Robert Peston's programme last Thursday 17th, on the politics of the euro, was simply a re-run of what has been said for the past twenty years, by those who had given the project any thought. As the euro crisis has deepened it is amazing how many "pundits" are coming out of the woodwork, expressing the view that they never thought it would work. The latest stage of the crisis has dominated the media for weeks now and the reality of both the euro and the EU have never been more stark. The situation in Greece cannot be salvaged by the Greeks on their own, unless they default on their massive debts, leave the euro and revert to the drachma. The majority of Greeks are apparently opposed to this, as are the majority of the leaders of the other member states, but the majority of Greeks are also opposed to the austerity measures required of them, in order to retain membership of the single currency. Cynics have suggested that they want their cake after they have already eaten it and want everyone else to pay for it. The contagion fallout is already hitting Spain hard with 21 of its banks having been downgraded further, more empty properties than the whole of the USA, unemployment at 24% and at 54% for those under 24 years of age. The Irish have finally wakened up to the fact that those who are having to pay for the debacle are not those who caused it.
Peston's programme provided a fair summary of how the euro project was never seen as an economic measure, by those European politicians who were the architects. It was always a political measure, with the aim of creating a federal United States of Europe, while claiming that the member states would continue to be "independent nation states", with their sovereignty hardly reduced at all. The fact that control over agriculture, fishing, trade and industry and a whole range of other areas of sovereignty had already been surrendered, without as much as a whimper from the Euro elite in all the member states, ensured the euro would be set up with the full support of that same political elite. The people in those member states were lied to by their leaders, something with which they are now having to come to terms as they attempt to deal with the consequences. The Euro fanatics and fantasists in all EU states, even those which did not join the euro, now have to admit that either, they did not understand the likely consequences of the setting up a single currency or, they set out to deliberately mislead the people. The only person from the inner cabal of the SNP that I have seen admit he was wrong, is Euan Crawford who was an adviser to Alex Salmond until recently, more of which below.
There is still no agreement among the EU political elite about the way forward and while they were all full of confidence and certainty when they could either ignore or belittle those who tried to warn them of the likely consequences, now they are having to face those consequences, their confidence seems to have deserted them. Germany's Merkel controls not only the politics of her own country but she also dictates the policies of those who are supposed to be her "equals", occupying seats "at the top table" where the main decisions are allegedly taken. It has ever been thus in monetary unions, the strong dominating the weak, from the Monetary Union of Colonial New England in the 1750s, to the Latin Monetary Union of the 1860s, to the Scandinavian Monetary Union of the 19th and early 20th century. Despite the long and turbulant history of attempts to create monetary stability by controlling several different currencies, operating in different countries with different economic policies and tax regimes, little or nothing of that history seems to have been taken on board by the advocates of the euro. The Bretton Woods Agreement of the years immediately after WW II, eventually collapsed under the strain of attempting to control the currencies of countries with diverse economic problems. The Exchange Rate Mechanism - an early forerunner of the euro - met the same fate and should have been the starkest warning of what would happen, having collapsed as late as 1993.
The problem with the creation of the euro was always that the true intention had to be disguised. The people of the UK were lied to by Heath and his government, and believed they were joining a trading agreement, as the very name Common Market suggested. They were told that unless they joined, there would be 3 million unemployed in this country, a figure almost reached under Margaret Thatcher between 1981 and 1986. Having to disguise the real intention behind the euro forced the EU leaders to postpone the centralisation of taxation, necessary to allow the massive transfer payments needed to prop up the peripheral nations such as Greece, Portugal, Ireland et al. The European electorate has allowed itself to be lied to and browbeaten into accepting the progressive surrender of sovereignty through a series of Treaties but the EU elite did not have the confidence to push the centralisation of taxation because of the further surrender of sovereignty it would entail. That is now inevitable if the EU intends to keep the original project on track. It was always inevitable, as critics of the single currency repeatedly warned, but it also means a single economic policy - or as near as can be achieved - in a Union with such economic diversity among its members. There may be regional differences in how policy is applied but a centralised tax system will ensure that spending will also be centrally controlled. The alternative is to allow Greece to leave, followed by other countries such as Spain and Ireland, which are finding the one-size-fits-all monetary policy too much of a burden.
Where does all of this leave the SNP and an independent Scotland? John Swinney has already said it will be the "best part of a decade" before Scotland could consider joining the euro, although membership is still the long-term aim of the party. The SNP has hardly covered itself in glory anent the EU, being one of the strongest advocates of both entry to the EU and the euro, under the fatuous banner of "Independence in Europe", a contradiction in terms if ever there was one. The current leadership has been among the strongest supporters of the centralising Treaties of the EU over many years but repeatedly refused to explain how membership of the EU and the euro could possibly be equated with independence. In 2001 Kenny MacAskill in his "Euro Route to Independence" said, "Leave aside spurious nonsense about surrendering sovereingty to Frankfurt rather than London, as Scotland has no independence to sell". Obviously the aspirations to independence were no longer of any consequence and were no longer to be pursued. He went on, "The inclusivity and opportunities of Europe and the euro can overshadow the exclusivity and isolation of independence." That one of the leaders of a party which is supposed to have "independence" as its raison d'etre, could make such a ludicrous claim unchallenged by the party members, said a great deal about the New SNP's concept of independence.
Mr MacAskill had some interesting things to say about the supposed "benefits" of entry to the euro, claiming that, "the economic arguments are substantial and the political case overwhelming", offering Scotland "an opportunity to actively and positively sell independence within Europe". As was the fashion within the SNP at the time, he used Ireland "the Celtic Tiger", as an example "of the benefits available to small nations in being able to react quicker and deal with matters more speedily and efficiently". We expect our governments to have not only an understanding of how the economic system works, but an ability to anticipate the potential hazards. At the very least, we expect them to have advisers with those abilities, both of which were obviously lacking in Mr MacAskill's case. Has anything changed in the economic thinking of the SNP leadership since the financial crisis of 2008? One major change has been the decision to keep the pound sterling as the currency in an independent Scotland, rather than the euro, and to have the Bank of England as the "lender of last resort" rather than the European Central Bank. Obviously, this change of policy was inspired by the crisis in the eurozone, underlined by John Swinney's statement that it would be at least a decade before the SNP could consider euro entry and then "only when the economic conditions are right".
There is little indication however, that the SNP leadership have any greater understanding of either the euro or, any kind of monetary union. On the 14th december 2011, Alex Salmond lambasted David Cameron for refusing to sign up to the agreement arrived at by the other members of the EU, with the exception of Hungary, which called for austerity and fiscal discipline in order to "solve" the currency crisis. Salmond called Cameron's refusal, "irresponsible posturing that will damage Scotland's fishing industry and cost jobs." That Cameron's refusal could damage Scotland's fishing industry any more than the EU has already done is risible enough, but Salmond was arguing in favour of a treaty which called for central control of member states' budgets. So much for "Independence in Europe". Alyn Smith, SNP MEP went even further, claiming, "This deal tonight has been good news for the eurozone, good news for the EU and it is appalling news for the UK. The eurozone is getting its act together" Asked by BBC Scotland, if the SNP was still in favour of joining the euro Smith claimed, "Give it six months and the UK will be sinking a lot faster than the eurozone".
Unfortunately for the SNP leadership, the people who have had to live with the consequences of the crisis in the eurozone, the Greeks, the Spaniards et al took a slightly different view of the agreement pushed through by Germany and France, under Zarkozy. There have been riots in the streets in Greece, Spain and Italy as well as furious demonstrations in Ireland; the government in the Netherlands collapsed, the Greeks have had two attempts at forming a government and failed and Italy has had a government imposed. European fund managers are offloading their euro assets in preparation for the expected exit of Greece from the eurozone by January 2013. The new President of France, Francois Hollande has said he will not implement the austerity measures called for under the Treaty agreed by his predecessor Zarkozy and he intends to increase government spending to alleviate the problems of serious unemployment.
Alex Salmond, supported by some of the hard-of-thinking cybernats, continues to push the nonsense that monetary policy is of little importance "in the modern world", arguing that "fiscal policy has primacy". He seems to have completley overlooked the fact that the reason the eurozone cannot get its act together, is because of the one-size-fits-all monetary policy. Whatever spending policies helped to cause the financial crisis and the soveriegn debt of the worst-affected countries, it is the application of a single monetary policy on so many diverse economies that is preventing the crisis being solved. Greece cannot survive inside the euro but until the last week, the political consequences of a Greek exit from the currency, were considered to be too serious to be contemplated. The inevitability of Greece's exit has now been accepted, particularly by Germany, which should allow the Greeks to follow Iceland and bring the Greek people some relief.
In 2007, Iceland was on the verge of bankruptcy. Between 2007 and 2009, GDP fell by 10%, unemployment rose by seven times, its three banks collapsed, defaulting on debt totalling 64 billion euros. The krona depreciated by 50% and the purchasing power of households fell by over 30% but, a combination of tight fiscal policies, including a rise in taxation, together with substantial cuts in public spending and strict government control of the banks, has allowed Iceland to turn the corner. GDP has increased by 2.5% in each of the last two years and Iceland's debt has been upgraded from junk status to investment status. In 2009 an application was lodged to join the EU, something which immediately improved Iceland's ability to borrow on the foreign markets but the irony of that has not been lost on Icelanders, whose new found enthusiasm for EU entry has waned somewhat. Iceland had two main products - fishing and tourism, both of which flourished during the period in question but the main point is that the country was not hidebound by a monetary policy totally unsuited to its needs. The currency found a level at which Icelandic products were attractive to foreign buyers, although the cost of imports rose substantially. If Greece reverts to the drachma, the currency will fall in value on foreign exchanges in much the same way but at least the Greeks will be able to see a way forward. It will not be easy or even pleasant but it will be a start, with an end in sight which is likely to be a great deal closer than the prospects facing the country under the regime in the eurozone.
Now that the campaign for a "Yes" vote in the independence referendum has started, the policy statements of the SNP leadership will come under closer scrutiny. It is not enough for the party supporters to shout the mantra that "these things can wait until we are independent" while the SNP leadership continues producing policies that will undermine independence. The argument that "Scotland has no independence to sell" is fatuous and an insult to our intelligence. The SNP has shown it either does not understand how a monetary union works or, it is trying to mislead the people of Scotland. I will vote "Yes" in any referendum on independence. I would vote "Yes" even if I was sure I would be worse off, but I want independence to mean something worth while, not a collection of compromises and deals, cloaked in a series of half-truths or disguised as "gradualism". The latest You Gov poll shows that 28% of people who voted SNP at the last election, are opposed to independence. That tells its own story. The SNP has stated that part of its strategy was to show the Scottish people it could be trusted to govern well and, in some respects it has done that. It has failed totally to show it understands monetary union and the future direction of the EU, and if it has any sense, it will promise the Scottish people a direct vote on EU membership, something which it promised once and then reneged on. That is a vote which Scots not only deserve, but is vital if democracy is to mean anything in an independent Scotland.