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November 07, 2011

If the Euro is to be saved there must be a simultaneous referendum in every country of the Eurozone - argues Brendan Simms

Posted by Brendan Simms

What is now needed is a Eurozone wide referendum - it is the only hope for the Euro. Or so argues Brendan Simms, Professor in the History of International Relations at the University of Cambridge.

What Europe faces today is the financial and economic equivalent of May 1940, when the continent was plunged into darkness by the Nazi invasion of France and the Low Countries. Nothing in the Eurozone is certain now: neither private nor public pensions, neither asset values nor salaries, neither personal nor public finances. The unfortunate Greeks are beginning to find their credit cards rejected abroad. Only a few countries, such as Germany and Holland, can be confident of emerging from a breakup of the Euro if not unscathed then at least with a strong currency, a general creditworthiness and a robust economy.

Many other states - Greece, Italy, Spain, Portugal, Ireland, and perhaps even France - risk total fiscal, economic and social meltdown. In most cases, the situation will be disastrous whether the common currency stands or falls, with states having only the choice between a decade or more of austerity to maintain the Euro, or departing for a world of no credit, high import costs and punitive interest rates, being no more attractive than that between leukemia and a Brain tumour. The leader of the free world - the United States - remains aloof as it did in 1940, not least because of its own problems. It is at times like these that one counts oneself lucky to be living in this country, which is insulated from the very worst of the continental catastrophe by the existence of the pound.

That said, Britain - as the Chancellor rightly warns - will be seriously damaged by the collapse of the Euro, which would quickly smother the tentative economic recovery here. It is less easy to know how to influence the destiny of the continent.

In 1940, Churchill laid such stress on keeping France in the war that he suggested a full political union with that country. The equivalent today would be the deployment of Britain's reserves and credit in support of the Euro, in effect joining the common currency. Mr Cameron and Mr Osborne have wisely refused to do so, because the total financial firepower available will not be sufficient to stop the tsunami of debt contagion which will sweep the Eurozone as one country after the other defaults. Hurling more money into the Eurozone would thus be like Dowding sending the remaining RAF fighters to France, where they would have been no more than a drop in the ocean, instead of holding them back for the Battle of Britain.

The other extreme, which is to use the crisis to demand the repatriation of powers from Brussels in a legislative Dunkirk, is not helpful either, because it would suggest to our European partners that we are completely turning our backs on them. Inaction is rarely the right choice, but all we can do for now is wait.

The country at the centre of the storm, Greece, is fond of invoking 1940, the year when it rejected the Italian ultimatum. Here, however, the analogy is not merely strained but harmful, as the hysterical anti-German propaganda of the past two years in Athens attests. There is no desire in Berlin or at the Stammtische of the Federal Republic - to dominate the Greeks or any other European people, quite the reverse. The problem for Greece and the rest of the PIGS is not that the Germans have been bossing them around today, but that they failed to do so for so long. Nobody forced them to join the Euro and it is reasonable to ask them to make sacrifices to escape a predicament for which they themselves bear the primary responsibility.

On the other hand, the consternation caused by Greek Prime Minister's announcement that he would put the most recent "bailout" deal to a referendum in the New Year was further proof, if any was needed, that the European Union has a problem with democracy. Under heavy pressure from Frau Merkel and Mr Sarkozy, Mr Papandreou rowed back from his original plan, suggesting that the vote could be brought forward, or even avoided if a coalition government could be formed which would sanction the even greater cuts to the public service which the agreement requires.

This shows that neither he nor the European leadership have understood that the crisis will not be solved without a referendum not merely in Greece but in every country of the Eurozone.

At the moment Europe is bedevilled by democratic involvement of the worst sort: a cycle of Irish referenda, Bundestag votes and German regional elections, each of which hold up the process unilaterally. Some Europeans are asked at different times to vote on different proposals, and others are consulted through their democratically elected governments, but at no point have they been consulted simultaneously on the same fundamental issue, which is how much of their national sovereignty they are willing to trade for increased security and prosperity. Yet if the common currency is to be saved then all the peoples of the Eurozone will have to agree on the solution: those in rich countries to the use of their taxes to support "Eurobonds", and those in the poorer countries to bear the austerity measures necessitated by continued membership.

Nothing less than a collective popular act of refounding the Union, or at least of the Eurozone, will do. In short, Mr Papandreou may have chosen the worst possible moment to consult his people, and he may have done so for entirely opportunistic reasons, but he had the right idea.

Dr Brendan Simms is Professor in the History of International Relations at the Centre of International Studies at the University of Cambridge and co-President of the Henry Jackson Society.

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