The euro: a recipe for mayhem

In the 1990s, JD Wetherspoon campaigned against the euro (the single European currency) on economic, rather than political, grounds. We had recently witnessed the debacle of Britain's membership of the exchange rate mechanism (ERM), the predecessor of the euro, which caused extremely high interest rates during a severe recession, as we catastrophically tried to tie our currency to the Deutschmark. This created mass unemployment, negative equity for millions of homeowners and economic dislocation for businesses.

During this time, I was spokesman for the 'No' campaign, which opposed Britain's entry into the euro, and was asked to go to the European Parliament in Brussels to debate the issue with a euro supporter, who is now a Government minister.

We were both asked to hand out, to the audience of European business people, a short biography of our careers. Mine was one short paragraph, while my opponent's was several pages — although, for extremely obscure reasons, he omitted to mention the dozen or so years he had spent as a journalist, culminating in the job of financial editor of The Independent, a fact most people would have been proud of. Since he was around 45 years old, this was indeed a major oversight.

My major argument was that the ERM had collapsed, only after causing mayhem in Britain, and my opponent had been a major supporter of Britain's entry into the ERM, so his advice about joining the euro should be taken with a large pinch of salt.

My opponent denied he had promoted Britain's entry into the ERM, but I was able to produce an article he had written for The Independent, in which he urged Britain, in the strongest terms, to join.

The omission of any mention of his career in journalism, combined with the denial of his support for the ERM, indicated a less-than-frank approach to reality, but did not stop my opponent from issuing a subsequent press release saying he had "won" the debate, which was not my interpretation. The politician in question, then an MEP (a member of the European Parliament) was Chris Huhne.

Being against the euro does not make you 'anti-European'. In my case, it just means that separate countries cannot, as an economic matter, join their currencies together, without joining their governments together, with the central government having full tax-raising powers to transfer taxpayers' money from Germany and France, for example, to help Italy and Portugal.

No currency in history has survived without a central government to support it.

In my opinion, the euro has already failed and is causing the same economic mayhem in Ireland and Spain (among other countries) that the ERM had caused in Britain. Interest rates were too low during an economic boom, stoking up a huge property bubble — and now interest rates, and the currency itself, are too high for the economic conditions. Ireland and Spain are unable to reduce them to appropriate levels, so those countries' citizens are paying the price, with chronic unemployment and calamitous economic dislocation.

The surprising aspect of the euro, as I've argued before, is that it was an invention of what the French call 'les énarques' — intellectuals from great universities who presumably felt they could invent a new type of economic system, in defiance of history. In this respect, the euro's intellectual and utopian appeal recalls the almost religious allure of the work of Marx and Engels a century and a half ago.

Nigel Lawson, as Chancellor of the Exchequer, disastrously 'shadowed the Deutschmark' and advocated entry to the ERM.

His predecessor, Geoffrey Howe, was a similar advocate of the single currency, forcing the then prime minister Margaret Thatcher's resignation after his speech on the issue. Michael Heseltine, Roy Hattersley and Tony Blair were in the same boat, with many others.

Outside the world of politics, Adair Turner, now Lord Turner and chairman of the Financial Services Authority (FSA), which oversees the banks, was a fanatical advocate of Britain's euro entry. Richard Lambert, then editor of the Financial Times, was pro-euro, censoring anti-euro comments in the newspaper.

Until recently, he was director-general of the Confederation of British Industry (CBI), the most important big business representative for governments. Yet, even today, it seems many influential economists and MPs do not accept that the euro is a busted flush. Two of the most widely-read economists in Britain — David Smith, of The Sunday Times, and Martin Wolf, of the Financial Times, have written long lucid articles as to why the euro will survive.

It's a strange paradox that those who are supposed to understand money best — economists, intellectuals and former Chancellors of the Exchequer — appear to understand it least. The man on the Clapham omnibus, as lawyers say, seems to understand the folly of the euro much more readily.

In the meantime, thank God for democracy and independent-minded politicians, such as Frank Field, Michael Howard and William Hague, combined with a motley crew of business people, journalists and trade unionists, who also saw the light years ago.

For now, the euro hiccups along, causing further economic distortion with every day it survives, but it will surely collapse eventually, with the worst economic consequences for those who can least afford them.