Friday, 27 April 2012

What if the French turn left…

An electoral contest of fantastic magnitude is just ten days away across the Channel: the consequences of which could be truly quite severe for our country’s future. The very fate of the European single currency – our most significant trading bloc – hangs on the outcome of this binary selection facing the French populace.

The socialist candidate, to whom the pundits have assigned the designation ‘front-runner’, is calling for a less robust approach to tackling the monstrous levels of debt which have beset the Eurozone since the financial crash. Indeed, Francois Hollande has an altogether obstinate objection to fiscal tightening, whilst his enthusiasm for a transactions tax risks decimating our most significant industry: broadly one pound of every ten in this country’s economy has its root in the City of London, and his would-be brutal assault on the bedrock of our prosperity might bring about an important choice which we cannot duck for much longer. It is extremely improbable that his spending ambitions will assist either his fellow country-men or the long-suffering taxpayers of the Eurozone; and we must ensure that our economy is not made to pay the price. A transactions tax would force our hand: total oblivion is not too dramatic a concept should Monsieur Hollande get his way on that.

However, equally unpalatable is the ‘Merkozy’ vision for the Eurozone. Sadly, the basic truth remains that these two leaders need each other – and the future of their political project depends on mutual survival. The needs of Germany have been overwhelmingly prevalent throughout the sad life of the single currency, but Frau Merkel is waking up to the prospect that this is not Francois Hollande’s priority. The Franco-German axis, which has dominated the ever-growing drift towards European political union, faces its greatest threat in decades.

But we face difficult choices of our own: either outcome represents a potential disaster for the United Kingdom. We have, to date, failed to take full advantage of the opportunities to help ourselves – we have not done enough to enable our economy to grow. As we drift back into recession, we need to accept that we have not focused sufficiently on embedding growth. And some of us have been pressing the Chancellor of the Exchequer to recognise this priority for more than a year: a single-minded dedication to the dogma of the supply-side altar is taking too long and, frankly, has failed us in this time of peril. Why have we set our face so firmly against some private-sector demand stimulation measures which would help to stimulate that growth which has been in such short supply recently. People cannot spend if they are struggling to keep afloat, and growth must be the best antidote to our present predicament.

The colossal programme of quantitative easing has inflicted great harm on our route to recovery. We need to create the conditions in which growth will occur. The election of an overtly hostile President in France might force us voluntarily to take our leave from the Euro-table. But going it alone is only an attractive way forward if we can get our own house in order; but the dilemma becomes that bit more acute should the commentators have got their speculation accurately targeted in the coming French contest.

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