Story of the EU is one of failure on a grand scale
France and Germany set up the European Union to benefit themselves, argues James Macintyre
The EU was inaugurated by France and Germany for the benefit of France and Germany.
Germany’s currency on a trade weighted basis is 15 per cent undervalued – Germany is sucking in jobs from all over the EU.
France originally received 40 per cent of Common Agriculture Policy grants. After the wine lake and butter mountain fiascos, the proportion of France’s CAP was cut to 19 per cent – still too high for a country with an excellent agricultural system.
The EU has failed on the single currency, unitary bank rate, employment, open borders, corruption and management. Here is how.
In 1980, the EU was advised that the monetary union was not sustainable without fiscal union – a single currency needs a single tax system. This was amply demonstrated by Greece, who didn’t have enough tax to fund public services and borrowed to make up the shortfall.
Excessive borrowing causes a country’s currency to fall. But not in Greece, as the Euro’s value is determined by the average of member states. The Greek currency overvaluation is balanced by states including Germany, whose currency is undervalued.
A unitary bank rate is unsustainable without control of borrowing – again demonstrated by Greece, who continued to borrow to fund their deficit.
Normally a country with excessive borrowing will pay a higher rate of interest. But not Greece, as the interest rate is universal and determined by the European Bank.
If the EU is about anything it should be about employ- ment. Unemployment in the eurozone is 19 per cent, with Germany the only country below 10 per cent.
Taxes and welfare are high and employment laws strict. Therefore unemployment is high. However productivity is 12 per cent higher than the UK, partly due to higher investment.
When it comes to boundaries, EU citizens can travel unhindered across EU borders, but non-eu citizens require a visa. When Bulgaria and Romania became EU members, they should have been restricted from entering EU states until their economy was closer to that of members.
They should be given grants to improve infrastructure, education and job prospects, as EU companies move factories into these countries.
Now to corruption. Certain countries got EU grants for projects that were never built – the money disappeared. As a result the accounts of the EU have not been signed off by the auditors this century.
A company in Greece was due to pay €15m in tax but only paid €3m. A year later three ministers responsible for the negotiations each moved into €1m houses.
Finally, in 2008 after the financial crises, Greece was bankrupt. Borrowing was 160 per cent of GDP.
Greece should have left the Union, devalued its currency, reneged on its debt and improved its economy.
The EU bailed out Greece twice. Greece used the money to repay loans – mainly to German and French banks. The EU probably saved those banks from collapse.
The European Union has failed. ● James Macintyre lives in Linlithgow. He is an accountant.