Interview: Alistair Darling tells John Humphrys – the latest Eurozone treaty is “absolutely mad”

London Symposium 2012: Rt Hon Alistair Darling, tells John Humphrys: the latest Eurozone treaty is “absolutely mad”  and solves none of the structural problems underlying the current crisis; the G20 moment seems to have melted away; Europe must renew its focus on promoting trade, enterprise and competition.

“The Futures of Europe”

[By: Daisy Blacklock]

Over two days, world leaders converged in London. Brought together, to decide together, how to face “the greatest challenge to the world economy in modern times”.

Along the course of their meeting they agreed a plan of action worth $1 trillion. The summit closed with an expression of hope and satisfaction that their collaboration had led to a swift and decisive, but most importantly, global, plan for recovery.

That was April 2009.

Two years on, the Former Chancellor, Alistair Darling, lamented how the urgency of that G20 summit, for countries round the world to work together, had since fallen away.

And as for Europe, the Labour MP for Edinburgh south west said he had felt increasingly frustrated and “dispirited” by the lack of governance shown by the Eurozone’s politicians.

Europe may be one continent, but “we live in a globalised world”, and no man – certainly no continent – is an island, was his charge.

Darling’s frustrations were palpable as he articulated his thoughts on Europe’s turmoil to date, and what he thought could be in store for Europe’s future. Dependent of course, on the sagacity, and willingness, of EU politicians.

While speaking “not as a Eurosceptic,” Darling said that the latest treaty to be signed by Eurozone members was “absolutely mad”, and because it didn’t deal with the structural problems underlying the crisis, served only to “buy time” until the next breaking point.

But then, would anyone expect differently? The Eurozone had, after all, the Former Chancellor argued, been conceived in denial.

“When we look at the Eurozone, we all know it’s a political project. It wasn’t written by economics, it was written by politics, first and foremost. The problem there is, is that politicians never accepted the logical consequences – if you have a single currency, then you have to have everyone involved in increasing economic and political cooperation, if not union…

“Now this compromising environment may work well when the good times roll … [but] Greece illustrates, in a graphic sort of way, the problem you’ve got when you have a Eurozone that knows there is a problem, but simply refuses to act when it needs to.”

Exacerbating the situation is a lack of a credible plan for growth, he said. The new treaty was anti-growth, even, in that its emphasis on extreme austerity, requiring that member states’ deficits exceed no more than 3% of their GDP – but without addressing structural deficits, which are “notoriously difficult to ascertain” years after the event – just isn’t workable.

As for the notion that Eurozone countries across the board will merrily surrender their budgetary powers “to unelected bureaucrats”:

“I don’t think it will last,” Darling commented. “I don’t think people in Germany or France, will like it any more than they do in this country.”

Concluding “the future of Europe” then, the long-serving politician’s advice to the Eurozone was to urgently take stock of the Euro project, with a view to making correct and proper structural changes.

“What will get growth going again? What do we need to do? And it’s a question of coming back to some pretty elementary things.”

“The Eurozone has to accept if you’ve got a single currency, you have consequences. That means you have to allow transfer payments to help the poorer members rebuild and make the structural changes they need”.

YouGov-Cam’s recent polling found that 60% of Brits want a looser relationship with the EU or to leave it altogether. But Darling was adamant that it is important the UK remains a part of the European Union. And (while we’re on the subject), that Scotland remains a part of the UK.

Alistair Darling submitted that the British public were never going to ‘”love” Europe. But if Europe could renew its focus on promoting the pro-trade, pro-enterprise, pro-competition aspects of the trading bloc (as stipulated by the Lisbon Treaty), across its member nations, large and small, then people “could and should be able to value it”.