With the EU Summit just days away, debate over possible solutions to the eurozone crisis is hotting up. Cue euro-sceptic rant from London Mayor Boris Johnson. In response to George Osborne’s pronouncement that the only solution to the current crisis is the ‘remorseless logic’ of monetary union resulting in closer fiscal co-operation, BoJo has questioned the Chancellor’s sanity.
‘I think it would be absolutely crazy to decide that the solution to the eurozone crisis is to intensify fiscal union and try to create an economic government of Europe,’ Johnson expostulated. ‘I really can’t see for the life of me how that is going to work in the long term.’
Indeed, a sobering statement from Bank of England Governor Mervyn King to the Institute of Directors in Liverpool yesterday brought home the negative effects of the UK’s intimacy with Europe. He blamed the eurozone crisis in part for the almost non-existent UK growth figures released earlier this week. ‘A slowing of the world economy, especially in the euro area, is a threat to our strategy of rebalancing and recovery of the UK economy,’ he said. ‘In the absence of rebalancing, globally and especially in the euro area, we could be facing a recovery that is not merely reluctant but recalcitrant.’
On the other side of the fence, French President Nicolas Sarkozy is on barn-storming form. He has been having a little chat with Dutch Prime Minister Mark Rutte about appointing a kind of euro finance minister to enforce budget discipline in the euro area. ‘Allowing the destruction of the euro is to take the risk of the destruction of Europe. Those who destroy Europe and the euro will bear responsibility for resurgence of conflict and division on our continent.’
Cue La Marseillaise? Sarkozy’s comments come in the wake of Moody’s warning yesterday over a possible downgrade of France’s Aaa rating. France is being speedily sucked into the swamps of tristesse économique. Shares in French banks have dropped sharply over the past few days with BNP Paribas and Société Générale down 4% and 5% respectively. President Sarkozy would be better advised to get to grips with these issues rather than rail against the markets.
Meanwhile, in academia, word of the Wolfson Economics Prize has been sent down by carrier pigeon from some ivory tower with a challenge of sorts.
Wanted: a plan for the painless euthanasia of the euro
The prize is open to anyone who can come up with an effective and compassionate way of winding up the euro sharpish. The money has been thrown into the pot by Simon Wolfson, CEO of UK clothing chain Next. ‘The future of the world economy will, in large part, be governed by what happens over the next few years in Europe,’ he says. ‘I, along with most European businessmen, hope that the eurozone will stabilise [doesn’t look like it, mate], but in the event it does not Europe must not sleepwalk into a policy vacuum.’
The deadline for entries, in case you want to have a stab, is January 31. But don’t put pen to paper quite yet. Once the EU leaders have meet in Brussels this weekend to discuss emergency measures to recapitalise European banks and sort out the Greece fiasco, the goal posts may move significantly.