22nd June 2012 Budapest, Hungary
The UK and the Eurozone
The Euro zone crisis has dominated the news this week: whether it’s the Spanish banks, the Greek elections or comments at the G20 Los Cabos meeting. The UK, of course, isn’t a euro zone member. But this crisis and its outcomes are vitally important to us. In the face of speculation in some media sources about the UK, the euro and the future of the EU, it might be helpful if I outline our point of view.
It is in the UK’s interest for the EU to be effective, credible and prosperous, and membership of the EU is a vital part of how we in the UK create jobs, expand trade and advance our interests around the world. The UK is committed to the EU.
Member States need an outward-looking EU that is more dynamic and competitive on the global stage, where we face one of our greatest challenges, as the speed and scale of globalisation shifts the balance of wealth and political power towards emerging economies. This shift reinforces the urgent need for EU countries to reform to stay competitive, generate growth and maintain employment and standards of living.
As a close union of 27, soon to be 28, nations we need a multi-faceted EU where Member States with a range of different interests and needs can work together in informal groupings, such as the like-minded groups, or in more formal groups, for example the Schengen countries. It is in both the EU and UK interest that the EU has the flexibility of a network and not the rigidity of a bloc. The EU is not and should not become a matter of everything or nothing.
A satisfactory outcome to the Eurozone crisis will mean an evolution towards a tightly-integrated Eurozone within the EU’s current structures, which the UK will support, but it is critical for the UK and Europe as a whole that Eurozone integration does not work against non-Eurozone EU Member States.
The fate of the Eurozone matters hugely to the UK and it is strongly in Britain’s interests for our biggest export market to succeed. The risks for us of a disorderly outcome are huge. Based on trade flows alone Britain’s exposure to the Eurozone is more than six times greater than that of the United States – and that doesn’t include the impact on confidence and our closely connected financial systems.
So, those are key times for the EU, euro and the UK. There are risks to us as the crisis develops. But also opportunities: resolution of the Euro zone crisis would do more than anything else to give our economies the boost they need in these uncertain economic times.
The best interest of UK and all EU memberstates to launch a comprehensive program on orderly dissolution of the Eurozone and to return to the earlier system of floating national currencies with a comprehensive debt write-down program, which reduces debt levels to sustainable level and allows re-launch economic growth. Unfortunately this would also entail huge shocks and grave economic hardship, but at least may allow to upkeep what is the core of the European project: a free trade area with core freedoms for mutual benefits for all nations involved. The other way, unfortunately, would lead to disorderly dissolution, with political extemism across nations, mutual recriminations for the failure of the euro-dream, and at worst return to the 30s.