As I said, Ken Clarke’s conversion to Euro-realism should be seen in the context of his desire to be Conservative Party leader. Playing on the nano-second attention span of the average British voter he believes that if he pretends he’s gone all anti, free-born Englishmen the country over will vote for him.

Bugger it, he’s probably right.

Anyway, The Business reckons Ken’s having us all on. It has heard our Ken make negative noses about the single European currency and reckons he’s having us on. And it pulls no punches about it either:

kapow !

Mr Clarke’s words were anything but a step down from his long-held europhile views. Everybody knows that, had Mr Clarke been Prime Minister at the time, he would have shoehorned Great Britain into the single currency by now and signed up enthusiastically to the European Constitution, which even the French and Dutch have rejected. Indeed Mr Clarke’s constant refrain until last week was that Britain had done neither because Prime Minister Tony Blair had failed to show sufficient euro enthusiasm and leadership.


booof !

Mr Clarke’s pseudo-confession is no more than a grudging nod to reality. Even supporters of the single currency, like Mr Blair, admit that there is no chance of Britain joining it for the foreseeable future (though, undaunted, Mr Clarke raised the possibility of British entry in 10 years time, presumably, in his dream world, towards the end of the first term of a Clarke government).

thwack!

The fact that other European countries, for their own reasons, have also turned against the EU has refuted the myth that only Little Englanders or xenophobes oppose the EU. The euro-establishment in all three mainstream British political parties, which used to hold such sway over public opinion, has now lost all credibility with voters.

Full article can be read by clicking ->

Comment & Analysis

A European Union beyond reform
August 28, 2005

DESPERATE men say desperate things, as Kenneth Clarke, the former British Chancellor of the Exchequer and Tory cheerleader of European integration, illustrated last week. In a shameless interview designed to boost his chances in the Tory Party’s long-running leadership race, in which sentiment is strongly against further European integration, he performed a partial U-turn on Europe’s single currency, admitting that the euro had “so far” failed to lead to the economic boom across the euro zone he had forecast so confidently only a few years ago; indeed, he conceded, there had been “considerable teething problems” he had not foreseen.

Needless to say, this carefully-crafted statement was presented as a Damascene conversion by some overexcited commentators, especially in the left-wing press and the BBC, who are pushing Mr Clarke for Tory leader, even though they would no more vote for a Clarke Tory party than a Thatcher one. These people do not have the interests of the Tory party at heart; and, of course, Mr Clarke’s words were anything but a step down from his long-held europhile views. Everybody knows that, had Mr Clarke been Prime Minister at the time, he would have shoehorned Great Britain into the single currency by now and signed up enthusiastically to the European Constitution, which even the French and Dutch have rejected. Indeed Mr Clarke’s constant refrain until last week was that Britain had done neither because Prime Minister Tony Blair had failed to show sufficient euro enthusiasm and leadership.

Mr Clarke’s pseudo-confession is no more than a grudging nod to reality. Even supporters of the single currency, like Mr Blair, admit that there is no chance of Britain joining it for the foreseeable future (though, undaunted, Mr Clarke raised the possibility of British entry in 10 years time, presumably, in his dream world, towards the end of the first term of a Clarke government); and the Constitution has been holed below the water line by France and Holland, making the promised British referendum on the matter unnecessary (and it would have been another resounding “No” anyway). With both Mr Clarke’s dreams shattered, why not come more into line with the views of the party he aspires to lead, which has not shared his dreams for almost two decades? It is no more than the tactical manoeuvring on policy which always accompanies party leadership contests; but it is of some small significance all the same.

The fact that even Mr Clarke, whose support for most things Brussels has never before been found wanting, is prepared to admit that the euro has so far been a failure is another large nail in the coffin of the single currency and further European integration, at least as far as Great Britain is concerned. The extent of the recent shift in British public opinion against the European Union (EU) - even among business folk, hitherto its greatest supporters - has been remarkable. It is a shift born of experience, especially the unarguable fact of the euro zone’s well-established economic failure, but also the growing realisation that the EU, with its mountain of regulations and wasteful farm subsidies, is essentially beyond reform. The fact that other European countries, for their own reasons, have also turned against the EU has refuted the myth that only Little Englanders or xenophobes oppose the EU. The euro-establishment in all three mainstream British political parties, which used to hold such sway over public opinion, has now lost all credibility with voters.

Mr Clarke’s own statements over the years are a good illustration of how he and his kind have been rumbled by events. Only a year after the euro was launched in 1999, Mr Clarke was already convinced the venture was a roaring success: “The euro has already created wider and deeper capital markets,” he opined. “It has done what I thought it would do: speed up the essential restructuring of western European economies. It has also stimulated trade and investment across borders. It is leading to liberalisation in every area. Euroland economies are achieving rapidly accelerating rates of growth. I never thought that the disadvantages of our having to wait would become apparent so soon.” To Mr Clarke’s embarrassment and chagrin, not one of these claims has turned out to be true. Capital markets are largely unchanged, trade within the euro zone has not been stimulated, nor has investment; there has been no liberalisation and not much restructuring (witness the wholesale failure of the so-called Lisbon reform agenda); and the growth rates of the euro zone’s major economies have languished, not accelerated.

Of course five years ago Mr Clarke was not alone in spouting such nonsense; many supposedly intelligent folk on the right and the left believed it too. Today, any professional economist who spoke about the euro zone in such terms would be laughed out of a job; some are now openly forecasting a break-up of the single currency. But Mr Clarke is a slow-learner. Three years ago he was still cheerleading for the euro and sensing that opinion was moving his way: “There has been a decisive swing to the pro-euro cause. The public mood is changing as people can see the success of the new currency on the mainland and the alarming fall in inward investment into Britain.'’ The world Mr Clarke had identified, of course, existed only in his imagination. Opinion was actually hardening against the euro, people on the “mainland” complained about rising prices rather than praising any “success” and Britain has retained the lion’s share of EU inward investment throughout the life of the euro.

Nor have European issues “gone away” now that Britain will sign on to neither the single currency nor the constitution. Brussels remains in control, or is highly influential, in so many crucial areas of policy - and accounts for a majority of the new laws governing member state every year - that EU-related issues are permanently and unavoidably at the top of the political agenda. The Tories seem to be unaware of this: a combination of intellectual laziness, lack of guts and the debilitating effect of a protracted leadership election mean that the party has still not moved on since the French and Dutch referendums; indeed, it has been leapfrogged (albeit only rhetorically) by the government, especially after Mr Blair’s claim that he wanted to “get rid of” the common agricultural policy (CAP). Britain now desperately needs an opposition with a comprehensive, alternative vision of British foreign policy that breaks with the Foreign Office’s post-war obsession with Europe. Such a vision would flesh out new trading and defence alliances for Great Britain on an international scale to meet the needs of an age of globalisation, the continued dominance of the United States, and to the rise of China, India and the rest of Asia. It would also require a new, much looser relationship with the EU. None of the pretenders to the Tory throne, however, is offering anything like this.

Yet there is an urgent need for such radical thinking: barely a day goes by without more evidence of the EU’s flaws and inadequacies. The chaos that has followed its profoundly reactionary decision to slap quotas on the import of clothes from China, for example, after barely six months of free trade is the EU at its protectionist worst. As we warned at the time, Peter Mandelson’s pledge to push for economic and trade liberalisation when he became EU trade commissioner was never worth the paper it was written on. The job is far less powerful than Mr Mandelson would wish to admit. The regulations enforcing the quotas on China were passed by EU states under qualified majority voting; they will remain in place until a fresh majority can be assembled to repeal it, which may not happen for several years. So much for Mr Mandelson’s free trade rhetoric.

Apart from the rhetoric, of course, nothing really ever changes in the EU. A report from the independent Congressional Budget Office (CBO) in Washington last week found that the EU protects its farming more than anybody in the world, even America. The EU shields domestic farming with “extreme tariffs” of more than 100% on 39% of its entire farm production, compared with 26% by the US. The EU also subsidises exports dumped on developing nations more than any other bloc, accounting for 85-90% of the world’s export subsidies. These figures demolish the widely-held belief that the EU and US are equally protectionist when it comes to agriculture. America is bad enough; but the EU is beyond the pale.

Moves are now afoot to slap quotas on shoes and trainers from Vietnam and China. For all its warm words about making poverty history, the EU in practice could not care less about the poor in developing countries who are reliant on exporting to the West for jobs and prosperity.

One reason for the EU’s protectionist imperative is that the Brussels’ regulatory machine remains stuck in overdrive, churning out ever more complicated directives that undermine the ability of business to compete, without even dreaming of subjecting them to cost-benefit analysis. As we argue on the page opposite, a tidal wave of red tape is threatening to undermine the City of London’s status as the capital of international finance under the guise of extending the single market to financial services. Airlines are another victim of the EU’s addiction to regulation: rules on compensation for passengers from delayed flights will cost EU airlines, most of them already ailing, E560m a year, over and above existing compensation; for a medium-sized European carrier, that will amount to about E40m a year - about a fifth of its operating profit.

The euro zone’s economic underperformance continues, dragged down mainly by Germany and Italy but also by France. There has been a concerted effort over the past few months by some in the City of London to rehabilitate Germany, supported by The Economist, which periodically predicts (so far, wrongly) German recovery. The truth is less cheery: German companies are doing better after years of painful restructuring, during which time they have brought labour costs back into line with the rest of the region; but, overall, the German economy remains in a sorry state, still dragged down by a bloated state, crippling taxation, an overly tight monetary policy caused by the euro zone’s one-size-fits all interest rate, falling house prices and a construction sector stuck in recession. The German economy has grown by only 1.5% a year over the past decade. Chancellor Gerhard Schršder’s cautious reform process is likely to continue if Angela Merkel, the centre-right opposition leader, is elected next month; but its pace is unlikely to accelerate, such is the opposition of ordinary Germans to radical change.

The blunt truth is that the euro zone’s poor economic performance and high unemployment are likely to be with us for the foreseeable future while the Brussels bureaucracy is forever trapped in its own regulatory mindset. As a result it is only realistic to conclude that there is little hope for the EU. It stands condemned to permanent decline, making it time for Great Britain to start thinking of forging a new, looser relationship with its European neighbours, most of whom seem resigned to accepting decline. Working out how to do this should be one of the Tories’ main concerns in their current leadership contest. Clearly, this is not a task for Mr Clarke; but it is easier to rule him out than to identify anybody who is up to the job.