A Dickensian idea for Europe

Ted Wheatley (left), visiting a school in Germany

“Annual income £20:Annual expenditure £19.19s 6d: result, happiness.   Annual income £20; annual expenditure £20.0s 6d: result misery.”

Mr Micawber in ‘David Copperfield’ by Charles Dickens

Mike and Pete were brothers. They had the same work place and each earned £20,000 a year. Mike planned his life carefully and always lived within his means, spending £19,900 a year. When he died he had a little to pass on to his wife and children. Pete took extra holidays, which pleased his wife, but when he died he left her and his children with massive debts. He had been spending £21,000 a year and his borrowing had steadily accumulated. Which brother did the right thing?

Government economies are just like household budgets, except that they are bigger. Some national governments live within their means; some don’t. The problem with democracy is that a government can spend freely, please its people and win votes at elections. In time it is voted out of office and another party takes the reins and is left with the bill. The tendency has been for that party to continue overspending; the interest payments on the National Debt become an ever-greater drag on the public finances. The Dickensian advice is cast aside.

Currently Britain is faced with a massive debt and the crunch has arrived. Taxes go up; services go down; lending is restricted; growth diminishes; jobs are lost; misery increases.

Many countries are in a worse state than Britain. America‘s National Debt is $14.3 trillion.

But let us look at the European Union. Italy and Spain are down on their knees. Ireland’s bubble has burst. Greece is a lost cause. What should be done? Let me suggest a rather drastic development which may rebuild our European Union.

I suggest that some countries at the centre of the EU take an initiative and come together in a closer economic union, then invite other European nations to join them in a club with rather stricter rules.

A small core of nations including Germany should agree to have much tighter EU control over their economies. Each national budget would have to be passed by EU auditors before being presented for parliamentary approval; it should be manageable within that nation’s debt problems.

Should the budget be considered unwise the auditors would be able to take one of three actions;- first to offer guidance, second to order fines on that nation’s exports to other E.U. countries, finally the nation could be suspended from the EU until its finances were regularised.

The panel of auditors would be appointed by the European Parliament and would report to them

If the Inner Club agrees on this and establishes such a regime it may well mean the end of the EU as we know it. The trouble with Europe is that although Jean Monnet always wanted a real federation, national governments have not been willing to make the sacrifice of national sovereignty required: this is why the problem has arisen. There has never been an enforceable economic policy. Now we must re-examine our national sovereignty as we bring some discipline to our financial affairs.

Other countries that may wish to join the Inner Club will have to satisfy certain criteria; they should be stable democracies, they should not bring too much ‘baggage’ with them and they must have a National Debt that can be handled.

Greece, Italy, Portugal and Spain have current debts that may make it impossible for them to join this financially responsible EU at present, although support may be given to bring them on board as soon as possible.

Initially it would not be essential to use the euro, although at a later stage it may be advisable. Certainly Britain may be invited in, also Poland, Sweden, Latvia, Lithuania and Estonia. It may well be that Switzerland, Denmark and Norway may wish to apply. I believe Ireland’s case may be strong because it is making effective efforts to deal with the debt problem; even Turkey’s admission may not be impossible. Finland, the Czech Republic, Slovakia, Hungary, Austria and Slovenia may make valuable members. Probably Rumania and Bulgaria would present problems at this time and Malta, Cyprus and Iceland are not mainland European nations and their entry initially may be questioned.

A new EU would arise, one whose nations were not saddled with increasing National Debt payments, one where the euro may become the most desirable currency in the world, one that could be a strong moral force in world politics.

In the years ahead nations to the east such as Belarus, Ukraine, Georgia, Armenia and even Russia as well as nations to the south such as Lebanon, Israel, Egypt, Libya, Tunisia and Algeria may consider examining their democratic credentials to see if they too want to join the club. Economically it would be a strong club.

In the future the club may decide that the euro will be the sole currency. Initially some nations may prefer to stay with the currencies they are using at present. A conference in five years’ time would be the appropriate time and place to discuss and agree finally the rules and membership of the club, but unless there is greater fiscal and financial controls from the centre the euro and the European Union cannot prosper.

There will be a price to pay. Nations not included in the Inner Club may decide to ‘file for bankruptcy’, to refuse to honour national debts, to change their currencies and devalue drastically. Argentina has done that in the past, but it has now recovered and enjoys one of the best growth rates in the world. Nevertheless governments and banks which have given loans to such countries will lose heavily. The euro at present has massive problems. Yet I believe this policy could make it eventually the world’s leading currency.

Going back to Mike and Pete, which one are you? Nobody wants to pass on massive debts to their children as Pete did. But we are actually like Pete. We are passing on a massive National Debt which our children and grandchildren will have to pay through heavy taxes, poor services and lost jobs. We have the opportunity now with our neighbours in Europe to change the pattern of history and create a nation and a world that makes sense. Have we Europeans the courage to take the plunge?

Ted Wheatley, July 2011.  The opinions expressed are those of the author and not necessarily those of Federal Union.

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