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Name the guilty men!

Monday, 1st December 2008

The President of the European Commission Jose Manuel Barroso has said that Britain would be better placed to face the global credit crunch if we had joined the euro, and that serious people in the UK are defying public opinion and thinking in terms of British membership. He says he will “respect the confidentiality of private conversations”, but that prominent British politicians have told him we should be better off in the euro.

This is not good enough. He cannot proceed by innuendo in this way. He needs to name the guilty men. Until he does, we are all under suspicion, so for the avoidance of doubt: I have not expressed that view to President Barroso, and my strongly-held opinion, both publicly and privately, is that we should avoid the euro like the plague.

The global credit crunch is a good example of the “asymmetric shock”, which economists have warned could undermine the viability of the single currency. Britain has a much larger financial sector than any eurozone country, and will therefore react differently to global conditions. We absolutely need the currency flexibility to respond appropriately. Yes, the Pound has lost value compared with the dollar and the euro. If it had not, if we had been locked into the euro, our country and our exporters would be suffering from the effects of an over-valued currency.

Far from providing a reason for Britain to join the euro, the global crisis represents an existential threat to the survival of the single currency project. We have seen bond spreads between southern European countries, especially Greece, on the one hand, and Germany on the other, reach unprecedented and unsustainable levels. The question is not whether the euro can survive, but which eurozone member will be the first to leave. The euro is headed for a crisis, and we should thank heaven that we will not be there when the break-up comes.

The Pound does indeed face a serious threat, but that threat comes not from our position outside the euro, but from Gordon Brown’s recession and Alistair Darling’s profligate and unsustainable borrowing. This is a Labour crisis made in Britain.