Monday, 10 August 2015

Euro Unification vs. German Reunification !!!

One of the points that caught my eye whilst reading "The Trouble with Europe" was that Roger Bootle mentioned that France decided to drop its objections to German Reunification in 1989/90 in exchange for agreement in progressing with the launch of the Euro currency.

I realise my knowledge of the detail is limited, but I was surprised to think that France could have any control over such an issue. So I decided to look briefly into the history of German Reunification.

I have been browsing here on Wiki, just as a means of quickly gaining an insight

What was interesting to see was that it was not just France who was concerned about German Reunification but also the UK aswell. Margaret Thatcher remained firmly against it to the end.

How could countries like France and Britain  have a say on these matters 40 years after the war.

Then I started reading about how, here

France, Britain, the US and Russia still had control over East Berlin, and there were implications for Nato and the defence of Western Europe through NATO that had to be considered.

Back to France; I am not sure I quite take what Roger Bootle said in his book as completely accurate on this point. The plans for the Euro were already well developed by that stage, and probably France just saw it as an opportunity to push forward sooner with the Euro than perhaps Germany wanted,  by agreeing to German Reunification. I can also well imagine that France might see the common currency as a means of constraining Germany within the European Project and so not grow bigger independently from Europe. German reunification caused concerns within other European countries that had to be assuaged. 

As a result of my reading about this issue , I realise,  Europe in whatever form will always be some kind of political union in some way shape and form. Countries cannot do as they like independently from others. All these different countries have to work together in some form of political working arrangement. German reunification caused concerns within other European countries that had to be assuaged. 

A vote for NO in the UK Referendum on EU membership will not allow us to be isolated from the EU. We have to continue to work with the other countries, for the economic benefit of us all. And this fact by its very nature, means we have to have some form of political cooperation moving forward.

But I suppose the Eurosceptics amongst us realise that the way the EU is developing is not going to lead to a successful conclusion.

This is an area where Roger Bootle's book was so informative. He is an economist by profession, but highlights in simple terms how EUs 'evercloser' political union will only lead to upset and failure. This failure is manifesting itself currently in significant migration flows, high unemployment, and poor growth for most of the Eurozone. In his view those politicians and technocrats who are driving the EU/Euro Agenda, with harmonization and solidarity are making mistakes, that are having a significant impact on huge numbers of people, particularly the younger generations. And through the democratic deficit of the political structure, the general population can not exert any influence on such  developments through the polls, by voting the politicians out for such failings. There are no effective checks and balances.

One of the main mistakes is trying to develop Europe in isolation from the rest of the world. Perhaps they should concentrate more on collective trade agreements with the rest of the world, to help provide growth, rather than seeking to develop Europe in ways that prevent it from adapting to the effects of globalization.

Interestingly, the wiki articles shows that the cost of German reunification was 200billion Euro per year over 20 years. A lot of money, but it was a political and fiscal union from the outset. The East Germans wanted to adopt the Deutschmark as they saw it as a more stable currency. They wanted to be a member of NATO and relinquish its former connections through the Warsaw Pact.

In contrast, the two Greek bailouts totaled 240 billion Euros (ie about a year of German reunification) of which France and Germany are the main creditors. In the grand scheme of things it is relatively small cost as part of the "Euro Unification" Project. And Greece has effectively lost its political independence and its sovereignty.

Does Germany want to fianance Euro-Unification aswell. Just what is the benefit? For them? And for the others? I think sometimes I just lack any understanding of benefits for peoples of Europe that EU / Euro gives

In his book, Roger Bootle talks of the huge  imbalances in currency flows between the various countries within the Euro. Germany has benefited enormously within the Eurozone. It is the strongest economy within a currency whose exchange rate is fixed by the overall performance of all the Euro zone countries. i.e the Euro is held lower relatively allowing Germany to trade more easily, where as, if the Deutschmark were still traded, it would trade at a relatively stronger rate than the other Euro countries, thereby blunting its competiveness edge relatively, making its goods and services more expensive for the other countries to buy.

To be a success any shared currency union has to have political union. All of Germany wanted to reunite, both politically and economically.

The Euro zone has a shared currency but without full political and fiscal union; and the associated full loss of sovereignty by the participating countries.

The political elites within the EU/Eurozone want full political union and whilst they fail to build a system that encourages the general population to openly want it as well, their progress to this end will be difficult. No referendums in any country have been fervently for Euro-integration.

For the UK, is the EU referendum really about putting a stop to 'ever closing union'? Maybe this is where David Cameron has come to in his thinking! The outcome of David Cameron's negotiations will  be very interesting, for sure.

There has to be some kind of intergovernmental working relationship between all the countries in Europe. That is a political union to a degree but one where the politicians are kept closer to the electorate!

Back soon.....

.... An Undecided Voter

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