Welcome to my club

How easy it is to jump onto the bandwagon of popular opinion.

For years, UKIP have been labelled everything from fanatically anti-European to xenophobic for holding the view that the European Union was bad for Britain. As recently as a couple of years ago, throughout the early months of my tenure as an MEP, I received accusations of scaremongering if ever I suggested the Eurozone was doomed. Those critics have fallen strangely silent of late.

Now politicians from across the political spectrum are championing a British exit from the EU, warning of the dire economic consequences of prolonging the single currency without fiscal unanimity and bandying about suggestions of an in-out referendum. All of a sudden our party line is trendy.

One thing is for certain. For the single currency to survive member states must forge closer economic bonds, to the extent of becoming a single federal entity (the argument is that the EU has borders, a flag, an anthem, a Parliament, an army, foreign policy, a currency and laws, so the only thing separating it from a federal state is the lack of tax raising powers). If this does not happen, the Eurozone will, eventually, implode, and in doing so, force the UK into a decade of depression.

Of course, the UK would resolutely not wish to be part of a federalised super-state. It raises the question of what sort of relationship we could have with a new Europe. UKIP has always championed a relationship akin to the current Swiss model, where free trade and continental cooperation remain priorities, despite not being a member. This is now being mooted by politicians who but a few months ago championed a more integrated European Union, only to find their subject today ridiculed by fate.

Either way the tapestry that has been woven by Brussels over the last five decades is unravelling at an alarming rate. Spain requires a £100 billion bank bail out to save her finances. The incomprehensible nexus that has formed between the Spanish state and the banking sector means the Government can no longer sensibly bail out the very banks that have been bailing out the Government. The Spanish Finance Minister has resolutely denied needing a bail out, but we’ve heard this before. Greece, Portugal and Ireland all said the same thing. In the UK, the Government recapitalised British banks to the tune of £1 trillion, a measure that was widely criticised on the continent as too closely bound to Anglo-Saxon capitalism. But it saved us from the economic disaster we are now seeing affect banks in the Eurozone’s largest economies – even in Germany. It’s estimated at least £200 billion must be injected into Eurozone banks to stimulate borrowing capacity, but in order for this to happen Germany must essentially underwrite all single currency loans.

It’s understandable that Germany doesn’t like the idea of so-called “Eurobonds”. Why would they? Holding them culpable of the debts of their neighbouring countries is hardly going to seem fair to the majority of Germans. Meanwhile Spain wants a bail out with no strings attached. Of course they would. They can see what has happened in Greece, where desperately ill people are queuing outside pharmacies for life saving medicines as stocks run dangerously low. Germany does not want Spain to get a free handout without agreeing to fairly stringent conditions. And thus we are left trapped in an ever revolving circle of national self-interest that is leading critics to cry out for the greatest seismic shift in political power ever seen by Europe – the move to federalise the Eurozone before the clock ticks down, despite such a schismatic resolution flying in the face of democracy.

What about the UK? What do we want? We need Eurozone banks to be protected. Barclays is exposed to Spanish banks to the tune of £26.5 billion. RBS is liable to £14.6 billion if they do collapse, while Santander, one of the high street’s biggest financial retailers, is actually Spanish owned. Then there’s our economy. In many respects inextricably intertwined with European markets, not just through EU membership but as the result of simple geographic positioning.

The most sensible answer would be the UKIP option. Leave the EU, enhance trade with traditional partners in the Commonwealth and demonstrate neighbourly cooperation and free trade with Europe as is the modus operandi of Switzerland and Norway.

As part of the Queen’s Diamond Jubilee celebrations, a lunch with Commonwealth leaders was hosted at Buckingham Palace. We were reminded that our Queen is not just the head of state in the UK. She is Queen of Antigua, Barbados, Bahamas and Belize, Canada, Grenada, Jamaica and New Zealand, Papua New Guinea, St Kitts, St Lucia, The Grenadines, the Solomon Islands, Tuvalu and Australia, as well as being head of the 54 countries that make up the Commonwealth of Nations, including India, Nigeria, Pakistan, Singapore, South Africa and Kenya. These are long established natural allies of Britain, countries with a diverse diaspora, different geographical landscapes and as a result, present true international trade opportunities.

This year Commonwealth GDP will soar past the Eurozone’s. While the Eurozone will grow by only 2.7% if it manages to avert fiscal disaster, the Commonwealth will be boosted by 7.3% growth.

I’m not bitter that my views are now being championed when for so long they have been slated. I would be a poor politician were my pride more important than my conviction. I just hope the newest recruits to Eurosceptic ideology have strength enough to hold as steadfast to their beliefs. For what Britain and Europe needs more than anything right now is a steady hand on the tiller.

FFS the FTT is not FFP

What a difference a day makes.

In the rapidly unfurling madness that hs gripped the Eurozone, the summer may prove to be a cataclysmic season. Yesterday European finance ministers gathered to thrash out plans for growth and investment ahead of an EU summit at the end of June. It was an opportunity for new French President to bring the the table the concept of Eurobonds - a policy idea on the back of which he competently rode to election victory. Yet the concept of drawing up co-liability between Eurozone member states for debt, as such becoming eachothers' guarantors, has never sat easily with the Germans. This is despite the fact that simply sharing in a currency is enough to allow economic contagion to rip through the continent like an Australian bush fire.

Last year, 25 of the 27 member states of the EU signed a fiscal treaty. Only the Czech Republic and the UK refused to be signatories. The treaty essentially outlined austerity measures that all member states agreed to in order to try to protect the fragile economic situation in Europe from further sharp blows. Yet also in this treaty was a proposition to add the Tobin Tax, or Robin Hood, tax, on financial transactions. The concept that the tax robs the rich (bankers) to give to the poor (Brussels) is a twisted distortion of what would likely be the outcome. As we all know, incurred costs are more often than not passed down to the consumer. In this instance, all members of the general public with bank accounts. The other potential repercussion is the mass exodus of the banking sector from the European Union to more liberalised financial sectors in other countries, such as Zurich or Hong Kong, This of course would result in a disproportionate blow to the UK, who houses more than three quarters of the banking sector of Europe in The City of London, as well as many corporations around the world. Were these institutions and multi-national conglomerates to up and leave, the impact on the UK economy would be substantial. The contribution to GDP of the financial sector in the UK is hugely significant, as well as the jobs it provides and the capital that flows to the country.
And so for this reason, in December last year, the UK vetoed the treaty. As a result of not being able to achieve unanimity, such a schismatic legal change could not be made under EU terms. In effect, the withdrawal of the UK ace should have brought the house of cards down

And yet it hasn't. For yesterday the European Parliament voted 487 votes in favour, 152 against, with 46 abstentions for the Podimata report which paves the way for the Financial Transactions Tax to be levied.

An amendment to shoot down the report brought forward by the ECR group, to which the Conservative Party belong, was strongly defeated, leaving the UK Government with little room for manoeuvre. The question now is whether the UK Government can do anything at all to prevent the FTT from coming into affect. 

The proposal is for both sides of the transaction to be taxed. Those who signed up to the treaty vetoed by the UK Government on the basis of this tax would benefit from a reduction in EU contributions. The UK veto has as such been rendered useless, placing the onus on the UK taxpayer to pay the tax on all transactions for member states who had signed the treaty, yet without receiving the benefit of a reduction in EU contributions. 


The tax essentially allows the EU to finance itself directly from taxpayers’ pockets  - and yet without any recourse to a public vote. Giving the EU tax raising payers without any democratic scrutiny is utterly unacceptable and is also the final step in making the European Union a federalised super-state.

In theory the tax cannot be approved without the unanimous backing of the European Council. Surely the British vote would most steadfastly be against the introduction of the FTT. However the Parliamentary report calls for the implementation of the tax by the beginning of 2015 "even if only some member states opt for it".

Nine countries have come out in favour of the tax including Austria, Belgium, Finland, France, Germany, Greece, Italy, Portugal and Spain, with it being labelled as the main route of exit from crisis. Yet rapporteur Anni Poadimata's view that it would brung a "fairer distribution of the weight of the crisis" is utterly skewed. The majority of the weight of such a tax would be carried by the UK, and it would appear the intentions are to use the extra finances to shore up the single currency.

The FTT is not FFP

The Financial Transactions Tax is not Fit For Purpose

A report by the Institute of Economic Affairs warns agains the dangers of a Financial Transactions Tax. In it, it is suggested that

• An FTT can be imposed with varying effects depending upon how many other governments do so at the same time. A purely EU FTT would see much trading leaving the EU, as happened to Sweden when it unilaterally imposed such a tax in the 1980s and 90s. A global tax would not have the problem of trading moving but would still have all of the other associated problems
• There would be no net revenue. While there would be revenue from the tax itself there would also be falls in revenue from other taxes. The net effect of this is that there will be less revenue in total as a result of an FTT
• The FTT simply means it would be the EU's own money to spend as they wish. The revenues from the FTT would be designated as the EU’s ‘own resources’, that is, money which comes to the centre to be spent as of right; not, as with the current system, money begrudgingly handed over by national governments. The EU bureaucracy therefore has a strong interest in promoting such a change. What’s in it for the rest of society is harder to spot.
• It will be the taxpayer who carries the burdern. All taxes and any tax, means less money in the wallet of some live human being. The first and great lesson of tax incidence is that taxes on companies are not paid by companies. They are not, despite legal personality, live human beings and therefore cannot carry the ultimate burden of any tax. With the FTT the one place we know the tax cannot fall is on the banks. Banks are corporations and corporations cannot bear the burden of a tax; it has to be some human being. Some part falls upon capital, making raising capital more expensive. This, in turn will affectworkers’ wages: more expensive capital leads to less of it being employed. Yet this does not mean bankers earning less: it is the workers who earn less as a result of less capital being employed. The second part is the incidence upon the users of the financial markets: a fairly obvious result of a transactions tax. Pensions would yield lower returns, partly as a result of lower share values as a result of the tax and partly as a result of paying the tax itself. The FTT would thereforeimpact upon all users of any financial instrument.
• The loss in GDP as a result of the tax is larger than the revenues raised from the tax. The total incidence, the total lost from all pockets, is higher than revenues and thus the incidence of the tax is over 100%.
• A transaction tax would increase, not decrease volatility. Since an FTT would decrease the size of the financial markets, prices would jump around rather more than they do at present - completely the opposite of what certain supporters of the FTT suggest.
• The markets that do high volume, low margin trades  would be affected by an FTT such as the foreign exchange (FX), futures, options and stock markets. None of these markets failed in any manner in the recent or current troubles. So the FTT doesn’t even work as a way of avoiding the recent financial crash: for it taxes the things that did not cause problems and would not make much difference to those things which did.

 The situtation in Greece is appalling, with drugs at an all time low as a result of deep austerity measures cutting healthcare budgets and forcing families onto the streets. The country is on the brink of a healthcare crisis, with panic spreading among high risk patients who fear they will have no access to life saving drugs. One healthcare profssional predicts that within two weeks, if the European Union does not grant Greece the loans it needs, chaos will erupt on the streets. Another healthcare worker, a cardiologist, has told the press of his horror at treating mean, women and children for sickness due to eating out of bins. A member state of the European Union is quickly degrading into scenes of a third world dictatorship.

Yet the money currently being dangled in front of Greece would not restock pharmacies.Instead it would be placed into a separate account, inacccessible by public service financiers, to simply pay off interest of Greek debt. In return for the loan, further cutrs would have to be implemented by the Greek Government - itself non-existent after dramatic election results left no one party with a big enough majority and 70% of Greek people voting for manifestos that promised an end to the crippling austerity measures.

It is without doubt a crisis situation in Greece, and the country desperately needs money. The causes of the problem, the finger pointing, the accusations of profligate waste during boom years, have been rendered vacuous. These are real people's lives. But what people must understand is taxing the banking sector is not going to directly resuce Greece. Far from it. It will line the pockets of Brussels and enable them to continue with their single currency project while using their new found security as a mallet with which to strike the Greeks into submission.Where they stand now, a Grexit could seriously harm the single currency, removing some of the might from Germany's arguments. Yet if the FTT is pushed through, Europe would be once again armed with power. And this time, not just the war-tanks of legilsation that have ridden roughshod over national interests. They would also have a constant and controlling source of income.An FTT will not reduce volatility, it will increase it. It would shrink those parts of the financial markets which did not in any manner contribute to these problems. It would increase revenue collected directly by the EU - as the Union's first tax raising power, while reducing total national revenues by shrinking the overall economy. Meanwhile those who would carry the economic burden of the FTT would be workers and consumers iplacing dependency straight back into the hands of the federalised superstate.

Over the next few days decisions made by financial and political leaders in all member states could have a profound impact on the future shape of Europe for all. With picture changing so rapidly on a daily basis, who knows what the autumn will bring.

Franco-Saxon Fiscal Union?

The phrase two-speed Europe has been bandied about in recent weeks, and it seems even the most optimistic commentators have started to pluck their heads from the sand and brandish claims that fiscal and federal union is the only thing that could save the Euro.

For a long time, people like me have claimed that you simply cannot have a common currency without the homogenisation of economies, harmonising taxation and spending and thus surrendering a great deal of sovereignty. That is why it is vital the UK never joined the Euro, and it is why the currency has suffered so significantly in the global financial crisis. Yet when we were saying this even just a year ago, we were labelled doom mongers, trying to scare the public that the EU was more ambitious than it really was, that no one was trying to undermine domestic power and there is no need to force the Eurozone to club together and become more than just an economic bloc, but in all respects other than name, a federal superstate. Now everyone is proclaiming how it is essential these moves are made, as if they too had been stating the obvious for years and were also jeering at the Commission everytime another bail out was awarded which would have as much efficacy as trying to bail out a sinking ship with a thimble.

Now, all of a sudden, the two Eurozone powerhouses, France and Germany, in the wake of the portent of economic federalisation, called an urgent meeting to establish a Eurozone government.

This new government would be made up of heads of state that will meet when necessary and will elect a stable president for two and a half years. The man they have in mind is (somewhat laughably) that famous European figurehead Herman Van Rompuy. Who? Oh, you've forgotten him already! You know, that chap who was elected President of the EU...

The establishment of this government to oversee national budgets and taxation and so forth will require changes to domestic constitutions over the coming years, and it will be interesting to see whether voters are consulted. One imagines if they were few would lean favourably towards the proposition of further intrusion upon national powers, so as is often the case with the EU when it comes to unfavourable voxus populai, one imagines there will be no recourse to public opinion. Not really democratic, but afterall, when it comes to the EU, what truly is?

It will also be interesting to see how other Eurozone countries respond. After all, the proposals amount to them handing a large amount of budgetary power over to France and Germany.
Angela Merkel and Nicholas Sarkozy are optimistic that they can persuade all the eurozone nations to pass these domestic amendments by summer 2012, which is highly unlikely.
Yet also these agreements have failed to solve the problem. International markets are wondering what will happen if Italy requires a bail out. The EFSF currently contains 440bn euros which would be a long way off enough to save Spain and Italy if there economies deteriorate. Yet actually growth in Germany has slowed to a painstaking place and actually stagnated in France, so where they could seek additional funds in the Eurozone is unclear. For the same reason the German and French leaders also refused to issue eurobonds, meaning underwriting European debt using their own taxpayers' money, by acting as guarantors. Eurobonds would have allowed weaker economis to borrow at the same costs as France and Germany, but would ultimately have led to huge public outcry by French and German citizens who do not see it as their responsibility to rescue the economies of their common currency neighbours.

The negotiations therefore are looknig at long term solutions of establishnig a tighter knit Eurozone but does not resolve the real problem today. This is surely to be expected. Since the outbreak of the recession the Commission has sought opportunities to push for deeper integration, often championed by France and Germany.

Casting my eyes back over speeches last year and in 2009 it's interesting to see how words I said over 12 months ago that were shouted down are now being echoed by the IMF to the ECB to the BBC. Take for example this speech:

"What is the future of the Euro in the light of the problems in Greece, and for that matter, Spain, Italy, Portugal and Ireland? It must be of some reassurance to the UK that we never joined the Euro. It seems promises of strength through solidarity couldn’t be further from the truth.

The problem for the 16 nations in the eurozone is who pulls the purse strings. With little fiscal coordination, and no treasury, membership to the Euro is by no means an elixir for good economic health.

It turns out that when all turns sour, they take the opportunity to seize greater control while you’re on your knees. We must wait to see how Greece will react to becoming an economic protectorate of the European Union and whether it will bring civil unrest. Is this really the European Dream? Who is next ? Spain? Portugal? Italy? Or Ireland?"

Evidentally, all the countries above slipped into economic turmoil.

Similarly I said last year that

"Ideological clinging to the euro will see monetary problems resurface in boom time and bust.

A single currency only works in tight knit federal environments. Perhaps, with this being the Commission’s ultimate intentions, they have put the cart before the horse."

I hope now people will begin to see that Eurosceptics are not extremists, right wing lunatics, heretics, scaremongers or ill intentioned. Perhaps we simply have common sense, which clearly means no common currency!