Hard times for the euro

Roger Helmer MEP 

It's really been a rotten couple of weeks for the Euro-luvvies. One bad news story after another. The problems that I have been predicting for years are coming home to roost, while the so-called "benefits" of euro membership are just not happening.

The Euro means inflation. The pro side has been trumpeting the "success" of the introduction of euro notes and coins. Price transparency was supposed to lower inflation. But now the German government has called a panic summit meeting to discuss the rampant price-gouging taking place on the back of the euro. Opinion polls show 80% of Germans believe the euro has led to retailers rounding up prices, and more than half of them would have the Deutchmark back if they could.

And it's not just in Germany. My regular breakfast in Brussels used to be 175 Belgian francs. Suddenly in November it went up to 202 - that's a hike of 15%. Why? To round up to exactly 5 euros!

The Euro means higher taxes. Long-term, we know the euro will mean higher taxes and interest rates (see "Pensions" below). But a new report by merchant bankers Goldman Sachs says that joining the euro would mean a huge tax hike immediately. Why? Everyone agrees that if we join, the Pound's exchange rate will have to come down, and short-term interest rates will come down. But that would cause inflation to rocket upwards. Normally, we would solve that by raising interest rates. But in the euro, we can't. So higher taxes will be the only way to control inflation.

Business goes soft on the euro. The luvvies have always claimed that business saw the benefits of the euro - although the Institute of Directors and the Federation of Small Business have always been against. Now the CBI, the premier voice of UK business, is moving from "pro" to neutral. Their new President, John Egan (the man who rescued Jaguar cars in the eighties), says he's still waiting to be convinced of the business benefits of the euro.

The stability pact goes pear-shaped. Germany wanted the stability pact, so that high-spending euro-zone countries could not dump their problems on more responsible neighbours through higher euro interest rates. But with delicious irony, it's the Germans themselves -- with four million unemployed - who have been caught first, as their budget deficit threatens to breach the pact's 3% limit.

The pensions time-bomb. With Gordon Brown's new stealth tax on pensions, our own UK pensions are in trouble - but nothing like the trouble facing the euro-zone. As populations age, their massive, un-funded state pension liabilities are surging out of control. Governments will have to raise taxes, borrowings and interest rates to meet pension liabilities. If we join the euro, those tax and interest rate hikes will hit us, too.

There's one final irony. In Brussels, most MEPs are hoping the euro will go up. A German colleague was crowing recently because the euro got to 92 US cents. And with problems in the US, the euro could well go higher. But German growth is flat and unemployment at 10%, despite the fact that their currency has been devalued by over 20% in the last three years. You might have expected the devaluation to lead to economic growth. If the euro does go up, their economy will go from bad to worse.

John Major was right to demand a British opt-out on the euro - and we're right to keep the Pound.