The single European currency – gamblers` spin – odds against

Public spending means domestic manufacturing.

The Chancellor’s budget for health and public services will be a boost to manufacturing. Public spending generates productive growth. This is why the public sector unions and manufacturing unions need to work closer together. The limits imposed on public spending which are required in preparation for a single European currency are deflationary, and the public sector unions’ opposition to the Economic and Monetary Union should give the manufacturing unions something really to reflect on again. Manufacturing loses most from the single currency and we should consider more fully the fact that the long term interest rates required for manufacturing investment have been historically lower in Britain than the rest of Europe and this would change if we joined the euro.

Eurostat published figures in April 2002 showing that annual Eurozone inflation rose again 2.5 percent. More significantly, “core inflation”, which excludes energy and food prices, rose to 2.5 percent in February, its highest level since May 1996. Pedro Solbes said, “the inflation prospect is not looking quite so good now”. The inflation problem in the Eurozone has increased speculation in the financial markets that the Eurpean Central Bank (ECB) may raise interest rates as early as June. Headline annual inflation has not fallen below the ECB’s target of 2 percent since the introduction of euro notes and coins and inflation has overshot the ECB’s target in two of the bank’s first three years in charge of monetary policy. ‘Low’ short term interest rates in the context of high inflation do not amount to much. Low long term interest rates in the context of low inflation and high levels of employment and increased public spending as in Britain today can amount to a lot in terms of the aspirations of trade unionists and a productive economy capable of paying for health service investment.

Government procurement.

The Budget would have boosted British industry more if procurement from government funded works were exclusively from British manufacturers. Some NHS hospitals for example are equipped almost entirely by items made overseas. A key element of globalisation of course means the intensification of imports at the expense of domestic manufacturing. But above all, the Budget proved what can be done if an elected government, through its control of taxation, interest rates, and exchange rates is able to listen to the concerns of the electorate and make independent national decisions with its own revenue expenditure. Government funding at least can be directed to where the population most wants it to be spent. This cannot happen under a single currency.[2] In this, nation’s lose control of their elected government and government loses control of the key levers of economic power. They also lose their gold reserves incidentally, in our case a useful £22 billion to spend if there is a rainy day. Governments are fined if they break the strict rules of the monetarist club. One effect of this centralisation of power is that a  dangerous alienation from politics sets in, this leads, in part, to the rebirth of fascist nationalism as shown recently in Le Pen’s successes in France.

Single European Tax system on the way.

The single currency cannot operate ultimately without a central European tax system and plans for this are already underway.[3] A single European tax system requires a single European government and it is not therefore surprising to see EU leaders turning up the volume on their demands for this. Dick Benschap and others even think that Britain and France should give up their  seats at the UN Security Council in favour of one EU seat to go along with the new single European Foreign and Security Policy.[4] A common tax policy with Britain contributing to it would significantly help other European countries out of their £13 trillion pensions deficit, while our pensions balance remains in credit, though in chaos as the state pension and final salary schemes come under real pressure.[5] Nor is it surprising to recall that the European Union sought, just prior to the British Budget, to get Gordon Brown to cut billions from public spending. Fortunately he refused. He would incidentally have £8 billion more to spend on British priorities this year if we were not in the EU. We pay this amount at least as a net figure into the EU every year.[6] National Insurance would not have to have risen to fund the new health service improvements if we dedicated all of our tax revenues to those who generate them domestically.

ECB – no interest in nations.

As members of the European Central Bank under the single currency our national interests would be diminished to the European wide calculations demanded by the one size fits all policy that governs the euro. Eddie George and the Bank of England’s monetary policy committee may seem remote and uninterested in manufacturing, but at least we know their names and can influence them and ultimately remove them. Also, it is the Governor of the Bank of England who has most consistently and clearly warned of the extreme dangers of a Europe wide set of rates.[7] National influence on European Central Bankers is forbidden by the Amsterdam Treaty.[8] The Commissioners who run Europe are there for life or until the next huge fraud scandal is revealed. (Fraud still accounts for about 6% of the EU budget each year).[9] A European Central banker makes up his or her mind by seeking to balance the needs of the Trans National Corporations, whose demands for flexibility in Europe and control of inflation are paramount, with the widely different needs of say the Greek and German economies. This is an impossible task. We have already seen the consequences for Ireland of having to adopt rates inappropriate for its own overheated economy and the first victim of this has been the union-employer pay deals ironically once signed in the name of European Social Partnership.[10]

Corporate dictatorship behind the euro.

In fact, even in Germany the euro is known as the ‘teuro’ (the German word teuer means expensive) because prices in Europe where the euro was adopted were universally rounded up especially by the most pro euro companies like Unilever. Besides, trade unionists can just about mount a lobby against the UK Monetary Policy Committee and make their pressure felt in London. Frankfurt is a bit more difficult to get to. Effective lobbying of the ECB is in reality impossible as it is against a Europe-wide body whose deliberations must remain secret and who listen most intently of all to the most powerful lobby group in Europe - the Roundtable of Industrialists which represents the Trans National Corporations the euro’s biggest supporters.[11] British based manufacturers in the Confederation of British Industry are now officially neutral on the issue and cannot be relied upon by the pro Euro lobby to lead the referendum campaign for a yes vote. The Institute of Directors is also against the euro. Farmers, except the large corporates which have benefited from the Common Agricultural Policy subsidies to set productive land out of use, and fishing communities are all against the euro. So too is the Federation of Small Businesses which has considered the matter very deeply over the last few years. For good measure, polls reveal time and time again that, like the rest of the population, trade union members are against euro entry. A new campaigning group of Labour MPs has also been formed to tackle this issue properly.

The euro and the f word.

The new currency in Europe was imposed without a democratic mandate from the people, and it was consequently opposed on January 1st 2002 by some of the largest trade union demonstrations for many years. Trade unionists from all over Europe marched against the euro in Brussels and the crowd was marked by the presence of tens of thousands of young people.  These marches have been followed by a General Strike in Italy where Berlesconi has merely applied the ‘f’ word flexibility, (so necessary to the success of the euro), to his own people in one quick move in relation to one key employment law, instead of the drip drip approach applied here and the government’s refusal to undo the key elements of previous employment and trade union legislation. Flexibility of labour within Europe means small advantages to those who speak a second language, but a nomadic existence for those, as in the TV programme Auf Wiedersehen Pet, uprooted by unemployment from their own communities as companies move around to the cheapest markets. All of the so called social-Europe legislation has not managed to curb the unemployment rate in the eurozone which is twice ours and in many areas, notably Spain and Germany, rising. The prediction of the European Parliament’s own employment committee that the euro would raise unemployment is certainly coming true and with tragic results.[12]

Germany in recession.

The centre of gravity in the ‘European economy’  has been Germany and the dominant currency in the euro is the Deutschmark. Germany is now is free fall. There were 46,900 business insolvencies in Germany in 2001 as they prepared for euro entry. Unemployment has gone up sharply officially to 4.32, but more realistically according to Die Welt at the start of 2002 to 5.5 million.[13] In the first quarter of this year German retail sells fell by 4%. The German banks, once the powerhouses of Europe, are now bottom of all the European banking league tables. Not surprising to see that in recent polls only 38% of Germans are in favour of the euro and most want to return to an independent Deutschmark.

Despite Germany’s recession, which is really bordering a slump, British Treasury officials have recently calculated that the pound would need to be devalued by a staggering 30% before Britain could join the euro and they have described the path “to a devaluation of that magnitude” as being “too difficult as it would reignite inflation.”[14]

Eurozone – low growth area.

The misnamed Stability and Growth Pact designed rhetorically to get eurozone countries out of their misfortunes is only compounding the problems. Germany will have to cut its public spending by a massive 12 billion euros to meet the terms of the pact and Amsterdam and Maastricht Treaties, hardly a helpful move for its unemployed and public sector and manufacturing workers. French Ministers and officials have already made it plain that to achieve a balanced budget by 2004 would be “impossible”. The newly elected Prime Minister of Portugal has already said that Portugal’s public finances are “totally out of control” and a budget deficit in excess of 4.5%, that is way above the Maastricht guidelines, is already anticipated. In this context it is inevitable that some European countries are seeking to break the rules on other matters too. For instance France is seeking to protect itself from the neo liberal competition that underpins the euro. It has refused to open up its energy market to competition, while of course remaining quite keen to buy up any energy supply, utility or service on sale under EU laws in Britain or elswhere.

Britain trading with the world.

We are told sometimes that we will be isolated and squeezed if we remain outside the euro. The truth is the opposite. On most indicators we are the most successful economy in Europe. We were told that we would be frozen out outside the euro. The truth is t at the British share of inward investment by value according to UN figures has remained stable since 1998 and amounts to a huge one quarter of all inward investment into Europe. This perecentage shows no sign of abating from its record levels. We were told that if we didn’t join the club our European neighbours would shun us. The truth is that since the launch of the euro UK trade with the EU has risen by 25%. The pound is strong on the basis of an economy in Britain unique in Europe for the extent of its world trading links. And this is how we should keep it as the euro continues to weaken. The world is our oyster, not one troubled corner of it.

Unions think twice.

One of the best indications for British trade unionists of the perils of euro entry remains the last time that we linked our currencies with the emerging eurozone. In order to join the euro now we would still have to participate in the Exchange Rate Mechanism (ERM). The last time we did this unemployment doubled up to 3 million in one year and 100,000 businesses went bankrupt. If you want to bankrupt Britain and privatise what remain of public services keep pushing for the euro. In the single currency it would be impossible for Gordon Brown to present another Budget reflecting our own political interests. This fact is beginning to dawn on Labour voters too. In fact the recent ICM poll of Labour voters has shown that only 22% support membership of the euro in this Parliament. And 20% would be less likely to vote Labour at the next General Election if the government campaigned to join.  National independence could yet prove the greatest contribution to international liberation from the clutches of the neo liberal global forces that have made trade union life so hard.



[1] (Der Standard, 17 April).

[2] UNISON. Say No ! Anti euro pamphlet, May 2002.

[3] Lionel Jospin, Jaques Chirac, Romano Prodi, Gerhard Shroeder, and Pascal Lamy and many other leading European figures have all recently raised the prospect of one harmonised tax system.

[4] Die Welt, 16th April 2002.

[5] Labour Research, April 2002.

[6] Burkett, Brian, Baimbridge and Whyman, Phillip, (1996) There is an Alternative: Britain and its relationship with the EU. Campaign for an Independent Britain, 81 Ashmole Street, London, Sw8 1NF.

[7] Eddie George highlighted other concerns in the second week of April 2002 week about the implications of Britain joining the euro. Speaking at a conference in Oviedo, Spain, he said, “One has to distinguish between the benefits at the micro-economic level and the macro-economic implications … The real question for the UK is whether the one-size-fits-all monetary policy suits all of the participating countries.”

[8] Amsterdam Treaty. The Campaign Against Euro Federalism publish the full text of the main EU Treaties. CAEF, 57 Green Lane, Merseyside, L45 8JQ.

[9] See, Burkett, Brian (1996).

[10] Coughlan, Anthony. Ireland and the euro, (2001). The Democratic Platform.

[11] Atkinson, Rodney (1996) Europe’s Full Circle - Corporate Elites and the New Fascism. Laughland, John, (1997) The Tainted Source, The undemocratic origins of the European Idea.

[12] Coates,Ken. (1999) Full Employment.

[13] Die Welt January 9th 2002.

[14] The Business, 13th April 2002.



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