The determination of Europe's leaders to keep the single currency is unwise, writes Daniel Hannan.
ONE by one, the governments of the eurozone are giving way under the strain. The first to collapse was Fianna Fail, which had won every election in Ireland since 1932. In last year's election, it fell from 42 to 17 per cent as voters took revenge on a government which, to prop up the euro, had sided with Brussels against its own people.
Next came the coups in Greece and Italy, which saw elected prime ministers toppled in favour of Eurocrats. Both countries are now administered by "national governments": in practice, Brussels-backed civilian juntas whose sole purpose is to implement policies that would be rejected at the polls.
Now it's the turn of the Netherlands, whose government has fallen over the austerity measures required by the treaty on fiscal union. The coalition had been propped up from the outside by the anti-immigration Freedom Party, led by Geert Wilders. Faced with a proposal to raise the retirement age, Wilders declared: "We won't let our pensioners suffer for the Brussels dictators."
It couldn't have come at a worse time for the euro, which has fallen to a 20-month low against the pound. No longer is the crisis largely confined to the Mediterranean. On Sunday, one in five French electors backed Marine Le Pen on a platform of returning to the franc. The largest share of the vote went to Francois Hollande, who has promised to abrogate the FU Treaty (initials which, in the minds of many eurozone citizens, precisely summarise the attitude which Brussels takes to ordinary people). First Hollande, then Holland. Where next?
If it can happen in Holland, after all, it can happen anywhere. The Netherlands enjoys a AAA credit rating. Its Liberal-Christian Democrat coalition had been seen as a model of sobriety and prudence. Think of the stern burghers in a portrait by Rembrandt or Frans Hals and you'll have the general idea.
That such a country should be drawn into the maelstrom is proof that we are dealing with a crisis of monetary union and not, as euro-apologists like to claim, with a general debt crisis. The Dutch deficit is 4.7 per cent, compared with 8.3 per cent in Britain and 9.1 per cent in Greece. Its total debt is 66 per cent of GDP compared with, respectively, 82 per cent and 161 per cent.
Wilders was wrong to oppose the budget. All Western countries, including the Netherlands, need to deal with the happy problem of increasing longevity. His walkout, however, should be seen in context. The Netherlands is just one of five big budget contributors in the eurozone along with Austria, Germany, Luxembourg and Finland. Taxpayers from these countries are being asked, in effect, to bail out governments that have been less prudent than their own. Many Dutch voters believe they are being asked to retire later so Italians can retire earlier: robbing Pieter to pay Paolo.
Their resentment is heightened by the EU's profligacy. While it preaches austerity to the 27 member states, the European Commission unblushingly demands a 7 per cent increase in its own budget. There was a time, not long ago, when Brussels' waste and sleaze went unreported by the Europhile Dutch media, but the internet has changed all that. Our sundered kindred are starting to see the EU as we see it, and to become angry. Heaven knows they have plenty to be angry about. Since the crisis struck four years ago, Europe's leaders have been concerned with preserving the single currency rather than with maximising the prosperity of the people who use it. It is now clear to almost everyone that the euro is a recessionary mechanism. It is causing deflation and emigration in the southern states, and threatens massive tax rises in the north.
Don't imagine, by the way, that Britain is exempt. Already, it is on the hook for #12.5 billion in the Irish, Greek and Portuguese bailouts. In defending this extra debt, Treasury officials make two claims. First, the fund is not intended to bail out the eurozone. (Who's it for, then? Canada?) Second, that it's a tremendous investment, and that Britain will get the money back with interest. Well, if so, why not "invest" #100 billion? Or a trillion?
The euro or, rather, the determination of Europe's leaders to keep it is not only causing preventable destitution it is also vitiating democracy. Britain is investing, not merely political capital, but actual capital, in trying to hold the single currency together. Why is Britain paying for the privilege of hurting its allies?
Frequently Asked Questions about this Article…
What is the main argument of the article about propping up the euro?
The article argues that European leaders’ determination to preserve the single currency is unwise: propping up the euro has political costs, undermines democracy, and is economically damaging—creating a crisis of monetary union rather than a general debt crisis.
How has the euro crisis affected European governments and politics?
According to the article, the crisis has toppled or weakened governments across Europe: Ireland’s Fianna Fáil collapsed in an election, elected leaders in Greece and Italy were replaced by Brussels‑backed administrations, and the Dutch government fell amid disputes over austerity—signalling widespread political fallout from the euro crisis.
Why does the article say the problem is a crisis of monetary union and not just a debt crisis?
The author points out that fiscally prudent countries like the Netherlands (AAA rating, 4.7% deficit, 66% debt‑to‑GDP) are being pulled into the turmoil, which shows the core problem is the structure of the eurozone’s monetary union rather than only excessive national debt in a few countries.
What economic effects of the euro does the article highlight that everyday investors should know?
The article describes the euro as a ‘recessionary mechanism’ that is causing deflation and emigration in southern member states and threatening large tax rises in northern countries; it also notes the euro had fallen to a 20‑month low against the pound, underscoring currency volatility investors should watch.
How are taxpayers and countries like Britain exposed to the eurozone bailouts according to the article?
The article says Britain is effectively on the hook for about £12.5 billion related to Irish, Greek and Portuguese bailouts and criticises Treasury claims that such funds are mere ‘investments,’ arguing the political and financial exposure raises questions about who benefits and who pays.
What role does public resentment and EU spending play in the eurozone tensions?
The article explains that taxpayers in fiscally responsible countries resent being asked to support less prudent governments, and that resentment is heightened by perceived profligacy at the EU level—such as the European Commission seeking a 7% budget increase while preaching austerity.
Which countries are cited as major budget contributors to the eurozone and why does that matter?
The article names the Netherlands, Austria, Germany, Luxembourg and Finland as the five large budget contributors; it argues their voters feel unfairly asked to shoulder the cost of bailing out other eurozone governments, fueling political backlash against austerity measures tied to the monetary union.
What should everyday investors monitor in light of the article’s view on the euro crisis?
While the article is an opinion piece rather than investment advice, it suggests investors keep an eye on political stability in eurozone countries, currency moves (like the euro‑pound exchange), bailout commitments by other governments, and policy shifts that could affect markets and sovereign risk.
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