FOR THE EU IT'S NOT THE DEFECIT, IT'S DEMOCRACY THAT'S THE PROBLEM

I sussed it. No seriously, I’ve worked out the euro problem.

Economists can stop thinking about that £250,000 prize money. It’s mine.

This is what is needed to bring this horrible, dragging, sorry tale to its conclusion:

Abandon democracy.

Think about it. The reason why there is a deadlock between France and Germany is political.

President Nicolas Sarkozy is heading into elections and the last thing he wants is a ratings downgrade or even worse a banking collapse, to give succour and, more importantly, votes to Marine Le Pen.

Over in Germany, the voters are sick to death of picking up the bill for Europe and this is being reflected in the growing impatience of the coalition with Chancellor Angela Merkel who, to add to her troubles, now finds herself hemmed in by a ruling from the Constitutional Court.

And look at those glorious bureaucrats in the European Union. They get it. They also can see that democracy is preventing them from doing what they wish.

Only this week, European Council President Herman Van Rompuy warned that it was “dangerous to let the fate of the world economy depend on domestic policy squabbles within the parliament of one of the 17 [Eurozone] countries, large or small”.

In the ultimate expression of the ever-growing mission creep of the EU, he added that further fiscal discipline and economic and fiscal integration was needed with countries accepting a “loss of sovereignty for all”.

You see, Van Rompuy is a visionary. They all are.

Over in Brussels, they have worked out that those pesky voters and their domestic squabbles are to blame. Never mind that for the likes of Germany, Holland and the UK, voters are individually forking out a fortune on this corporatist dream.

Why should they have a say in the billions squandered, most probably illegally, in propping up countries and banks through the European Stability Mechanism and the European Central Bank?

And never you mind, you voters, that some Eurocrat will soon be able to come into your country and rule on the budget and spending polices of a government that you had voted in. Remember, this is all in the name of Europe.

Although I have frequently called out the Eurozone for its dithering and indecisiveness, it is actually healthy for the body politic to behave this way.

What the politicians are failing to do is to devise a plan that can be presented to the people of Europe.

If there is an argument for more German money pouring in or for French banks taking a haircut, find it and make it to your voters.

If they understand, and if they believe you, then you will be voted in again. Hiding behind “manifesto promises” or internal issues will not help you find the solution to this mess.

This democratic deficit extends to the UK.

From the Bank of England printing money, to buying bad banks and guaranteeing loans to the Eurozone, these actions have been done without the participation of the voter.

Now, of course in a representative democracy we expect our parliamentarians to represent us and take actions on our behalf.

But Europe is an area where there has been a deficit since 1975. I, and millions like me, am of a generation that has never had a say on the direction of Europe and our position in it.

I have grown up watching the Common Market mutate into the single market, European monetary union, and now a vicious land-grab on our economic policies through Tobin taxes and financial regulation.

Van Rompuy warned that the “great enemy of any project is the scheming mind that asks, '“What do I get out of it?"' in what I presume was a dig at the UK (though it could have been a spiteful poke at Slovakia whose parliament, in the first instance, had the audacity to reject the euro bailout scheme only to be forced into an about turn two days later).

Well, I think that rather than expecting countries just to keep coughing up ever more funds and devolve ever more of their national sovereignty, a government has a duty to find out what its citizens really want..

Prime Minister David Cameron introduced the Back Bench Business Committee to rule on whether popular petitions should be rewarded with a debate, and a non-binding vote, in Parliament.

Yet bizarrely, the government is lining up a three-line whip on the vote on our future with Europe on Monday, risking outright rebellion and resignations from the executive.

Whatever your views on Europe, surely now is the time for our representatives to debate freely and without party-bias.

It is this democratic deficit that eventually will kill the EU. Politicians should represent the wishes of the people and the bureaucrats should enact those wishes.

This fundamental principle is being turned on its head at the moment, but as with the economic deficit, eventually the bills can’t be paid.

In a democracy, this usually takes the form of a ballot box massacre but, as events in Greece and elsewhere have shown, it could turn into something altogether different, and more violent. We shall see.

By the way, actually there is one idea on solving the euro crisis that hasn’t been looked at – the hard ECU, but in reverse.

The Greeks float a new drachma tied to the Euro, used electronically and domestically while the Euro is used internationally and to honour debt.

Hopefully, the drachma would stabilise at its natural rate and Greece would have control over its interest rates and economic policies using the Euro as a control mechanism for the country’s eventual withdrawal from full monetary union.

Can I have my £250,000?

Originally published at: The Commentator

WELCOME ONBOARD

The rollercoaster that is the Eurozone looks set to pick up speed again as Moody's downgrades Portugal to 'junk' status.

Like some wheezing old carney ride on Coney Island, it drags itself up to the summit, only to risk diving once again into fears of default and contagion.

Now having one agency downgrade, is not in itself dangers - although the markets are positioning themselves accordingly this morning.

And Moody's said there was better political stability and will in Portugal than in Greece.

However, somewhere down the line those in control in the Eurozone really will have to ask what the payoff is between a political will to keep the Euro going and the financial costs that this is bringing on members?

EURO DESIGNS

This blog is meant to allow us to take a sideways glance at the news, sometimes offering serious comment, sometimes less so-serious

However, sometimes, the humour is just too easy:

10 years of the euro – commemorative coin design to be chosen by the public

 All citizens and residents of the 17 euro-area Member States will be able to vote on the design of a new 2-euro coin via the internet. The new euro coin will be issued by all euro-area Member States at the beginning of 2012 to mark the first 10 years since euro banknotes and coins were introduced and the euro became part of people's daily life. The public will be able to vote between five designs preselected by a professional jury from a competition open to citizens of euro-area countries.

So I wonder what the Greeks, Irish and Portugese would vote for?

A MINISTRY OF FINANCE - REALLY?

Apologies but this is a gift that keeps on giving.

Greece is in a terrible state, Ireland and Portugal would dearly love some of that Quantative Easing that we and the States have indulged in and German is worried that its economy could overheat.

So not really the most ideal time to call for further centralised monetary controls and a ministry of finance is it Jean-Claude?

CURRENCY

In an ominous statement, Greek officials have warned that either Greece reforms its economy and makes sever cuts or it should return to the Drachma.

Now, that may not necessarily be a bad thing for Greece to do.

With control of your own currency, governments can, and do, use monetary policy to ease the deficit problem - re: UK - but without that control, there are very limited things that a government can do.

In addition there is the issue of what is the natural balance for a country.

It seems that the natural balance for Dollar/Sterling is between 1.45 and 1.65. Apart from a few blips, this range appears to be the norm as far as Forex is concerned.

Indeed, one of the major issues for the UK when it was in the ERM was that its peg to the Deutschmark was too high and the economy paid the price.

Some in the insurance industry have just come back from a golfing jaunt business conference in Spain and complained about the price of beer.

For years, Spain, Greece and Portugal were the destinations of choice, in part because of their relative cheapness after currency conversion. However, following the Euro, many noticed how much prices had gone up. Now, there was a sleight-of-hand mark-up in prices but also the currency was linked with that powerhouse Germany so prices went up after conversion.

If Greece does return to the Drachma, not only will it return to having a degree of control over its economy but in addition, prices will fall and tourists will return in their droves.

Is that necessarily a bad thing?