: ‘you wait, they’ll strangle this place in red tape’. And so it proved. The same will happen with the EU.
Why there are so many supporters of the EU in this country who want to be controlled from Brussels by people like Juncker and Selmayr is beyond me.