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Bruce Anderson

Bruce Anderson: Cameron says no-one ever lost money by lending to the IMF. But there's always a first time.

It is becoming a bore, and I imagine a lot of readers are having a similar experience. Everywhere I go, the question is the same; "What will happen to the Euro?" I have a stock response: "That is easy to answer. Things will either get worse, or they'll get better - or they'll stay the same". There is only one problem with that. There is no guarantee that we will not be having an identical conversation this time next year.

Yesterday, writing for ConservativeHome, David Davis argued that the PM should stop pretending that the Euro could be rescued. In a rational world, Mr Davis would be right; when in a hole, stop digging. In a sane world, David Cameron would tell the other Europeans what some of them surely know already. This was never going to work; there is no way of making it work. Every month that it drags on means the further destruction of output and jobs, with all the social dislocation which that is bound to cause. Every month that it stumbles on sees a further erosion of Europe's power and reputation, at a dangerous moment in world history. At a time when European leadership could be useful, the travails of the Eurozone are turning Europe into a joke. Europe deserves better. There is no easy way of putting things right. But if you have a condition which requires major surgery, the quicker you are under the knife, the better.

In any remotely rational world, it would not be necessary for our Prime Minister to proffer that advice. It would long since have been acted upon. In any remotely rational world, Nicolas Sarkozy would be a court jester seeking promotion to gigolo. In the world we are stuck with, any attempt by David Cameron to offer wise counsel would lead to furious resentment. Some readers will be sceptical. Am I really claiming that Eurozone leaders would behave like overtired children being told that it is time for bed? When one of the children is the current President of France, the answer is "Yes".

To be fair to M Sarkozy, he is merely the latest and perhaps final exponent of French delusion; he did not create it. The whole of post-war French foreign policy has been founded on self-deception: the fantasy that France could become a superpower, almost the equal of the Americans and the Russians. The French were abetted in this by the Germans. The whole of post-war German foreign policy has been based on the need to apologise for the era in which Germany was a superpower. The French have always known how to exploit German guilt. France and Germany are like two neurotics, who met in the psychiatrist's waiting-room and then had a love-affair on the psychiatrist's couch. In recent years, however, much to French alarm, there have been signs that the Germans were ready to climb down and declare themselves cured. After all, it is easier to forgive yourself for military victories than for military defeats.

Still wedded to illusion, much of the French political elite has been clinging to the hope that under French leadership, Europe could be the bedrock of France's prestige. This may explain why that elite is now so tetchy. If the Eurozone collapsed, forget prestige. But what if the nations of the Eurozone decided that in order to save the single currency, they really would become a single country? That country would, one presumes, be democratic, with a sovereign parliament. In such a parliament. the French would have around a fifth of the seats. It would no longer be possible to protect France's interests by intergovernmental deals. In the early phase, France would no doubt exercise a disproportionate influence. But with every passing year, French leadership would follow the franc, into history.

Apropos the French elite, it may be unfortunate that a French politician is now in charge of the IMF. It is not yet clear whether Mme Lagarde is sufficiently impartial. On the IMF, David Davis is right. The British government should not provide it with more funds to support the Euro - which it should not be doing. As George Osborne said a few weeks ago, the IMF is there to support governments, not currencies. Moreover, when the IMF moves in to sort out a country's affairs, it often begins by insisting on devaluation. Admittedly, this did not happen with Greece, Ireland or Portugal. But the Greek package is now bound to fail, while the combination of austerity and an excessively strong currency cannot possibly work for the other two.

David Cameron has pointed out that no-one ever lost money by lending to the IMF. True, but there is always a first time. The Greeks invented much of the language of public affairs. Politics, democracy, economics... anarchy. Even if the modern Greeks have a curious view of economics, they have not forgotten anarchy. Equally, if the Euro ends in a disorderly break-up - or even if it just ends - who will be responsible for the ECB's Euro-denominated loans, and will they accept their responsibilities? The disorderly exit would lack the charm of the students scarpering from the Cafe Momus in la Boheme. But who might end up as Alcindoro, stuck with paying for everyone? As the UK was not at the party, we should keep clear of the bills.

That too would provoke resentment. The French are desperate for any excuse to blame us for their mistakes. But at least we would protect our money.

On the subject of unfair blame, we ought to keep Fred Goodwin in perspective. Although he was guilty of a colossal misjudgment, he would have been fine if the world economy had gone on growing vigorously for the next few years, as he would have assumed. At the time, that assumption was shared by almost every banker, politician and commentator. It must be remembered that Barclay's was prepared to spend almost as much on ABN-Amro, though it would have paid in paper. Even so, that was the luckiest underbid in history. Fred Goodwin was much less villainous and much more unlucky than his enemies would have us believe. It is not necessary to believe that every lynch-mob is always wrong, to find something crude and distasteful in the vilification of poor Sir Fred.

He was also much less villainous than the inventors of the Euro. Early in the banking crisis, Chris Patten wrote a complacent piece, chuckling over the bankers' follies. A single mother in St Louis takes out a self-certifiied mortgage. Three weeks later it is a triple-a rated asset in a German land's pension fund: how absurd. Lord Patten was right. But he failed to follow through the logic of absurdity. A single mother in the slums of Salonika is expected to use the same currency as they do in Stuttgart, with minimal fiscal transfers. Equally absurd, and much more damaging. It is a lot easier to deal with a banking crisis than with a continent-wide currency crisis.

There is a further point. Hardly anyone foresaw the banking crisis. But there were constant warnings from British Eurosceptics about the folly of a single currency without fiscal support. Constant. Year after year. And year after year, they were disregarded, by ex-Commissioner Patten and the other federasts. Fred Goodwin was unlucky. He was able to implement his errors. The Eurofanatics were undeservedly lucky. Because of the cowardice of Tony Blair, the cussedness of Gordon Brown and the dogged good sense of the British electorate, the country was spared the consequences of their grandiose folly. Otherwise the lynch-mobs would have different targets.


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