Was Margaret Thatcher right about the euro?

Grumpy Jack

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Very interesting piece in today's Daily Telegraph by UK political commentator Peter Oborne.

Basically, he said Margaret Thatcher was right to oppose the euro back in 1989/90 and that everything she predicted would happen if it was embraced has come to pass.

Today, Margaret Thatcher’s autobiography, first published in 1993, reads like a prophecy. It shows how deeply and with what extraordinary wisdom she had examined Delors’ proposals for the single currency. Her overriding objection was not ill-considered or xenophobic, as subsequent critics have repeatedly claimed.

They were economic. Right back in 1990, Mrs Thatcher foresaw with painful clarity the devastation it was bound to cause. Her autobiography records how she warned John Major, her euro-friendly chancellor of the exchequer, that the single currency could not accommodate both industrial powerhouses such as Germany and smaller countries such as Greece. Germany, forecast Thatcher, would be phobic about inflation, while the euro would prove fatal to the poorer countries because it would “devastate their inefficient economies”.

It is as if, all those years ago, the British prime minister possessed a crystal ball that enabled her to foresee the catastrophic events of the past year or so in Ireland, Greece and Portugal. Indeed, it is one of the tragedies of European history that the world chose not to believe her. President Mitterrand of France and Chancellor Kohl of Germany dismissed her words of caution. And when Mrs Thatcher was driven from office in 1990, a crucial voice was lost, and a new consensus started to form in Britain in favour of the euro.
He cites two Irishmen, Peter Sutherland - who needs no introduction here - and Niall Fitzgerald, then chairman of multinational Unilever, as two of those who said Britain would suffer for staying outside the euro.

Irishman Niall Fitzgerald, chairman of the industrial giant Unilever, forecast British economic obliteration outside the euro. In a dark irony, it is his native country that now faces obliteration.
He turns fire on a who's who of europhiles across the spectrum of British politics: Ken Clarke, Michael Heseltine, Tony Blair, Peter Mandelson, Danny Alexander and Chris Huhne, as well as leaders of British business who supported the euro - and the BBC.

Oborne said William Hague also warned of the perils when he was Tory leader and he was ridiculed at the time.

Those who challenged this consensus were ridiculed. Even William Hague, then leader of the opposition, received this contemptuous treatment. Hague made a series of speeches which, reread today, rival Margaret Thatcher’s in their prescience. He predicted that membership would “lead to huge booms and deep recessions”. Hague chillingly added that “the single currency is irreversible. One could find oneself trapped in the economic equivalent of a burning building with no exits.” He noted that euro membership could lead to a “full-blown banking and financial crisis.”

Nobody listened, many mocked, and Hague was accused of dragging the Tory party to the Right. The BBC, an integral part of the pro-European alliance, played its full role in marginalising critics such as Hague. The state-owned national broadcaster lumped the Tory leader in with cranks and xenophobes. By contrast, euro supporters were invariably presented as mainstream and sensible.

But it is Hague’s speeches that have stood the test of time, while the excitable expostulations of Heseltine, Blair, Mandelson and Clarke all look ridiculous today.
Oborne concludes by saying those who mocked and ridiculed Thatcher, Hague and other Tory opponents of the euro should now apologise to them. And he finishes:

One other point. Margaret Thatcher may have been the first victim of the single currency, but there have been many more since: the millions who have lost their jobs and the nations that are being stripped (as she forecast) of their pride and independence.
.

Margaret Thatcher knew the single currency would devastate Europe – Telegraph Blogs

So was Thatcher right after all? Should we have listened to her back then and her successors ever since? Will history judge her as someone who stood alone against the hubris and folly of her European contemporaries - and was proved right?

I pose these question to the floor...
 


Tea Party Patriot

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+1 on the OP, excellent post.

What many people don't seem to realise is that Margaret Thatcher based her opinions not on ideology but on sound economic principles. I just wish we had someone of her calibre to vote for in Ireland right now.
 

Arracht

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Even a stopped clock is right twice a day.
 

Breadan O'Connor

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Very interesting piece in today's Daily Telegraph by UK political commentator Peter Oborne.

Basically, he said Margaret Thatcher was right to oppose the euro back in 1989/90 and that everything she predicted would happen if it was embraced has come to pass.



He cites two Irishmen, Peter Sutherland - who needs no introduction here - and Niall Fitzgerald, then chairman of multinational Unilever, as two of those who said Britain would suffer for staying outside the euro.



He turns fire on a who's who of europhiles across the spectrum of British politics: Ken Clarke, Michael Heseltine, Tony Blair, Peter Mandelson, Danny Alexander and Chris Huhne, as well as leaders of British business who supported the euro - and the BBC.

Oborne said William Hague also warned of the perils when he was Tory leader and he was ridiculed at the time.



Oborne concludes by saying those who mocked and ridiculed Thatcher, Hague and other Tory opponents of the euro should now apologise to them. And he finishes:

.

Margaret Thatcher knew the single currency would devastate Europe – Telegraph Blogs

So was Thatcher right after all? Should we have listened to her back then and her successors ever since? Will history judge her as someone who stood alone against the hubris and folly of her European contemporaries - and was proved right?

I pose these question to the floor...

It would be intersting to know why the Irish political establishment suported euro membership.

I suspect FF were pushed to do so by their property and banker backers, who knew it would create a bonanza.

So what reason was there for FG and Labour? Was it just naive hubris?
 

darkhorse

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Absolutely true.
The Euro is very largely responsible for the current crisis due the the loss of control of interest rates and exchange rates.
 

dgeraghty

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Very interesting piece in today's Daily Telegraph by UK political commentator Peter Oborne.

He cites two Irishmen, Peter Sutherland - who needs no introduction here - and Niall Fitzgerald, then chairman of multinational Unilever, as two of those who said Britain would suffer for staying outside the euro.


So was Thatcher right after all? Should we have listened to her back then and her successors ever since? Will history judge her as someone who stood alone against the hubris and folly of her European contemporaries - and was proved right?

I pose these question to the floor...

Well from my rudimentary knowledge of monetary policy, it seems we were right to stay in the euro, for macroeconomic reasons (the micro benefits, including the tangible effects for the ordinary person on the street needs no mention). Conversely, the UK (in the short term at least) they were right to stay out! So his reference to irony of an irishman predicting Britains demise I think is ill-founded- the costs of having our own currency during this crisis might very well have bankrupted us far sooner than what is happening now- which incidentally is nothing to do with our being in the euro. How much would it have cost to prop up the Punt, when the markets short our currency? We wouldn't have needed to do anything to devaluate our currency as the markets would have seen to that. And what about the billions of loans the ECB have given Ireland- where would we have got that from if we weren't in the euro.

But anyways, whatever about Ireland, Greece shouldn't have been let into the euro and I think that was the eurozone's biggest failure.
 

Orchard Rebel

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+1 on the OP, excellent post.

What many people don't seem to realise is that Margaret Thatcher based her opinions not on ideology but on sound economic principles. I just wish we had someone of her calibre to vote for in Ireland right now.
To clean up the mess left by the unfettered free market neoliberalism she did so much to promote in the first place?
 
D

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Absolutely true.
The Euro is very largely responsible for the current crisis due the the loss of control of interest rates and exchange rates.
The government had other mechanisms available to it to forestall the present crisis - since it didn´t use those what makes you thing it would have used interest rates or exchange rates? The euro was not the problem.
 

dgeraghty

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Absolutely true.
The Euro is very largely responsible for the current crisis due the the loss of control of interest rates and exchange rates.

What's your thesis? That we should have higher interest rates? The euro rates are at historic lows.
And as I mention in my post above, trying to control a tiny currency, when the markets are itching to take you out (if you'll excuse the use of emotional language), is by no means an easy (or cheap!) task.
 

hiker

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I dont think she was right but she was wrong in her assesment about why it would fail.

She never saw the destruction of American hegemony in europe and the obliteration of American finance which is where this whole sorry saga begins.

Of all the currencies on the world stage the euro is still holding strong, too strong some might say.

The headlines reads "Thatcher new the euro would devastate europe".
It was not the euro that did it but the collapse of the worldwide financial markets in 2008.
Its the euro that might actaully save europe in the end.......
 

scallioneater

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To clean up the mess left by the unfettered free market neoliberalism she did so much to promote in the first place?
Dont think Mrs T would have given bankers a blank cheque. Thats not free market neoliberalism, it just the wealthy robbing the poor.
 

darkhorse

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What's your thesis? That we should have higher interest rates? The euro rates are at historic lows.
And as I mention in my post above, trying to control a tiny currency, when the markets are itching to take you out (if you'll excuse the use of emotional language), is by no means an easy (or cheap!) task.
Yes, if we were able to increase interest rates to calm the property bubble, then the bubble and the crash would probably never have happened.
Its not easy to control a tiny currency but it works for other countries and could have continued to work for us. Right now, we cannot devalue and so our ability to rebuild the economy is much reduced.
 
D

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Yes, if we were able to increase interest rates to calm the property bubble, then the bubble and the crash would probably never have happened.
Its not easy to control a tiny currency but it works for other countries and could have continued to work for us. Right now, we cannot devalue and so our ability to rebuild the economy is much reduced.
If you´re talking about competitiveness via devaluation you can achieve this by lowering costs such as wages, utilities etc.
 

darkhorse

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If you´re talking about competitiveness via devaluation you can achieve this by lowering costs such as wages, utilities etc.
Yes but only with great difficulty.
So much so that now we have to get the IMF to help us do this.
 

Orchard Rebel

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Dont think Mrs T would have given bankers a blank cheque. Thats not free market neoliberalism, it just the wealthy robbing the poor.
It's an interesting hypothetical but I suspect she would have bailed them out. Since she believed that wealth creation was a top-down principle, I suspect she would have imposed even greater austerity on her subjects, since a proper functioning banking system is a key driver of the free market.

I suspect she would have seen them as too important to be allowed to fail....
 
D

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Yes but only with great difficulty.
So much so that now we have to get the IMF to help us do this.
Agree - but only because the running of the country was handed to the unions - and this supports my argument that, even if we had interest rates and exchange rates under our control, we would not have used them to stop the party - regardless of who was in power. Just be glad that, at this present moment, we are in the eurozone and that its current problems put us in a position which gives others a reason to want to save us.
 

Passer-by

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Yes, if we were able to increase interest rates to calm the property bubble, then the bubble and the crash would probably never have happened.
We were able to control our budget and used that to give massive tax-breaks to encourage investment in a property market that was experiencing double-digit price rises in many years.

Since we were that stupid, the notion that we would have used interest rates wisely to counteract those taxation policies lacks credibility.

It is a bit like saying that if you have a child (i.e. the government) who burnt down the house after playing with matches (i.e. property tax breaks), that none of it would have happened if the child had been given petrol (i.e. interest rate control) as well as matches to play with.
 

dgeraghty

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Yes but only with great difficulty.
So much so that now we have to get the IMF to help us do this.
Using the currency to remain competitive is a rather inefficient tool. And as Orchard Rebel indicated, there are many tools a country can use to remain competitive. Interestingly, joining a major currency adds competitiveness to a small economy.
But as I mentioned, we probably wouldn't need to do anything to devalue as the markets would have done that for us. The problem is of course, would they have sunk the Punt, and caused far more havoc in that sort of devaluation than could even be comptemplated now?

Furthermore, the problem with interest rate control, is that we'd want to have low interest rates (as they are with euro) in order to increase lending and boost demand in the economy, but we'd need to keep them high in order to help prob up demand for the currency when the world economy doesn't want to touch it with a barge poll given the state of our economy now.
 

Sync

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She's right, and the English have always been very smart about their attitude to the Euro. The English understood what the European project was about better than most countries. They simply decided they didn't want much to do with it.

Now I believed in the project when I voted in previous referendums, and I still do.

The problem is with the people who thought and wanted to believe that the Euro was the final step. It's not. For it to suceed there needed to be a large amount of financial, social and organisational harmonisation. That slowed to a crawl after the Euro was introduced.

But whether you agree or disagree with the target, it's impossible to argue that there hasn't been a complete lack of fortrightness from most EU leaders in the last decade.

I do think the idea that if we'd the punt in the exact same situation that we'd somehow be better off is bunk though. Our currency would be worthless and the ability to increase interest rates wouldn't realy help the current problems.
 

darkhorse

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Agree - but only because the running of the country was handed to the unions - and this supports my argument that, even if we had interest rates and exchange rates under our control, we would not have used them to stop the party - regardless of who was in power. Just be glad that, at this present moment, we are in the eurozone and that its current problems put us in a position which gives others a reason to want to save us.
Who knows for sure but if interest rates and exchange rates had been used in the way they had been used traditionally, then the State would have the tools needed to calm the markets. Within the Euro we didnt have these tools - we basically castrated the Central Bank and left it powerless to intervene.
 


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