Monday, 27 June 2011

The warping influence of nationalism threatens the governement and Europe.

'The warping influence of nationalism' is threatening peace and prosperity in Europe again. The phrase from the old Liberal Party Constitution preamble-and often attributed to Elliot Dodds-reflects a deeply held  Liberal view that nation states need to be bound together more closely and their peoples will more likely live in peace and prosperity if law governs the relations betwen nations. The economic collapse that followed WW1 led to the retreat into protectionism and nationalism

Keynes famously predicted that that the war reparations demanded of Germany would impoverish the peoples of central Europe to a point beyond endurance. In his 'Economic Consequences of the Peace' he wrote:
If we aim deliberately at the impoverishment of Central Europe, venceance... will not limp. Nothing can then delay for very long that final civil war between the forces of Reaction and the despairing convulsion of revolution, before which the horrors of the late German war will fade into nothing, and which will destroy... the civilization and progress of our generation."
All the greybeards and the population at large took no notice and pursued payments back from German which, despite modest adjustments, were well above that nations capacity to pay. There was a national consensus that few had the guts to stand out against.
The repayments now demanded of Greece are greater than Germany endured after the Treaty of Versailles. A great deal of energy is being expended to try and stop the banks having to face the consequences of the dodgy lending. I guess the banks thought they were too big to fail and Germany's commitment to the Euro meant that they would always be bailed out not matter how reckless they were. I struggling to understand why the banks shouldn't take a hit, or in the jargon a haircut.I was staggered to see how much the combined bonuses for bankers were across Europe-enough to impact big time on the Greek debt if they were repaid!

Possibly the most depressing feature of all is to see the Euro sceptic press and MP's in all parties doing a jig to celebrate, telling each other how clever they were to stay out of the Euro. Just pause for a moment to think about the Greek collapse and the contagion spreading . They will not be laughing so hard if the Spanish economy is hit. It was bad enough when Northern Rock went down the tubes think about it if Santender followed suit. And don't be looking for help from Europe-we've been spit in their eye and telling them how clever we are for not pulling our weight.

Never has the inter-dependence of the European economy been so great. If a Spanish bank goes down it hits us, if the mainland of Europe slumps our economy slumps. Will Hutton mightily impressed the SLF conference with his analysis. British banks have £6.5 trillion outstanding in loans to the rest of Europe. That is four times our GDP. And how much equity have the banks to support that lending? £3billion. Do the arithmetic. In addition there is a hefty sum lent in Euros to Governments all over Europe. It is of course usual to quote John Donne at such moments:

No man is an island entire of itself; every man 
is a piece of the continent, a part of the main; 
if a clod be washed away by the sea, Europe 
is the less, as well as if a promontory were, as 
well as a manor of thy friends or of thine 
own were; any man's death diminishes me, 
because I am involved in mankind. 
And therefore never send to know for whom 
the bell tolls; it tolls for thee. 

Sadly no Liberal is making this essentially Liberal argument.  Fear of the Eurosceptic press, sheer funk or a flight from core values? I do not know the reason but unless somebody soon steps up to the plate the fate of Europe (including Britain) if it descends into nationalism is too awful to contemplate. We need to be part of the solution because the consequences  of failure are terible for us. We need to present a vision of nations working together under law and recognising their interdependence......

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