“The Exchange Rate Mechanism was a dry run for
the euro. It was demolished by the markets, because
the various countries still had economies that diverged
a lot. This should have been a warning. Instead, the
euro enthusiasts decided to push ahead, allowing entry
to all who wanted to join, whatever their debts, whatever
their running deficits, whatever their past performance
on bond rates, inflation rates and economic growth.
This led us to the current disaster.
—
“We should remind the Germans in particular how
long it takes to get a currency union to work, and how
much money it costs. They have recent experience of
uniting the Ostmark with the Deutsche mark. East Germany
was relatively small, and was linked to West Germany
by ties of history, culture and nationhood. Despite
this, it took far longer than a decade, and far more
money than West German taxpayers were told at the outset,
to create some stability and fairness between the two
parts of the union.
“How much more difficult is it going to be to
achieve such a state of affairs between the very different
members of euroland? There need to be much larger transfers
of taxpayer revenue from the richer to the poorer parts
of the union. The poorer parts have to accept much more
budgetary control and spending surveillance. Athens
needs to have the type of relationship with Berlin that
Liverpool or Glasgow has with London.”
