Why I was right to oppose euro from the start
Responsibility for the crisis lies with eurozone leaders, not the Greeks
Iwell remember the furrowed brow of President Chirac, sitting amid the splendid gilt furnishings of the Elysée Palace, as I explained to him in May 1998 why I thought the euro would not work as Europe’s leaders intended. The charm of his welcome had evaporated as I set out not only why joining the euro would be very bad for Britain, but also far from a good idea for some of the countries desperate to sign up to it.
After I gave my speech that night at my alma mater, the European Business School at Fontainebleau, Chirac and many others were appalled. I said that joining the euro would exacerbate recession in some countries, and that some would find themselves “trapped in a burning building with no exits” – a phrase that brought me a fair amount of controversy and abuse.
I was regarded around the EU as a rather eccentric figure, almost pitiable in being unable to see where the great sweep of history and prosperity was heading. One former senior colleague in Britain said I had become “more extreme even than Mrs Thatcher”, as if this was an unimaginable horror. Idealistic heads in Brussels were shaken in sorrow that the dreaded Eurosceptics were not only growing in the Conservative Party but had now taken it over, with me having become, astonishingly, its leader.
There is no doubt that I was wrong about quite a few things when I was leading my party. But I hope the eurozone leaders meeting today will remember that those of us who criticised the euro at its
“MERKEL has lost. Germany has lost.” This was the reaction not of a rabidly Leftwing Greek tabloid to the country’s referendum vote, but from Benoit Hamon, the former French education minister and ally of François Hollande.
For Mr Hamon, the resounding “no” vote was an opportunity for Mr Hollande to “resume leadership” in Europe. Old divisions run deep across the continent, and the Greek crisis brought them back to the surface yesterday as Europe’s financial superpowers squabbled like children at playtime.
Watching gleefully from the wings was the Russian president Vladimir Putin, who took the opportunity to stir the pot by ringing the Greek prime minister Alexis Tsipras and offering to strengthen “Russian-Greek co-operation”.
With Greece’s membership of the euro hanging by a thread, it became increasingly clear as the day wore on that Greece’s present will decide the whole continent’s future.
Major banks now put the chance of a Greek exit from the euro at 70 per cent. The country’s own banks will stay closed until Thursday and with Greece running out of cash under the strain of a €330 billion (£234 billion) debt mountain, there was talk of humanitarian aid, rather than bail-outs, for the Greek people. Doom-laden language was easy to come by. Answers were not.
Even before the “no” voters had slept off the hangover from their celebrations of the night before, the day began with a surprise announcement by Yanis Varoufakis, the shaven-headed Greek finance minister.
He told his Twitter followers at 6.31am that he had resigned, saying simply: “Minister No More!” Greece’s rejection of further austerity by an unexpectedly high 61 per cent had vindicated his hard line with European creditors, but Mr Tsipras saw him, ultimately, as an obstacle in the road to a new deal.
Mr Varoufakis said in a typically bullish blog that: “I shall wear the creditors’ loathing with pride.”
In the rest of Europe, the referendum result went down like a rotten oyster, while Greece won praise from the former Cuban president Fidel Castro, who said Greece “has won admiration across Latin America” and Bolivia’s president Evo Morales, who called the referendum a defeat against “European imperialism”.
Predictions of a collapse in share prices on European stock exchanges did not materialise: the FTSE opened 1.07 per cent down, though Stephanie Flanders, the former BBC economics edi- tor who now works for JP Morgan, said: “A messy Greek exit is now more likely than not.”
Mrs Merkel, a woman constantly trying to reconcile her own passion for European union with German taxpayers’ exasperation at propping up Greece’s corrupt economy, stood firm. She said she would wait to see what proposals the Greek government came up with, but saw no reason to enter into negotiations on a new bail-out programme as things stood. She said as much in a lunchtime phone call to Mr Tsipras, who said he would be presenting a Greek proposal for a deal at today’s crucial eurozone summit.
Germany’s economics minister, Sigmar Gabriel, was rather less measured. He made it clear that unless Mr Tsipras compromised, Greece would be offered only food and medicine. “For the Greek population, life will get even more difficult in the coming days and weeks,” he said. “The definitive insolvency of the country now is an imminent threat. We must now cover their needs very quickly.” This raised the prospect of food parcels being handed out on the streets of Athens.
“We cannot endanger the stability of the monetary union by Greece enforcing their own national interests unconditionally against 18 other [countries],” added Mr Gabriel. Debt relief would not be offered.
It was a flat contradiction of Mr Tsipras’s position after the referendum. He had said: “This is not a mandate of rupture with Europe, but a mandate that bolsters our negotiating strength to achieve a viable deal. This time, the debt will be on the negotiating table. It is now up to European prime ministers ... to propose any new bail-out deal including on debt.”
The European Central Bank had even harsher words for Greece. Ewald Nowotny, a member of the ECB’s governing council, said Greece’s suggestion of a deal within two days was “illusory”.
The Council of Europe, which is independent of the European Union, warned that the referendum did not meet international standards because it was called with one week’s notice and posed an unclear question on the proposed bail-out. France, it seemed, was Greece’s last ally. Mr Hamon’s claims that “Merkel has lost” reflected a desire to capitalise on Greece’s woes by tilting the balance of power between the two main architects of the European Union towards Paris.
The French minister of the economy, Emmanuel Macron, rather crassly delved into Germany’s troubled past by urging Europe to avoid another “Versailles moment” with Greece, referring to the humiliating postwar conditions imposed on a Germany in 1919 that allowed the Nazis to flourish.
With such dark rhetoric circulating, the intervention of Mr Putin was the last thing Mrs Merkel would have been hoping for.
It was Mr Tsipras who initiated the call to the Russian president, to crank up the pressure ahead of today’s eurozone meetings, but it nevertheless led to talk of Greece joining the Eurasian Union, the Moscow-led trade bloc that includes Belarus, Kazakhstan and Armenia.
By mid-afternoon Greece had a new finance minister, but there was no sign that he would be any more amenable than his predecessor.
Euclid Tsakalotos, a 55year-old Marxist who was educated at Oxford, was never a fan of joining the euro, and has predicted that a Grexit from the single currency would lead to the break-up of the eurozone.
George Osborne’s take on the day’s developments as he addressed Parliament at 4pm was that “the prospects of a happy resolution of this crisis are sadly diminishing”. The Chancellor urged British holidaymakers going to Greece to take plenty of cash and their own supplies of medicines.
The ECB announced last night that it had maintained emergency liquidity assistance to keep Greece’s financial institutions ticking over, but Greece faces at least one more day in limbo.
Mr Merkel and Mr Hollande sat down to dinner at the Elysée Palace in Paris, having issued a brief statement in which the German chancellor stressed the importance of Greece taking “responsibility” for reforming its economy, and Mr Hollande urged Europe to show “solidarity” with Greece. The statement distilled the divisions between the two countries on how to handle the Greek problem, and set the tone for today’s talks.
They will begin with a Eurogroup meeting of finance ministers, and culminate tonight with a summit of the 19 leaders of the eurozone countries. If those talks fail, default on an ECB debt repayment due on July 20 could finally end Greece’s membership of the euro, and put the future of the single currency in doubt.