Financial meltdown and the euro

If only Douglas Alexander's speech ( Britain needs a new EU policy for a new era , 13 November) had done what it said on the tin. Since the financial meltdown of 2008, Europe is certainly in a new era. But under current management, its response is dictated by the same old thinking that produced the worst global recession since the 1930s. It is not just that they have unlearned the lessons of 1929 (and of 2008) and – by trying to deflate their way out of a crisis – are instead plunging Europe back into recession. More fundamentally, the lessons of the 2008 meltdown, and the failures of the model of financial capitalism which provoked it, are not even on the agendas of a right-dominated European commission and council of ministers. The linkages between stagnant real wages, growing indebtedness, the shift in income share from wages to profits, deregulation, short-termism, an overweening financial sector and the growth of systemic risk have led to no re-evaluation of economic policy. Their remedies, seeking to restore fiscal health by an attack on wages, benefits and public services, will exacerbate the economic imbalances which generated the current crisis. In the process – as Angela Merkel's treaty change project shows – they will make of the EU a mechanism for enforcing austerity and suborning democracy. So yes, Europe needs a new vision, and it should be the central task of the European policy of any social democratic party to show how the EU can more effectively defend the interests of citizens. But in Alexander's speech I counted six concrete proposals, four of which were a defence of the status quo (on Britain's Lisbon Treaty opt-outs, the single currency, transfer of power to Brussels and the social chapter). The fifth was "fight wasteful spending". And the sixth advocated bypassing the EU by working directly with Paris and Berlin on China strategy. Alexander says treaty change is an opportunity – but not for an alternative vision of Europe. No, for him it is an opportunity to assert the interests of non-Euro countries against euro countries. In this he betrays the classic British instinct to see the EU as essentially a tug-of-war among member states, rather than a political arena in which the real battles are between left and right. In truth, the first step towards a real Labour party policy for Europe would be to realise that politics does not stop at the water's edge. Derek Reed Brussels • I am sorry the Guardian ( Larry Elliott , Jackie Ashley , 14 November; Steve Bell, 16 November) have decided, along with the Labour party, to join the Thatcherite anti-Europe tendency. Perhaps a way out would be for England to leave the EU altogether and join the North American Union, as once suggested by Nigel Lawson, and give us all a rest from the constant complaining. I say England advisedly as Scotland may well wish to remain in the EU and even join the eurozone. Alternatively, more thought could be given to the parlous state of the British economy, with the highest level of aggregate debt per capita in the developed world. Adding the figures up, national debt, the PFIs, the bank bailout and personal debt of some £1.6tr, makes Italy's debt problem look quite modest. Personal borrowing and government spending have been the main engines of growth for the past 10 years, but are no longer featured. This implies a declining standard of living for years to come. It might be better to work out how we'll cope with that rather than worrying ourselves sick over Europe, which may well turn out to be capable of looking after itself. Brian Wilson Bradford on Avon • It is time European leaders acknowledge the unspoken truth that the euro, as a single integrated currency, is finished ( Germany and UK come to blows over Robin Hood tax , 16 November). That is why the markets have soured over the past two months, in spite of repeated Franco-German attempts to shore up the eurozone. It is also why investors continue to run scared from the real economy and stock market and are sinking their money into gold instead. The need for at least partial disbandment of the euro and reversion to national currencies has been blatantly obvious for the past year, and yet (true to form) EU leaders continue to bury their heads in the sand and procrastinate on this issue, rather than facing up to what is now a festering inevitability. Not content with gambling the wealth of Europe on this failing currency, we have now arrived at the insanely undemocratic situation where elected leaders are being forced from office in failing eurozone states to be replaced by pro-euro stooges. If the price to be paid for survival of the euro is suspension of democracy in this way, then this is too high a price to pay. The point that's being missed is that it's not national debt crippling the world economy but fear. While the natural currency adjustments that would occur following break-up of the euro would create winners and losers (in the time-honoured traditions of capitalism), the overall result would be that the fear that has crippled the financial markets since 2007 would evaporate almost overnight, removing the last major obstacle to long-term stability and economic recovery of the western economies. As it is, the financial markets are picking off the weaker eurozone countries one-by-one, in chilling countdown to the inevitable collapse of the Euro. The scene is now set for a repeat of Britain's "Black Wednesday" ERM crisis of September 1992, but on a much larger scale and with the entire European economy at stake. Just as Britain's exit from the ERM in September 1992 was instrumental in settling the financial markets and bringing to an end the biting recession of the early 1990s, the restoration of natural currency fluctuations following break-up of the eurozone should finally relieve the locked-in stresses in the financial system, and clear the path for an early end to the financial misery that has been heaped on the people of the western world. The problem is that the European leaders are not yet ready to admit to all this, and instead are playing a dangerous game of "chicken" with the world economy. Dr Mark Campbell-Roddis Dunblane, Perthshire • A government minister on the Today programme stressed the importance of trading with Europe – he stated that Britain sells more to Belgium than China, India, Russia and Brazil together. Surely the government should be focusing all its energies on supporting British companies to sell to these enormous growing markets. Clinging to the shrinking European markets can only lead to rising unemployment and recession in the UK. Look to the future, stop this one-dimensional obsession with Europe. Peter Hudson Ipswich • Peter Wilby ( Profits up, wages down, democracy in crisis. Free trade has gone far enough , 15 November) takes a very parochial and eurocentric stance to the issues of free trade. Investment has certainly fled Europe eastward, especially since India and China have become freer economically, and of course this has put European economies under competitive pressure. This is a challenge, as he points out, and difficult as emerging competition may be for the populations of G7 nations, trade liberalisation has done enormous good for billions of people in the wider world, who now have the option of industrial work and all that that entails (education, literacy, healthcare etc). Their living standards are rising rapidly from the dismal lows they endured under directive socialistic regimes inimical to trade, and are set to rise further. In Europe our living standards are currently falling marginally if at all. Free trade has, in two decades, done far more for the poorest in the world than decades of socialism ever did. But most of Africa still remains dismally poor, and I would contend that a major factor maintaining that poverty is precisely the kind of protective trade barrier advocated by Peter Wilby; in the case of Africa, agricultural protectionism by Europe to protect wealthy domestic farming communities, which tends to inflate domestic food costs while holding back potential inward investment, jobs, livelihoods and futures from dismally poor people abroad. I don't personally mind too much if some people become ridiculously rich, if in so doing they improve the lives of the poorest. After all, the only things the rich can do with their money is spend it or invest it; they create jobs either way. Free trade is not a zero-sum game, and has not gone nearly far enough. Rob Evans Chatham, Kent • Fourteen years ago I left my much loved Tory party which had become too nationalistic and rightwing for me. A main specific in my defection was Europe. I was briefly an independent and then joined Tony Blair's New Labour party where I felt, as did others, completely comfortable. During the 90s the Conservative party was deeply divided. Poor John Major never had the chance to really govern. The dreadful current reality is that the Conservative party is not divided anymore! The morning after the biggest rebellion in Conservative history Michael Gove appeared on the Today programme to say that there is no tension, we all love each other now, being all sceptics together. The prime minister this Monday said the same thing, therefore no problem for the Conservative party. So no problem for the Conservative party but every problem for the country. We have a philosophically divided coalition government with very different ideas about Europe. The Conservatives will try to ditch the Liberals at the next election unless Conservatives are so weak that they have to adopt them. Should a Conservative majority government be elected, we will effectively be out of Europe. The sceptics can happily run their employment issues on a national basis while the City steadily gets drawn into the eurozone. We all wish the politically blind could see the obvious. Now to Labour. At present we will not win the next election by anything other than government default. If we can't do better, we will not win it at all. On Europe we do have a choice to make. Should we pander to focus groups and polls or should we use a bit of style and explain it to the people as it is? I have a high regard for Douglas Alexander, but both he and the leadership need confidence. His recent statement is politically de minimis and finessing minor differences from the government. You do not need to go far to see how it should be done. Tony Blair, on the Andrew Marr Show last Sunday, said it all and in such a way that opinion could be carried by what he said. On Monday evening Peter Mandelson got the message through, despite irrelevant Paxman interruptions, on Newsnight. It surprises me how the level of politics can change so quickly. The very best are sidelined by the ways of democracy and a prime minister makes lame party comments to bankers, whose banks we do not own anymore. They will go where they can best pursue their trade. If we do not get our act in order, which under the Conservatives we cannot, we will gradually sink to a dependence on others. So many opportunities for Labour to stand up for the future of the British people. If Europe gets a grip and the Euro survives, in whatever form, we are in big trouble. New Labour leaders have shown how this can be explained and acted on for the future. Conservative leaders have nothing to contribute but irritating interventions from the sidelines. There is a great chance here for Labour which it would be a great pity to miss. Peter Temple-Morris Labour, House of Lords