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Courtesy of Daily Telegraph article by Peter Oborne…
Margaret Thatcher knew the single currency would devastate Europe
Next week it will be 20 years since Margaret Thatcher fell. Pressure had been building on a number of fronts, but the issue which finally destroyed her was the yet-to-be-born euro. In the last weekend of October 1990, she travelled to a European summit in Rome, where Jacques Delors’ dream of European Monetary Union was high on the agenda. But while Mrs Thatcher was fighting her lone battle against the prospective single currency abroad, she was being fatally undermined at home. Geoffrey Howe, her bitterest cabinet critic, went on television to tell the interviewer Brian Walden that in principle Britain did not oppose the euro.In her Commons statement after returning home, she was forced to slap Howe down: “this government believes in the pound sterling.” Howe resigned, and days later delivered the famous speech from the back benches that set in motion a leadership contest.
Today, Margaret Thatcher’s autobiography, first published in 1993, reads like a prophecy. It shows how deeply and with what extraordinary wisdom she had examined Delors’ proposals for the single currency. Her overriding objection was not ill-considered or xenophobic, as subsequent critics have repeatedly claimed.
They were economic. Right back in 1990, Mrs Thatcher foresaw with painful clarity the devastation it was bound to cause. Her autobiography records how she warned John Major, her euro-friendly chancellor of the exchequer, that the single currency could not accommodate both industrial powerhouses such as Germany and smaller countries such as Greece. Germany, forecast Thatcher, would be phobic about inflation, while the euro would prove fatal to the poorer countries because it would “devastate their inefficient economies”.
It is as if, all those years ago, the British prime minister possessed a crystal ball that enabled her to foresee the catastrophic events of the past year or so in Ireland, Greece and Portugal. Indeed, it is one of the tragedies of European history that the world chose not to believe her. President Mitterrand of France and Chancellor Kohl of Germany dismissed her words of caution. And when Mrs Thatcher was driven from office in 1990, a crucial voice was lost, and a new consensus started to form in Britain in favour of the euro.
This consensus stretched across the entire spectrum of the British establishment. It took in Tony Blair’s New Labour and all of Paddy Ashdown’s Liberal Democrats. The CBI came out for the euro, and so did the trades unions. The Foreign Office was doctrinally pro-single currency. Leading businessmen, such as Peter Sutherland (chairman of BP and Goldman Sachs International) and the fashion-conscious Richard Branson were strongly in favour. The Financial Times, a newspaper whose judgment has been wrong on every great economic issue of the last 40 years, was another supporter.
This consensus was all the more powerful because it contained Conservative grandees. The Britain in Europe campaign, featuring an ambitious young Liberal Democrat called Danny Alexander, now the Chief Secretary to the Treasury, was launched in 1999. Ken Clarke and Michael Heseltine treacherously spoke alongside Tony Blair and Peter Mandelson.
“The price we would pay,” announced Mandelson, “in lost investment and jobs in Britain would be incalculable.” He projected that “outside the euro, there is little we can do to protect industry against destabilising swings in the value of sterling.” Michael Heseltine spoke apocalyptically about the terrifying consequences for British competitiveness outside the euro. Chris Huhne, now a Lib Dem cabinet minister, was scathing about eurosceptics who warned that entry to the euro would cause the Irish economy to overheat – warnings that proved to be all too accurate.
Irishman Niall Fitzgerald, chairman of the industrial giant Unilever, forecast British economic obliteration outside the euro. In a dark irony, it is his native country that now faces obliteration. Those who challenged this consensus were ridiculed. Even William Hague, then leader of the opposition, received this contemptuous treatment. Hague made a series of speeches which, reread today, rival Margaret Thatcher’s in their prescience. He predicted that membership would “lead to huge booms and deep recessions”. Hague chillingly added that “the single currency is irreversible. One could find oneself trapped in the economic equivalent of a burning building with no exits.” He noted that euro membership could lead to a “full-blown banking and financial crisis.”
Nobody listened, many mocked, and Hague was accused of dragging the Tory party to the Right. The BBC, an integral part of the pro-European alliance, played its full role in marginalising critics such as Hague. The state-owned national broadcaster lumped the Tory leader in with cranks and xenophobes. By contrast, euro supporters were invariably presented as mainstream and sensible.
But it is Hague’s speeches that have stood the test of time, while the excitable expostulations of Heseltine, Blair, Mandelson and Clarke all look ridiculous today. So let’s try a thought experiment and ask where Britain would be today if they had won the argument.
The first point to note is the British economic boom which ended in 2008 would have been headier still, thanks to the soft interest rate policies pursued by the European Central Bank in the early years of this century.
The second is that the subsequent crash would have been far, far worse. We would not have been able to lower rates as far and as fast as we did. We could not have devalued out of trouble. We would have been unable to fuel economic growth by printing money.With these options unavailable, the recession would have turned into depression. It is likely that unemployment would now be heading towards five million and our already broken public finances would be in ruins. Just like Greece and Ireland, we would be unable to raise funds on the international markets and the IMF would have moved in. Angela Merkel of Germany would be offering a bail-out – but only on condition that we follow policies set for us in Europe. We would have lost our independence and become a wholly owned subsidiary of Brussels – the fate Ireland faces today.
Yesterday, I tried to reach the leading politicians who tried so hard 10 years ago to abolish the pound – Heseltine, Leon Brittan, Mandelson, Neil Kinnock, Charlie Kennedy. I wanted to ask them whether they stood by their extravagant warnings. I wanted to ask them for an apology. Not one of them came back.
Other apologies are called for. From the BBC, which distorted the debate. From the superior commentators who sneered at politicians like William Hague, John Redwood and Iain Duncan Smith as they fought against the euro. From Heseltine and Clarke for their calculated betrayal of Hague. From the CBI, which (under its then director general Adair Turner, now chairman of the Financial Services Authority) sold the interests of British business down the river.
One other point. Margaret Thatcher may have been the first victim of the single currency, but there have been many more since: the millions who have lost their jobs and the nations that are being stripped (as she forecast) of their pride and independence. Baroness Thatcher has often been accused by her politically motivated enemies of callousness. But backers of the European project are today happy to countenance unlimited human suffering in their mission to enforce economic and monetary union. Mrs Thatcher knew this would be the result of their deranged plan, which is why she fought to stop it. Her last battle as prime minister could not have been fought in a greater or more compassionate cause.
Yikes a Maggie Thatcher.
Give us a George Bush. Some backbone to make tough decisions even for all his evils he at least has conviction.
Ireland is over for the forseeable future.
Europe’s economic issues aren’t due to the single currency. Iceland, Hungary, Latvia, and Estonia all have had recent severe financial crises without the Euro. Yet another thing Thatcher (and Reagan) was dead wrong about.
Miss W. Ireland’s financial crisis may not be entirely down to the Euro, but being in the euro meant that they were saddled with the interest rate that the ECB set and couldn’t raise it to cool irresponsible borrowing and lending during the "boom"
years.
Now that the ordure has hit the fan, being in the euro means they can’t act independently to right things. They are shackled to the euro. Thatcher (amongst others) foresaw the problems being tied to this currency would bring.Europe’s economic issues aren’t due to the single currency. Iceland, Hungary, Latvia, and Estonia all have had recent severe financial crises without the Euro. Yet another thing Thatcher (and Reagan) was dead wrong about.
Ireland should have raised interest rates to stop the economy getting out of hand a few years ago but they couldn’t because as insomniac says they are in the Euro.
It’s not an economic issue, it’s just bad debt that Ireland has, mainly caused by the housing boom. If the Irish government is forced to raise corporation tax then it may well turn into an economic issue.
http://www.bbc.co.uk/news/business-11766346
The mini article
‘What went wrong in the Irish Republic’
explains how joining the Euro screwed it up for Ireland.
It seems that many are willing to blame anything except the US bankers for the economic crisis in the world. The lack of integrity in the raters of creditworthyness such as Moodys is beyond belief.I understood that the collapse of Lehman brothers led to the financial crisis in London(no euros there) and by extension across Europe.Looks like Germany after WW1 when the burden of debt gave rise to the Hitler fiasco for Europe.Do those bankers never learn, or is greed insatiable? Incidentally it was during the Reagan/Thatcher era the concept that "greed is good" emerged, to be preached at many of the revivalist churches in the land.In 1992, the Bank of England suffered a crisis independent of the Euro. How does Tatcherism explain that? With or without the Euro to blame banks go bust,(see Wikipedia; George Soros) even the B of E.Are we advocating the ability to print money as the answer? Surely debt relief is more reasonable.
Andy – that there was a banking crisis/recession under Thatcher isn’t the point. What is the point is that when an economy goes tits-up, it needs enough independence to take whatever measures it feels will bring about a recovery. As politicians are predominately as thick as pig sh1t, they may well take the wrong steps, but at least they have the freedom/ability to take steps. Ireland -can’t. Why?
Because it’s in the euro!
You can point to financial crises going back centuries if you like, from countries with differing political ideoligies and leaders of varying ability – no one is saying that only being in the euro causes economc crisis. What I’m saying is, in Ireland’s case, being in the euro,
stops
them taking independent, Irish-specific steps to address the problem.
You can slag Thatcher, Brown, Reagan, Merkel, Sarkozy, the EU, Bill Clinton, Bank chiefs even the IMF off for economic stupidity until the cows come home. Some of the brickbats may even be justified. BUT BEING IN THE EURO STOPS IRELAND FROM CHOOSING FOR ITSELF HOW TO DEAL WITH THEIR PROBLEM. Get it?I understand what you are saying (but outside the Euro the choice was between devaluating the currence or printing more money)inside the euro the choice was between saving the banks which was their choice; or letting the banks fail,like many did even in England,which is outside the Euro. They could have let the banks fail but they choose otherwise for better or worse.Whether inside or outside Ireland were brought down by Wall Street,(and the credit rating agencies,who rated mortgage securities at triple A ratings) just like Iceland was.In fact some say it is better off than Iceland because it is inside the Euro.I neither agree nor disagree with you but point out another interpretation of the story.I will leave it at that.
It seems that many are willing to blame anything except the US bankers for the economic crisis in the world.
They’re also unwilling to blame the general public who gorged themselves on cheap money and credit, an ocean of cheap imports and cheap foreign labour.
Mind, which politician is going to bring up that particular truth when other bogeymen abound?
Mike
Quite right Mike .. the cheap money that was made available by low interest rates set by the ECB.
Andy, you seem to think that everyone is blaming the Euro out of spite or something, me, insomniac, the bbc .. it is actually a fact lol.
The thrust of the article proposes the theory that Thatcher had unique insight into the ultimate fate of the Euro, and furthermore that this was her only reason for distaste for the currency, and not xenophobia.
On the first point, the economies affected are dwarfed by that of the UK, and the impact to Britain if it
had
joined the Euro, would likely have been much less significant (on a parallel with the French, perhaps) than it has been in Ireland, Portugal, Greece and Spain.
On the second point, I suspect xenophobia more than played a part in forming her opinion. The suggestion that she gave a **** about how Greece would fare economically 20 years down the road is laughable.
The article is essentially cobblers, and is yet another piece of Thatcher revisionist drivel. I can only imagine that many now view her in a different light these days, because she was the last Prime Minister we had with a combination of integrity and honesty. But we shouldn’t forget that those qualities were used to drive a ruthless ideology that effectively destroyed large parts of the UK social fabric, and were rarely, if ever, put to ‘good’ use.
It is a slow day in a damp little Irish town. The rain is beating down and the streets are deserted. Times are tough, everybody is in debt, and everybody lives on credit. On this particular day a rich German tourist is driving through the town, stops at the local hotel and lays a €100 note on the desk, telling the hotel owner he wants to inspect the rooms upstairs in order to pick one to spend the night. The owner gives him some keys and, as soon as the visitor has walked upstairs, the hotelier grabs the €100 note and runs next door to pay his debt to the butcher. The butcher takes the €100 note and runs down the street to repay his debt to the pig farmer. The pig farmer takes the €100 note and heads off to pay his bill at the supplier of feed and fuel. The guy at the Farmers’ Co-op takes the €100 note and runs to pay his drinks bill at the pub. The publican slips the money along to the local prostitute drinking at the bar, who has also been facing hard times and has had to offer him "services" on credit. The hooker then rushes to the hotel and pays off her room bill to the hotel owner with the €100 note. The hotel proprietor then places the €100 note back on the counter so the rich traveler will not suspect anything. At that moment the traveler comes down the stairs, picks up the €100 note, states that the rooms are not satisfactory, pockets the money, and leaves town. No one produced anything. No one earned anything. However, the whole town is now out of debt and looking to the future with a lot more optimism.
Roddy, the problem with your analogy is that there aren’t middlemen taking huge cuts on every deal for very little benefit.
That has been the problem with both the UK and Ireland, and the way that the farm has been bet on financial services. And that was Thatcher’s vision.
Endowment policies don’t fail because they are an inherently bad product. They fail because some guy takes thousands of pounds in fees at the outset for about half an hour’s work. Multiply that by the transaction costs in every equities deal that underpins the ongoing management of the policy and there’s nowt left for the poor investor.
But lots of wealthy dealers and fund managers.
years.
, what a suprise. Shame the truth offends some people so much for free speech and all that garbage. What a load of bullshit.- You must be logged in to reply to this topic.