Wednesday, March 04, 2009

Reality is a nasty place

Simon Heffer offers a laborious analysis today, which amounts to a prediction that the euro might not survive the recession. Or is it wishful thinking?

In a way, the euro is like the bumble bee – in theory neither can fly but they do. The euro should have nose-dived many times, but it has led a charmed life and continues on, despite the gathering clouds of the economic storm.

The point that Heffer makes, though, is two-edged. Invoking Milton Friedman, he asserts that "there has never been a monetary union, putting out a fiat currency, composed of independent states. There have been unions based on gold or silver, but not on fiat money – money tempted to inflate – put out by politically independent entities."

What perhaps he misses is the qualifier "politically independent entities", in which context there is an alternative that he does not fully explore … that the "entities" cease to be independent.

The essence of the European "project" is that there has emerged a European political class, where the ruling élites have more in common with each other than the people they govern. We have also seen of late more than a little nervousness amongst those élites about the prospect of civil unrest, and not a few of them must have looked anxiously at Iceland and then Latvia, where the governments have been deposed.

The idea of "independence", therefore, is strictly one for the proles. This is not something that will at all bother the élites – their concern is survival and their own protection. And, having conspired against their own peoples for so long, the driving force amongst them will likely be, "hang together or hang separately".

For all their comedic elements, we see in the statements of Joaquin Almunia and others of the "colleagues" a determination to stretch the rules to breaking point and beyond. When it comes to the Treaty provisions and what is legal and what is not, we are well beyond the stage of keeping within the treaty boundaries. The "colleagues" will do whatever it takes to survive.

Effectively, in so baldly stating that, "It's not clever to tell you in public…" what they intend to do, Almunia is admitting that they have torn up the rule book and are flying by the seat of their pants.

Thus, we would like to think – as indeed does Heffer assert – that national interest will prevail, and in so doing bring down the euro and thence the whole edifice of the EU. But there is a greater, stronger interest at play – the interest of our ruling élites as a collective.

As long as they feel safer together, and can look to each other for mutual support, national interest will take second place. In there lies reality, where the rulers are responsible to their peoples and accountable for their actions.

That, for the "colleagues" is a nasty place to be and they do not want to go there. They will do everything in their power to prevent it happening.