Former British ambassador to France says EU leaders are unamused by prime minister’s advice on how to save the euro
David Cameron and George Osborne have decided to lecture the eurozone on what it needs to do to put its house in order.
In a video conference on Thursday with François Hollande and Angela Merkel, the prime minister decided to repeat his public warning of a “remorseless logic” that struggling members of a single currency should be supported by stronger members.
Sir John Holmes, Britain’s former ambassador to France, told Radio 4’s The World at One that EU leaders are unamused:
Other leaders find David Cameron’s lectures rather irritating.
Veterans of Britain’s tortuous relationship with the EU say Cameron and Osborne are giving a masterclass in how to annoy France and Germany, the two most important powers in Europe. They say that the prime minister and chancellor are putting their short term political interests – a need to blame Britain’s double dip recession on the eurozone’s failings – before the British national interest of ensuring maximum influence in the EU. David Miliband told MPs on Thursday that the government was seeking to find an “alibi for the collapse of our economy”.
As the prime minister has his first face to face meeting with Hollande, the veterans say Cameron and Osborne might like to bear in mind the following thoughts when they next lecture Britain’s two closest economic allies:
• Most of the German establishment were deeply sceptical twenty years ago about establishing a monetary union without a fiscal union. Cameron and Osborne have identified this as the central flaw of the single currency.
As I blogged last year, the establishment’s model was the introduction of what became the Deutschmark after the unification of Germany in 1871. But Germany signed up to Economic and Monetary Union as the price for French support for German unity after the fall of Berlin Wall in 1989.
Hollande and Merkel both have personal experience of the delicate negotiations back then. Hollande’s hero is François Mitterrand, the late French president, who demanded the death of the Deutschmark as the price of Germany unity. Merkel was brought up in East Germany after being born in West Germany and therefore had a particular personal interest in seeing the unification of her country.
Cameron and Osborne are not quite so steeped in European history. Osborne was learning to cope with his Bullingdon Club nickname of “oik” at the time of German unity. Cameron was settling in at the Conservative Research Department after a family friend at Buckingham Palace had eased his path into the Tory party.
• Germany and France have bigger and more successful economies than Britain. They have the fourth and fifth biggest economies in the world. The IMF lists Britain in seventh place.
• Cameron and Osborne failed to win a general election, unlike Hollande. Merkel has governed in various coalitions because Germany’s PR electoral system works against majority governments for obvious historical reasons.
Britain repeatedly says that saving the eurozone remains in Britain’s vital national interest. France and Germany may say that if Britain has such strong views on how it should be saved then it should cough up directly than through relatively modest and indirect IMF contributions.
For anoraks, these are the steps Cameron said eurozone leaders should follow. He outlined these to Hollande and Merkel (plus Mario Monti, Herman Van Rompuy and José Manuel Barroso) in their pre-G8 video conference on Thursday after setting out his thoughts in a speech in Manchester:
• Weaker members of the euro, the so called peripheral countries such as Greece, need to take “difficult steps” to cut spending and embark on structural reforms. Borrowing and spending to a recovery is a “dangerous delusion”.
• The European Central Bank must do more to support demand and share the burden of adjustment – a clear call for Germany to relax the rules governing the bank. “Monetary policy in the eurozone must do more.”
• The eurozone must put in place “governance arrangements that create confidence for the future”. The prime minister said the logic of monetary union leads to “greater forms of collective support” such as eurobonds.
• Europe needs to address its “Achilles Heel” – low productivity and lack of economic dynamism.