If all you have is a hammer, everything starts to look like a nail

How Brussels Stifles Democracy in Europe

By DANIEL HANNAN

How could so many clever people get it so wrong? The flaws in the euro project are not just clear with hindsight; they were visible at the outset and were widely pointed out. It was never going to be possible to jam widely divergent economies into a single monetary policy. It was plainly reckless to invite Italy and Greece to join the new currency when their government debt was at twice the permitted level of 60 per cent of GDP. Plenty of doubters said so at the time. Yet, in every national parliament, in every central bank, in every university faculty, in every television editorial conference, there was a collective suspension of disbelief. 

Why? What were they thinking? If you listen carefully to what Euro-integrationists were saying when the single currency was launched, you hear a subtext. It's not so much that they liked the euro, it's that they disliked the people who opposed it. Listen, for example to Charles Kennedy in 2002:

The euro, despite gloomy predictions from anti-Europeans, has proved to be a success. We cannot afford to be isolated from our biggest and closest trading partner any longer.

Or to Ken Clarke:

The reality of the euro has exposed the absurdity of many anti-European scares while increasing the public thirst for information. Public opinion is already changing as people can see the success of the new currency on the mainland. 

For such men, the issue was never really economic, or even political, but tribal. Having defined the question, in their own minds, as a Kulturkampf between sensible progressives and ignorant bigots, they became more or less uninterested in the facts. 

The extraordinary thing is that many euro-enthusiasts are still at it, quite unabashed by how things have turned out. Here, for example, is the historian Norman Davies in the Financial Times a couple of weeks ago:

‘How marvellous,' they chortle in the Tory clubs; ‘the busybodies of Brussels are meeting their come-uppance. After all, those ghastly Greeks who cooked the books to enter Euroland in the first place are sure to be cooking them again with an eye to ever larger bail-outs. Greece will push French banks down the chute first; but German banks won't avoid it, and together they'll finish Italy off. With luck, Italy will suck Spain into the abyss; Portugal will follow Spain, and Ireland Portugal. Just think of it! Those Irish traitors from 1922 will get their deserts! Terrific!'

Then continental banks lock their doors and the cash machines dry up. Minestrone kitchens appear on the streets of Rome. Spanish bullrings house the destitute. The bridges of Paris fill with rough sleepers. Weeks and months pass free of money. Europeans relearn the art of barter. When the cash flow stutters back, machines distribute drachmas again, the franc nouvel and the peseta nueva. Yet Britain's latterday Blimps will still not be satisfied. They hanker for the whole hog; before we pull up the drawbridge, they say, the EU itself must vanish.

For what it's worth, I have yet to meet a British eurosceptic who is enjoying the economic turmoil on our doorstep. It is plainly in our interest that the eurozone-which takes 40 per cent of our exports, and comprises our allies and friends-should flourish. That's precisely why we are alarmed at the readiness of eurocrats to sacrifice their peoples' prosperity so as to keep their monetary union together. 

Not that Norman Davies is much interested in what eurosceptics actually think. One of the oddities of the whole debate is that euroenthusiastic commentators who are quick to spot prejudice in others when it comes to racism, sexism or xenophobia are quite unable to detect it in themselves when it comes to people who don't share their Weltanschauung. (By the way, Professor Davies, one usesnouvel before a masculine noun beginning with a vowel – le nouvel an, but le nouveau franc. When loftily dismissing people as anti-Europeans, it's a good idea to get your own French right.)

None of this would matter if it were simply an academic debate. The trouble is that the people running the EU refuse to learn anything from their errors. Since the crisis began four years ago, they have had only one response: massive loans. They have reacted to the failure of each bailout by accelerating the policy, until it has acquired a momentum of its own, like a runaway train: bailout-and-borrow, bailout-and-borrow, bailout-and-borrow. 

Why this mulish determination to stick with a strategy that is impoverishing Europe? Supporters of the project have taken to offering the old cure-would-be-worse-than-the-disease shtick. They no longer dare argue that the euro has brought benefits — two thirds of the citizens who use it believe it has made them poorer, according to Eurobarometer — insisting instead that leaving would be impractical.

To British ears, such claims are eerily familiar. When it became clear that the Exchange Rate Mechanism, the euro's baleful predecessor, was wrecking our economy, the Establishment lined up to argue that, whatever the flaws in the system, we now had no option but to stick with it. Pulling out, declared John Major, would be "the inflationary option, the devaluer's option, a betrayal of the future of our country". In the event, of course, Britain's recovery began the day we left the ERM and continued for a decade and a half before Gordon Brown blew it away.

Yes, there would be practical difficulties with returning to national currencies, but none would be insurmountable. By definition, all the countries in the euro have recently managed precisely such a changeover: that's how they joined in the first place. Oddly, I don't remember any eurocrats at that time droning on about the huge costs and complexities of having to replace your banknotes. And, indeed, the switch would be easier now than it was a decade ago, because more money is digitised, and banknotes represent a smaller proportion of the currency in circulation.

Nor should leaving a currency union be any more complicated than joining one. I asked a Slovakian economist the other day how his country had managed the monetary transition when it divorced the Czech Republic. "Very easily," he replied. "One Friday, after the markets had closed, the head of our central bank phoned round all the banks and told them that, over the weekend, someone from his office would come round with a stamp to put on all their banknotes, and that, until the new notes and coins came into production, those stamped notes would be Slovakia's legal tender. On the Monday morning, we had a new currency."

Why not do the same today? Because, to repeat, the euro was never about the economics. As Angela Merkel told the Bundestag in October:

Nobody should take for granted another 50 years of peace and prosperity in Europe, and that's why I say, if the euro fails, Europe fails. We have a historical obligation: to protect by all means Europe's unification process begun by our forefathers after centuries of hatred and bloodshed.

Put in those terms, of course, the issue is literally beyond argument. If you oppose the euro, Mrs Merkel suggests, you're in favour of war.The trouble is that, on any objective measure, the euro is stoking rather than soothing national antagonisms. Relations between Germany and Greece haven't been so poor since-well, since the Second World War.

The reason, of course, is that people in both countries see politicians lining up with the Brussels elites against their own constituents. The few national leaders who dare challenge the EU risk being overthrown.

George Papandreou did something unforgiveable in the eyes of Brussels when he proposed a referendum on the loans-for-austerity package. Eurocrats dislike and distrust popular democracy. Referendums at any time are frowned on; but a referendum when the euro was teetering on the edge was seen as the height of selfishness and ingratitude. Within a week, Papandreou had been forced out.

A similar thing happened in Italy. Observing the EU's reaction to the Greek crisis, Silvio Berlusconi calculated that Eurocrats would do anything to prevent the break-up of the euro: if his austerity measures were insufficient, Brussels would come up with the extra cash. Accordingly, he let it be known that he was relaxed about whether or not Italy should remain in the euro. If the Brussels elites wanted to preserve their continental currency, he implied, they would have to pay for it. "Since the euro was adopted", he breezily told his countrymen, "most Italians have become poorer." Once those words were spoken, he, too, was doomed. An EU official at the Cannes summit was quoted as saying: "We're on our way to moving out Berlusconi." Five days later, il Cavaliere had been forced to announce his resignation.

The funny thing is that neither of the ousted premiers was a eurosceptic. Papandreou, indeed, was a federalist. Their crime, rather, was to pay too much attention to their electorates. Leninists had a term for people who, while committed Bolsheviks, none the less behaved in a way which endangered the movement. They were known as "objectively counter-revolutionary". The supreme counter-revolutionary act, in the EU, is to ask voters what they want.

If you think I'm exaggerating, consider the way the EU deals with referendum results when they go the "wrong" way. Ponder how Brussels swatted aside the verdicts of the ballot box in France, the Netherlands and Ireland. As José Manuel Barroso put it last year:

"Governments are not always right. If governments were always right we would not have the situation that we have today. Decisions taken by the most democratic institutions in the world are very often wrong."

People sometimes talk of the EU's democratic deficit as if it were accidental. In fact, it is essential to the whole design. Having lived through the 1920s and 1930s, the founders had little faith in democracy — especially the plebiscitary democracy which they saw as a prelude to demagoguery and fascism. They were therefore unapologetic about vesting supreme power in the hands of appointed commissioners who were to be invulnerable to public opinion. They were disarmingly honest, too, about the fact that their dream of common European statehood would never be realised if successive transfers of power to Brussels had to be approved by the national electorates.

The euro was the culmination of their scheme. It would never have got off the ground had the decision been subject to national referendums. The only two countries to vote on whether to join — Denmark and Sweden — opted emphatically to keep their national currencies. Nor would the bailouts be approved today by the voters of the contributing states; nor, indeed, would the austerity packages be agreed by voters in the recipient states. In order to pursue these policies, two regimes have had to be replaced with what are called "national governments" — although their sole purpose is, of course, to carry out programmes that their nations reject.

These "national governments" are headed by "technocrats" — meaning, in this instance, the euro-apparatchiks whose policies created the mess in the first place. The new Italian prime minister, Mario Monti, is a former European Commissioner; his Greek counterpart, Lucas Papademos, a former Vice-President of the European Central Bank. Mr Papademos, indeed, was running the Greek central bank when the calamitous decision was made to join the euro with twice the permitted debt level. In recent weeks, the EU has made explicit what was implicit all along. Bureaucrats in Brussels now deal directly with bureaucrats in the stricken peripheral states. The people and their elected representatives have been cut out. Greece is now as much a satrapy of the European Commission as ever it was of the Ottomans. Its people are learning at first hand that you can have European integration or you can have full democracy, but you can't have both.

While most people recognise that the EU is undemocratic in its own structures, few understand the extent to which it subverts the internal democracy of its constituent states. In order to participate in an inherently unpopular project, the 27 national governments are repeatedly obliged to defy their own electorates — or face the consequences.

The downfalls of Papandreou and Berlusconi are eerily reminiscent of that of Margaret Thatcher. She, too, was an elected national leader who had got on the wrong side of the Brussels machine. Her emphatic rejection of Jacques Delors's scheme for federal unification in 1990 was followed by the famous "ambush" at the EU Rome summit, when she was left looking unprepared and isolated. That was the trigger for British europhiles to move against her.

It's true, of course, that all three leaders were already unpopular: Thatcher because of the poll tax, Papandreou because of the austerity measures and Berlusconi because of innumerable scandals. None the less, it is sobering to think that the Italian premier, having weathered allegations of corruption and mafia links, of bribery and underage sex, having shrugged off investigations by (at his own count) 789 prosecuting magistrates, having survived in office longer than any leader since Mussolini, should have been felled in the end by the EU.

Borrowing a felicitious phrase from C.S. Lewis, I think of the phenomenon as the EU's "hideous strength". In his science fiction novel of that name, Lewis tells the story of a diabolical plot to take over Britain, which takes the guise of an apparently beneficent bureaucracy called the National Institute for Co-ordinated Experiments: NICE. The functionaries of NICE have deep pockets, offer generous salaries, and are vague but upbeat about their aims. They succeed in subverting one institution after another.

The EU has a similar power to purchase the loyalty of NGOs, charities, business organisations, local councils and, above all, governing parties. Again and again, it persuades politicians at the domestic level to act against their national, party and personal interests for the sake of Europe. To give only the most recent example, all three British party leaders put out a three-line Whip against the parliamentary motion calling for a referendum on EU membership — despite the fact that 67 per cent of voters wanted their MPs to support the resolution, and despite the fact that all three parties were promising referendums on one aspect or another of European integration before the general election.

The truth is that the EU, run by its 27-member politburo, is barely more democratic than the "German Democratic Republic" or the "Democratic Federation of Yugoslavia". While its member nations are all, in themselves, parliamentary democracies, Brussels functionaries fear and resent public opinion, or "populism" as they call it in their peculiar argot. Their attitude might not be quite so objectionable if the technocrats actually displayed any real expertise. Yet, time and again, they have been shown to be wrong, the mass of ordinary voters right.

Rarely has this been more obvious than in their response to the financial crisis. Most of us know that the last thing an indebted friend needs is more loans. Most of us understand that if you're in debt, you should cut back on spending, not go on a binge. Most of us can see that if jamming disparate economies into a single currency isn't working, the answer is less integration, not more. Yet these truisms are quite lost on the European elites.

The leaders of the eurozone are, of course, free to make their own mistakes. If they want to inflict penury and emigration on their southern members, and perpetual tax rises on their northern members, that is their prerogative. If they are prepared to pay a ruinous price to keep the euro — or, more precisely, to ask their peoples to pay, since eurocrats are exempt from national taxes — that's up to them.

What I find inexplicable is that the United Kingdom should be investing political capital — let alone actual capital — in supporting the project. At the time of writing, Britain is on the hook for £12.5 billion in the Greek, Irish and Portuguese bailouts — a colossal sum even in these wastrel times, equivalent to £500 for every household in the land. To put it in context, consider that all the spending cuts made by the Coalition in its first 12 months in office amounted to £6.2 billion. Yet, if we are drawn into the Italian crisis, the bills will be far higher: ministers talk of Britain injecting a further £40 billion through the IMF. 

In justifying these subsidies, ministers tell us that the prosperity of the eurozone is in Britain's interest, and so it is. Yet it is now surely clear that the euro is a recessionary device. The survival of the single currency and the economic success of its constituent members, far from being synonymous, are becoming incompatible. Britain, in short, is being made to pay for the privilege of impoverishing its neighbours.

What the devil are we thinking? According to the most thorough study so far, conducted by the Centre for Economics and Business Research, Britain's interests would be better served by the break-up of the euro than by its maintenance. There would be short-term pain followed, after about 30 months, by a higher rate of growth. Yet the Coalition continues to insist that the survival of the euro is an essential British interest. How has the Conservative Party moved so swiftly from "save the pound" to "save the euro"?

The short answer is that it won office. It is difficult, until you encounter it at first hand, to grasp the intensity of the euro-fanaticism in the civil service and, most especially, the Foreign and Commonwealth Office. The guiding principle of our Brussels mandarins is that they must always be present at the table: being human, they have an understandable tendency to conflate their own influence with the national interest. 

A minister who seriously challenged the basis of our relationship with the EU would be declaring war on the permanent apparat — a war that would consume his energies for an entire parliamentary mandate. Such ministers are, of course, rare. Which is why, in every EU member state, euroscepticism has so far been an exclusively opposition phenomenon. In most EU states, the governing cadres are as steeped in Keynesian economics as in euro-enthusiasm. Government employees are perhaps naturally sympathetic to doctrines which encourage state intervention, and their reaction to the financial crisis was the same as their reaction to all crises: to increase spending. As Mark Twain observed, if all you have is a hammer, everything starts to look like a nail. 

We can now see where such profligacy has led Europe — and, indeed, where it has led the United Kingdom. Our treasury is empty, our credit exhausted, and we are reduced to relying on inflation to erode a deficit which we daren't tackle with spending cuts. Yet, broke as we are, it is seriously being proposed by our immaculately educated officials and ministers that we borrow billions more in order to prop up a currency union which is asphyxiating its participants. My masters, are you mad?