Blogging from the Highlands of Scotland
'From fanaticism to barbarism is only one step' - Diderot

Wednesday 17 April 2013

Farage: EU is the New Communism

I am no supporter of UKIP (the party that wants to take the UK out of the EU), far less of their wilder flights of policy fantasy designed to appeal to the worst instincts of their supporters (notably their rampant homophobia), but Farage is 'on the money' appropriately enough with his remarks on the Euro, the currency currently used by 17 of the 27 EU member states:

- although before the Euro was launched I was attracted by the idea in principle, I was of the view then (as I am even more now) that the idea of tying such widely disparate economies into a common currency and interest rate regime could never work in the long term. The last 5 or so years, in particular, have amply demonstrated the shortcomings of this currency experiment and the increasingly desperate measures to shore up the edifice (confiscating money from people's bank accounts in Cyprus and proposals to levy additional property taxes on those deemed 'wealthy' in any future bail-outs) reveal how flawed this whole experiment has been. As Nigel Farage rightly observes, these measures will only lead to many sensible investors taking as much of their assets out of the Eurozone as they can. The real longer-term solution for many of the Eurozone countries is to take themselves out of the currency union and to revert to using resurrected domestic currencies. None of the options available to the troubled Mediterranean economies (Spain, Italy, Greece, Cyprus and some others) is particularly palatable in the short-medium term, but if any of these countries is to avoid the increasing pauperisation of their populations the immediate need is to re-establish their own currencies and at least as importantly their own interest rate regimes - the short-term result of such a policy would likely to be extremely painful as there would be a dramatic revaluation (i.e. devaluation) of domestic asset values in all categories, but within 5 years and with policies designed to harness natural entrepreneurial flair I feel certain that countries prepared to take the difficult decisions in the short term would begin to see a real economic resurgence. A continuation of current policies will only make matters worse as the months and years pass, and make the eventual need to face economic reality all the more harsh and difficult.

Will any of the affected countries have the courage and vision to take the painful steps required, though?

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