A troubled euro
By Jeffrey Titford ALL is not well in the eurozone, according to a very sickly report issued by no lesser authority than the European Central Bank (ECB), late last year.
By Jeffrey Titford
ALL is not well in the eurozone, according to a very sickly report issued by no lesser authority than the European Central Bank (ECB), late last year.
The extravagant predictions made at the launch of the euro in 2002 are still fresh in the mind. All sorts of travel metaphors were used i.e. Britain missing the boat and the train was leaving and we aren't on board etc etc. Its proponents also said that the euro was going to rival the dollar and would soon fix all of Europe's economic ills. There were firework displays and general merry-making all over Europe.
Well, the party is over now. The cold, hard truth is that the euro is in serious trouble. The ECB Bulletin shows that during the first eight months of 2005, inward investment into the eurozone plunged to just £17.86 billion. This compares with £124.26 billion in the whole of 2002, the year the euro began its odyssey of mediocrity. During the period 2002-2004, foreign direct investment in the eurozone fell by a colossal 57 per cent.
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Furthermore, inward investment exceeded outward investment by £690 million in 2002 but by 2004, two years after the launch of the euro, outward investment exceeded inward by £53.56 billion. Worse still, during the first eight months of last year, the figure had risen to a massive £88.56 billion. To describe these figures as a vote of no confidence in the euro from foreign investors would be a masterpiece of understatement.
It is quite clear that since the launch of the euro, investors have not shown any confidence in its performance and have preferred to invest their money elsewhere. In fact, investment is leaking out of the eurozone at an alarming rate - a rate which is quite unsustainable.
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While Britain can draw a modicum of comfort from the fact that it is not a part of the eurozone, the future is far from rosy. Regrettably, the Prime Minister and the Chancellor have, over time, hitched our wagon ever more firmly to the failing European economic model. Our economy is being 'Europeanised' and because of this we are losing the advantages we have been enjoying over our Continental competitors. A distinctly unhealthy combination of increasing public expenditure as a proportion of GDP, higher taxes, the growing burden of regulation and the blunting effect of EU protectionism on economic competition are insidiously eroding our economic advantages.
It is indeed ironic that a Prime Minister, who embraced modernism with such fervour when he first came to power, is now ending his term by seeking further ways to shackle us to the past i.e. to the eurozone, a dated and conspicuously failing economic structure.
Jeffrey Titford is a UK Independence Party Euro MP for the East of England.