Clear sky for Britain after all
Britain's decision to stay out of Europe's monetary union could deliver new dividends in time as the region emerges from its turbulence.
And so when German chancellor Angela Merkel dined at 10 Downing Street last week, Merkel did not tell British Prime Minister David Cameron the real truth: Germany desperately needs Britain to stay in the European Union, because the EU will not survive unless the stronger countries stay in.
Unlike any other country in Europe, Britain can actually leave the EU because, thanks to Norman Lamont – one of the most perceptive chancellors in UK history – Britain joined the union but did not adopt the euro as its currency. And, of course, Lamont’s prime minister, Margaret Thatcher, also played a big role in making the correct call in the early 1990s.
CPA Australia recently brought Norman Lamont to Australia to explain what is ahead for Europe and I recorded a fascinating video interview.
Like Margaret Thatcher, David Cameron was able to explain to Merkel that part of Europe’s problem was the highly paid, wasteful public service in Brussels. Cameron wants big cuts but Merkel was urging fewer reductions because of the complexity of the task of keeping Europe together.
My guess is that David Cameron and his Cabinet are not ready to take the UK out of Europe at the moment. Nevertheless, while British austerity is much softer than many other European countries, the wasteful expenditure in Brussels is generating a wave of anti-European sentiment in Britain.
At the last EU summit, Cameron said that 16 per cent of the European Commission's employees earned over €100,000 per year. Segments of the Brussels public service are striking to protest against the moderate cuts already announced. Cameron wants much deeper cuts. One can only imagine what the Greeks think of the waste in Brussels.
It took two decades for Lamont’s predictions of the disaster ahead for Europe and its euro to be proved correct. Now Lamont is predicting that Europe will have a further extended period of turbulence and suffering before, one way or another, some of the weaker European countries restore their own currency. But it will not be an easy task.
In my view, while it will take an extended period, a stronger Europe might emerge out of the current turbulence, and Britain has the chance to be a clear leader.
Angela Merkel has not yet grasped the significance of the American gas revolution, which in a decade will see the US no longer requiring Middle Eastern oil. Energy will be therefore much cheaper, but Germany is over-investing in high-cost renewables which will render its industrial base uncompetitive.
Just as Thatcher and Lamont took a longer term view, Cameron will too. Cheap Middle Eastern energy gives Britain the chance to rise again, because by choosing to stay with sterling as its currency in the 1990s, Britain now does not have to go through the same level of self-destruction required in other European centres.