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p1 Cover: Dave’s charm offensive p3 Leader: Opportunity in crisis p4-5 Contents p7 Portrait of the week p9 Diary: Christopher Caldwell p11 The Spectator’s Notes: Charles Moore p18 The Alexander technique:
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Dave’s charm offensive
Cameron is risking the Tories’ traditional female vote, says Melanie McDonagh
Taki: the third toughest 74-year-old in the world
The KGB’s man in al-Qa’eda
Schiller’s killer Miller
COVER_25 June 2011_The Spectator_ 1
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Opportunity in crisis
How we all miss the drachma! If Greece still had a sovereign currency, that currency would probably have halved in value, thereby providing cheap holidays for the rest of us. Greece would then have defaulted on its debt, in a way that would have inflicted minimum financial damage on its neighbours. A few banks would have been burned, deservedly. Like Russia in 1998 and Argentina in 2002, Greece would have got over the pain quickly. Calamitously, though, Greece joined the eurozone — so it remains in crisis, unable either to repay its debts or to devalue its currency and export its way to recovery.
Britain has the great luxury of watching this from a distance.We were never fooled by the idea of monetary union, or the claim that the euro would somehow mean more jobs or lower prices. Taking the euro meant surrendering the two most powerful weapons in a nation’s economic arsenal: the power to set interest rates and let the currency plunge in a crisis. The slide in the value of sterling in 2009 has been the single biggest stimulus to Britain’s economy.
It will not be long before other countries in Europe start to develop currency envy. What the eurozone chiefs are doing to Greece is little short of sadistic. The bailout money is not helping anyone in Greece, but is intended to help the banks in France and Germany that lent money to their Greek counterparts. This money will never be repaid in full. Greece will certainly default, in one way or another. The only question is when.To save itself, the eurozone is prolonging and intensifying Greece’s agony.
urozone chiefs are terrified that another game of economic dominoes is about to take place — this time with countries falling rather than banks. Instead of Lehman Brothers, we have Greece, a country which, if allowed to fail, would take down Ireland, then Portugal, then Italy and perhaps even Spain.There is a limit to how many countries the European Central Bank can bail out, because there is a limit to how much pain German taxpayers will take. It could well be that Germany will be the first country to pull out of the eurozone, and finally bring down the curtain on this sorry show.
David Cameron should be ready. He cannot be expected to know how the fiasco will end; it is possible that the EU will need to draw up a new treaty requiring Britain’s signature. This will represent an extraordinary opportunity for the Prime Minister to renegotiate our membership of the EU in terms
The eurozone crisis may bring an extraordinary opportunity for David Cameron to renegotiate the terms of Britain’s EU membership that would finally be acceptable to the people who pay for the costs of this membership.
At present, Britain sends more overseas aid to the European Union than we send to Africa and Asia combined. Our net payments are in the process of doubling to £8 billion — which is more than equal to the cuts in defence and schools combined. While the cost of belonging to the EU club is doubling, the benefits are not.The European Commission’s own research shows that 60 per cent of Brits believe EU membership has ‘not benefited us’, the highest figure in the continent, and by some margin.
In opposition, David Cameron was suspicious of those who ‘bang on about Europe’, as he put it. In government, he is beginning to see their point. Privately the Prime Minister estimates that a third of his time is now spent carrying out various orders from Brussels.
This is what has led Steve Hilton, his lieutenant, to believe that the only honest solution is either to leave the EU or change the terms of our membership. But such ideas give the Liberal Democrats palpitations, their belief in the European project being the closest the party has to an article of faith.
As James Forsyth revealed last week, the Lib Dem sensitivities mean that no contingency plan is being drawn up for EU crisis talks. The government has plans for dealing with all manner of unlikely scenarios, from an Indian vs Pakistan nuclear war to an epidemic which kills a fifth of the British population. But the all-too-likely scenario of a eurozone crisis is something which the Lib Dems will literally not allow the government machine to contemplate. We might have a very short window — a few days — to make our case. As the Lehman Brothers collapse showed, the timing and extent of financial crises are impossible to predict.
Last week, Iceland raised an extraordinary $1 billion from foreign investors, and got away with paying them just 4.9 per cent interest. This is the same country that was until recently synonymous with toxic financial debt. Its government refused to bail out its banks, forcing them instead to undergo painful restructuring. Iceland’s great blessing was that it did not belong to the eurozone and did not qualify for any loans. If it had, the country would doubtless have been bullied into using taxpayer money for bailouts.
The eurozone experiment is ending. The nation state is back. Britain has much work to do in reclaiming parts of our sovereignty that should never have been surrendered in the first place. The government needs a plan for doing so, even if it has to be drawn up in secret by Hilton himself. If Cameron fails to seize such an opportunity, he will not be easily forgiven.
the spectator | 25 June 2011 | www.spectator.co.uk