Why it became necessary for the UK to vote to leave the EU

An article in this week's Spectator magazine has crystalised many of my reasons for voting as I did in our referendum on EU membership held on 23rd June last.

Dan Hannan (still an MEP), for a former committed "Europhile" such as me, brilliantly nails the lies and deceptions at the heart of the so-called "EU project". I voted Leave on 23rd June and have become more certain since then that it was the correct choice. For me this has got NOTHING to do with 'immigration', despite those who voted Remain presumptuously telling everyone who voted Leave that this was the reason we voted the way we did. Frankly I think this illustrates perfectly the sad beggar-thy-neighbour mindset of many (if I hope not most) Remain voters.

Sovereignty is not some esoteric concept, it is the basic choice as to how we make our laws and who is competent to adjudicate on them.

What really changed my mind about the "virtues" of the EU (which are many) is the callous way it has treated Greece, in the name of "EU solidarity"; Greece is not entirely innocent of course, it is not as straightforward as that, but what its treatment does illustrate is that a supranational body, the EU, is prepared to ride roughshod over the democratically elected government of a small and relatively "unimportant" member state, not for any noble reason, but simply to protect the financial institutions of its most powerful member state, Germany. To be frank, it is a moral outrage. I am equally disgusted by the petty arguments of some of my former "friends" who think the GBP exchange rate is sufficient reason to sell the soul of our country, the UK. I loathe almost everything Gordon Brown ever did as Chancellor and Prime Minister, but the one good thing he ever did was to make it impossible for the then Prime Minister, Tony Blair, to take the UK into the cesspit of the poorly-designed Euro, a continuing shambles, which tries to align the economies of vastly different countries, without the real and necessary mechanisms which make a 'currency union' successful, for example those which allow the US to have a common currency across 50 diverse economies, or the UK to have a similar common currency across its four component parts (and the separate regions of those four component parts).

Those mechanisms involve not just "benefits", but "obligations", which means sticking to certain basic rules - which means that countries within the Eurozone which flout the laid-down budgetary deficit rules regularly, rather than exceptionally, need to understand they cannot continue along this path if the currency union is to have any meaning and achieve longevity. This is however merely a symptom of the malaise at the heart of the EU. It seems that certain larger member states think they can flout fiscal and other rules, simply because they are large and economically significant, or powerful politically, whereas smaller states must be punished severely if they step out of line. This is not "democracy". The UK is undoubtedly a "more significant" country economically and politically, along with 3-5 other EU member states, but above all we are a democracy, and have been for quite a long time, and we think we believe in that old-fashioned concept called "fair play", not just "might is right". If I believed that true "reform" of the EU was possible I would have been amongst the first to have argued that the UK should remain a member, but empirical evidence over many years has demonstrated that this is not possible. We can and must leave the EU, and that is what we voted for on 23rd June, to ensure our democratic future as a free and successful economy, not as a vassal member state of the increasingly undemocratic entity that the EU has developed into. Other EU member states, including some if not all of the more powerful ones, have stated repeatedly that they wanted the UK to remain a member of the EU, but have consistently shown that they are unwilling to, or incapable of, making the "reforms" necessary for a true democracy such as the UK to remain. 23rd June 2016 was "crunch time" and the bluffs with which the EU has endeavoured to fob us off for many years have lost their power that day. Personally I very much regret that this decision has been made necessary. I believe that a brighter future for the UK is possible outside what has become the straightjacket of the EU. I wish the EU a bright and successful future too, of course, but am much less sanguine about that.

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?

UKIP's Farage on the Euro and ESM bailout vehicle

I'm not a supporter of UKIP (although I wouldn't entirely rule it out in the longer term), but Nigel Farage is one of the relatively few MEPs, along with Conservative Daniel Hannan, worth listening to. Here is Farage lambasting both Herman van Rompuy, President of the European Council and Manuel Barroso, President of the European Commission for their lack of credibility in the international markets for the latest moves to support the Euro to have much chance of bringing any more than very short term relief from the systemic problems inherent in the Euro. He also told Barroso, quite rightly, that he had made himself and all of us look like out-of-touch idiots by having the temerity to lecture others about 'democracy' when he is completely unelected himself! Anyway, watch Nigel Farage at work demolishing these small men, completely out of their depth to provide coherent strategies to even begin the job of rescuing the Eurozone from the mess it has got itself into and who seem intent on dragging the rest of us down with their doomed policies:



By the way, when is the European Union going to get its accounts in order - it has not done so these past SEVENTEEN YEARS! (Sources - here and here, but there are many more to choose from.) I repeat that - SEVENTEEN YEARS!

Eurozone agrees lend Spain upto 100 billion Euros

As a result of a lengthy (2 1/2 hour) 'conference call' yesterday afternoon between the finance ministers of the 17 Eurozone countries, it was agreed that Spain could borrow upto 100 billion Euros (about GBP 80.7 bn, or USD 125 bn) to shore up its shaky banking sector, specifically its 'savings bank' sector, hit particularly badly by the property crash.

Spain will be deciding over the next week, once an 'audit' has been carried out, precisely how much funding to ask for.

Assuming this plan goes ahead, it will undoubtedly put off the 'day of reckoning' for some time, but whether it will provide any long-term solution is less clear (to me at least), unless the productivity of the Spanish economy (just like the much smaller Greek) can be 'pole-vaulted' up much closer to German levels. It remains also to be seen how the German electorate will react in their elections next year. I fear all this latest scheme is doing is to 'kick the can down the road' a little farther. I think the Euro has fundamental flaws in its design which only stand a fair chance of being resolved either by:
- some of the weaker economies in the Eurozone leaving it and starting to use other currencies (presumably their former currencies or near relatives) and allowing them to find their own value against other currencies, including the Euro; or
- by the Eurozone countries agreeing, sooner rather than later, to pool their fiscal (and in reality their political) sovereignties into what would effectively be one unified political unit. Mrs Merkel broached this subject a few days ago, qualifying the process as 'gradual' - whether that would be good enough, even if the other countries (*) agree to go along with this idea, is anyone's guess, but their resolve would certainly be tested ferociously by the money markets along the way.

(*) - for example, both the French and the Dutch electorates already rejected the EU Constitutional Treaty in referenda, which effectively invalidated that idea then, although it was later resurrected under another name, the Lisbon Treaty.

Well it is warm and sunny here and the food and wine are good, so I suppose like most people who can I will simply carry on at least for the present enjoying myself. What will happen, though, should the music stop on the 'musical chairs' game being played trying to reconcile the irreconcilable?

Sources (just a few from amongst the hundreds, because this is a very major issue):
Spanish
- El Mundo
- BBC Mundo (in Spanish)

English
- Wall Street Journal
- Reuters

(This article is cross-posted from my Spanish blog, because of the importance of this issue)

By-pass the banks and get currency at much better rates

For most people, sending money abroad for various purposes (replenishing an overseas account, making payments when buying a property, etc) or simply buying some foreign currency banknotes as a part of funding a holiday abroad, has traditionally involved popping along to the bank and arranging the transaction. It will work pretty efficiently most of the time - the bank will make a charge for doing a transfer and, unless you are dealing in pretty large amounts, they will most probably 'sting' you with a pretty poor exchange rate.

When I was making the stage payments for the purchase of my holiday home abroad several years ago the individual payments I had to make were pretty substantial, so like most people I did the transactions though a foreign exchange trading company. For the very finest exchange rates, 'inter-bank' transactions normally begin at GBP5million and up, but if the individual amounts are rather lower (in the several tens of thousands of Pounds, typically the case when buying a property in a series of stage payments as the project progresses) one can still make very significant savings by going though a dealer, rather than simply going along to the bank branch, because even if they call up their own exchange centre to arrange the deal the margin they will take on the deal will be a lot greater than from a foreign exchange dealer. In addition, the foreign exchange dealer will not charge for the actual transfer, unless the deal falls below its own thresh-hold amount. Obviously one still needs to get the funds into the hands of the dealer so they can do the trade; in the days before internet banking (not so very long ago) that would probably mean sending the dealer a sterling cheque, which would take a few days to get there and be cleared by them, or (for a fee) arrange a domestic transfer through the local bank to the bank account of the dealer.

More recently I have been transferring funds once or twice a year to a currency dealer using my internet banking facility with my British bank in order to replenish my account abroad with the funds needed for my extended stays there; doing it only a couple of times a year means both better exchange rates because the amounts are a bit bigger and secondly no transfer charges because the amounts exceed the foreign exchange dealer's minimum amounts for free transfers - their profits come from the spreads they still make on the exchange rate, albeit a lot smaller than the local bank would levy.

However, I like to travel with some of the local currency of wherever I'm travelling to (unless the exchange control rules of the destination country preclude this) so that at least I can pay for a taxi on arrival or perhaps buy meals on the first day or so, before I can get to the bank there to change some money, in the old days in the form of travellers' cheques, in more recent years by sticking a piece of plastic in a cash-machine - and avoid the 'gouging' rates that exchange bureaux at airports typically indulge in. For this initial spending-money cash I have usually just gone to my bank, ordered the money a few days ahead and gone back to pick it up when delivered, paying the currency-note rate charged by the bank and thinking I had few realistic alternatives (apart from, say, going to the Thomas Cook branch in nearby Inverness) where perhaps the rate might be very slightly better.

However, having just a week or so ago done a relatively larger transfer to replenish my Spanish account using a foreign currency dealer (for reference this was World First), with me transferring the payment to them on-line via the internet and it reaching the destination two or three days more quickly than doing it direct from my own bank, as well as achieving a much better exchange rate (with a saving of about 3.5%) I began to wonder if I could get a better rate on-line for currency notes too, for that initial local spending money in Euros - a Google search threw up the compareholidaymoney.com website and the stark divergences in rates offered. The firm at the top of the list Travel FX seems to get a great number of uniformly-positive reviews so I thought I would give them a try. In a nutshell I booked a transaction with them last Saturday morning, transferred payment to them on-line during the weekend and received the Euro bank-notes today (via Royal Mail 'special delivery'), saving myself 3.99% compared with what I would have been charged by my bank locally, in fact the notes rate was not so much different from what a foreign currency dealer would have been offering for a funds transfer, whereas the margin on notes from local banks is usually much greater than for transfers, resulting in a much less favourable deal for bank-notes even than for transfers. As this was the first time I had ordered foreign currency notes over the internet I was slightly anxious that my notes would turn up as promised, but I have to report that I was kept fully informed by email at each stage of the process and the notes turned up here on time today, as agreed when I placed the order last Saturday. I shall most certainly consider using this method and this firm in future. It really is a "no-brainer" so far as I am concerned - technology and the internet have made such processes possible and it would be foolish not to use them.

Nigel Farage tells the truth to the European Parliament

I am not remotely a supporter of UKIP, nor of Nigel Farage, but it is undeniable that he often speaks great sense - colourfully, yes, but always jovially and rationally. Here he is, telling the unvarnished truth to the European Parliament on Wednesday 16th November 2011, in the presence of both Herman van Rompuy (President of the European Council) and José Manuel Barroso (President of the European Commission), about the constitutional outrages that have been perpetrated upon two EU member states in recent weeks, namely Greece and Italy.



Whatever one may have thought of Papandreou and Berlusconi, both were democratically elected by their respective countries, a lot more than can be said of the current puppet governments in both countries, nor indeed of von Rompuy and Barroso. It is a truly extraordinary phenomenon! Europe has slid, without any fanfare whatsoever, into a fascistic nightmare not, I am completely certain, any part of it a desire by modern-day Germany to 'dominate', but perhaps because of a completely understandable desire in Germany not to debauch their currency because of the painful relatively-recent history of that country. Even now, I can hardly believe what has happened and is still continuing to happen. From the time the UK joined what was then the European Economic Community (EEC), I have been a fervent supporter of it and I was even, emotionally at least, in favour of the setting-up of the Euro as a currency. However, I was always worried that this could never work properly without complete fiscal union of the countries involved, and for more or less the reasons that most now see the Euro as being a complete disaster. It bears repeating that the two countries which first broke the rule that national budget deficits should not exceed 3 per cent, as far back as 2003, were Germany and France and nothing happened, because both were/are too powerful. However, when a third country, Portugal, did the same it was 'read the riot act'. It was really from then that I began to have a much stronger view that the UK had been completely correct not to join the Euro, not of course that our own Labour government was behaving any more responsibly, but at least Labour kept us out of that disaster.

To be honest, whilst I am still not a Eurosceptic, I hesitate any longer to say I am a Europhile - if people like me are beginning to think this way, then I really do wonder how long we can be denied a referendum on our continuing membership of the European Union.

The economic and political shambles that is the Euro

My basic view about the currency called the Euro has not changed much over the past 10 or 12 years - as someone who is basically in favour of the EEC (now the EU), I was emotionally attached to the idea of having a common currency. However, whatever my emotional attachment to the concept of a single currency, I was always aware that that it could probably never work without the full fiscal (and effectively political) integration of all the countries participating. Trying to tie countries with low productivity and 'inefficient' tax collection regimes, into the same interest rate regime as countries with high productivity and a much more effective tax-collection history was bound to lead to major problems - and it has.

As such it was clear to me, however much I might personally have regretted this, that it would have been folly for the UK to have adopted the Euro as a replacement currency for the Pound Sterling. The political will simply did not (and does not) exist in the UK to adopt common fiscal and economic policies across the EU (or the more limited Eurozone). The price of keeping France and Germany 'sweet' with each other has always been for France to be allowed to dictate to the 'club' politically, with Germany picking up the 'tab'. Now the German population is at last waking up to the awful implications - the likelihood that Germany will have to subsidise the less-productive and more profligate countries on a semi-permanent basis. Germany may be a prosperous and successful economic 'powerhouse', but it is certainly not a bottomless pit - and Angela Merkel's efforts to carry a vote for continued German financial support for the troubled Eurozone economies may cost her dear politically in due course with her own electorate. On the other hand, one cannot ignore the fact that the low interest-rate regime and the downward effect on the value of the Euro because of the less-performing economies has certainly not been bad for the efficient German export-led economy; now the costs of that success are becoming clear to the German people.

Of course, now it is fashionable to blame the 'soft underbelly' of the EU (i.e. the profligate Mediterranean countries such as Greece, Portugal, Italy and Spain - plus of course the 'celtic tiger' Ireland) for the 'pickle' that the Euro and the Eurozone countries have got themselves into, but it was two of the theoretically strongest economies in the EU that first broke the rules by allowing their budget deficits to exceed the 3% laid down - when a little later Portugal also broke that particular rule it was of course this last country that suffered the ignominy of being called on it, whereas the first two miscreants escaped unscathed, simply because they were too big and powerful for the EU Commission criticisms at the time to have any effect at all - they were simply ignored. So the country that had always, since the 1950s, exercised prudence with both its currency and budget planning (West Germany, later the re-unified Germany, using the Deutsche Mark) broke with its own recent history, whilst France of course didn't need much excuse to follow.

Tax may be difficult to collect in most countries, but generally-speaking most countries in Europe have reasonably-sound systems for ensuring compliance (not perfect of course), even France, which has a reputation for 'creativity' in this area historically. But no-one could possibly have imagined that Greece fell into the same category - I don't think even the most fervent Greek patriot would ever have claimed this.

Of course, it's not only within the Eurozone that fiscal common sense went out the window! Our own beloved and much-unlamented Labour government, under Gordon Brown as Chancellor of the Exchequer and latterly as Prime Minister, thought that transforming as high a proportion as possible of the population into clients of the State, as recipients of so-called benefits, was a good thing to do, if only to try and tighten their own grip on political power forever - fortunately that particular myth, and horrific prospect, was dispelled with the election result of May 2010, even if somewhat inconclusively.

It so happens I was watching Newsnight last night and watched the bunfight develop in which Peter Oborne, a right-of-centre journalist for the Telegraph, became rather rude about an EU official speaking by video-link from Brussels:



- it is a pity that Oborne flung the 'idiot' label at the European Commission spokesman, Adameu Altafraj-Tardio, who is undoubtedly not an 'idiot' in the literal sense, although his attempted robust defence of the policies being carried out both by the European Commission under Barroso and various of the European political leaders, notably Merkel of Germany and Sarkozy of France, in their attempts to defend the [very continuance of] the Euro, might cast doubt on their total grip on reality. The unfortunate Adameu Altafraj-Tardio responded by walking out of the studio in Brussels.It is doubly-unfortunate that Oborne's verbal aggression took the direction it did, because his basic arguments were sound.

How long can the Euro survive in its present form and with its current constituent members? Whether it does survive or not, it is unfortunately likely that the political and economic costs will be huge and far-reaching. It is hard not to be melodramatic about what could happen, given the kinds of things that have happened in European history in the not so very far distant past.

Europe Day - 9 May 2011

For better or for worse today is celebrated as 'Europe Day':

- read about it here. You can read the 'Schumann Declaration' here.

For as long as I've been able to think about politics I have been broadly in favour of European unity as a concept, even if I would have voted 'no' to the EU Constitutional Treaty had a referendum on the matter been held in the UK and I would certainly also have voted a resounding 'no' to the hotchpotch that is the Lisbon Treaty had we been given a referendum on that topic. Similarly, whilst I was in theory in favour of having a single currency for the EU, I realised at the time that its introduction was being planned that it could never work long-term without complete fiscal (and probably political) integration, too - something that was deeply unpopular not just in the UK, but also in practice in other countries usually considered to be more pro-European, for example Germany and France - specially the latter, where what I will euphemistically call 'national self-interest' is a very highly-deleveloped part of the national psyche. And so, sadly, it has proved - as we have seen in the last couple of years with the shambles in Greece, Ireland and Portugal, perhaps to be followed by Spain or Italy in due course. Even now, however, I remain broadly in favour of the EU, but I do believe that certain powers need to be wrested back from the unelected European Commission, the civil service bureaucracy that runs the EU.

Anyway, folks, that's what we are marking today.

Spain's economic bind succinctly outlined

See my article in my other blog 'casabill- the blog' here; Edward Hugh's interview with Paul Krugman covers more than just Spain and I think is interesting for anyone interested in the current economic recession or in the future of the Euro, in particular.

Spain's 'Sovereign Debt' ratings under scrutiny

Yesterday's shock news is that one of the major ratings agencies, S&P, is contemplating (FT article) a revision downward of Spain's sovereign debt ratings; the immediate result in the markets was a widening in the spread between Spain's 10 year government bonds and those of Germany to its widest level since the launch of the Euro in 1999. This followed on from last week's warning that S&P was considering similar downward revisions of the sovereign debt of both Greece and Ireland.

The one positive factor in Spain's case is that it is, as the FT article points out, better placed to take on higher budget deficits than many other Eurozone countries (as a way of 'buying its way' out of recession) because it maintained budget surpluses during its many years of strong economic growth and as at the end of 2007 it had public debt of only 36.2 per cent of GDP, according to Eurostat.

It is noticeable that the Euro is trading off its end-2008 highs in recent days against other major currencies; a British right-wing and highly Eurosceptic newspaper columnist, Simon Heffer, has been writing (scroll down the page to the section headed 'I'm loath to say I told you so but...') about a possible 'correction' of the Euro/Sterling rate in recent weeks, to counteract the recent severe fall in the value of Sterling - time will tell; I often disagree strongly with what he writes, but this time I think he may well have a point as the only thing that seems to have strengthened the Euro against Sterling is possibly hysterical market sentiment, not that both the Eurozone and Sterling economies (not to mention the Dollar economy) are all in a mess, that is undisputed, unfortunately - on the other hand the Eurozone doesn't have Gordon Brown running its financial affairs (unlike the UK) so that must be a point in its favour, specially whilst the ECB countinues to be bound by the pretty strict rules laid down by Germany's Bundesbank at the Euro's inception as a condition of Germany joining the Euro. It is being speculated here that the European Central Bank may reduce Euro interest rates, so reducing the yield differential as against USD instruments - the Spain Economy Watch blog also has a great deal more commentary about how these and other factors may affect economic prospects in Spain and in other Eurozone countries.

Hold on to your hats folks; the ride has only just started - it could get much more bumpy.

The club expands - Slovakia will adopt the Euro wef 1JAN09

Slovakia will become the 16th of the current 27 members of the European Union to adopt the Euro as its currency on 1 January 2009. The fixed conversion rate between the Euro (EUR) and the existing Slovak national currency (SKK) is €1 = 30.1260 SKK.

The 15 EU countries currently using the Euro as their currency are: Austria, Belgium, Cyprus, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Malta, the Netherlands, Portugal, Slovenia and Spain.

Of the other 11 countries, two (Denmark and the UK) have negotiated opt-outs which mean they have no obligation, ever, to adopt the Euro as their currency if they do not wish to do so. The main Swedish political parties have agreed not to join the Euro until approval in a national referendum is given; a referendum in 2003 rejected adoption so Sweden has chosen not to join ERM II. Full details of each EU member's status vis-a-vis the Euro may be viewed here.

You can see images of the Euro coins being issued by Slovakia to coincide with its adoption of the Euro as its currency here. Euro notes are uniform throughout the Eurozone and show no differences from country to country.

Accentuating the positive, a very miserable positive

The turmoil in the world's financial markets is now (as we heard over the past weekend) beginning to affect Europe severely too, resulting in the Euro falling against the dollar and, incidentally, against the pound - my latest information shows a pound to be worth roughly 1.29 euros, as against 1.23 about a week ago. I won't be cheering too loudly though - who knows what any of these bits of paper ('fiat') money will be worth tomorrow!

Two more join the club - Cyprus and Malta adopt the Euro

Two of the recent (2004) intake into the European Union, Cyprus and Malta, have adopted the Euro as their currency from midnight last night, taking the currency union from 13 to 15 of the 27 EU members. The fixed converion rates to the new currency are €1.71 for 1 Cyprus Pound, whereas a Maltese Lira is fixed at €2.34 . The Cypriot Euro coins will be inscribed in both Greek and Turkish and the two British 'sovereign bases' on Cyprus will become the first two British sovereign territories to adopt the Euro as legal tender, a practical measure resulting from the fact that roughly 10,000 Cypriots live or work there. (NB/ For those not aware of it, the Euro banknotes are standard throughout the Eurozone and do not vary from country to country; only the coins vary on one side depending on which Eurozone member country has issued them.)

Joaquín Almunia, European Commissioner for Economic and Monetary Affairs, remarked:

"Today with the adoption of the euro, Cyprus and Malta have become even more integrated in the heart of the European Union, less than four years after they joined the EU. This is thanks to the stability-orientated economic policies pursued by both countries, which I hope will continue after they adopted the euro. I encourage the Cypriots and the Maltese to embrace our shared currency with confidence because they are entering a monetary union that has proven its worth in terms of price stability and low interest rates."

With inflation beginning to rear its ugly head in some of the Meditteranean EU members and economies which have become severely over-heated (e.g. Spain), things are not quite so rosy for some of the existing countries which use the Euro, though. Nevertheless I expect the change will make life easier for both Cypriots and Maltese and for those visiting the two countries, specially from other countries within the currency union.