Britain Caught In A Financial Mess – Of Others’ Making!

THEY DON’T use chalk any more. Instead they have a white board on which the teacher writes with a felt pen.

I mention this only because increasingly I seem to have two-way conversations with UJ readers – and it was my column on teaching (UJ October) that produced the liveliest of responses throughout the past year. Several people wondered if “50 Years at the Chalk Face” continued to make sense. I suppose it doesn’t!

In other months I have covered subjects ranging from the Oldham and Saddleworth by-election (UJ February) to the vote on the Alternative Voting System (UJ March), Prince Philip’s 90th birthday (UJ July) and Scottish independence (UJ November).

The only major subject that I have not written about directly is the Euro-zone Crisis.

As this momentous year draws to a close, it is time to remedy that omission, for the banking collapses that started with the Lehmann brothers’ bankruptcy in 2008 now threaten to engulf us all in 2012, with the Euro countries like Greece, Ireland, Portugal and Italy going down in domino fashion.


At present there are ten of us EC countries who do not trade in the Euro, and a further seventeen desperately trying to prop up that currency. The Brits, in spite of Tony Blair’s enthusiasm, have steered well clear.

I have to confess that, initially, I urgently wanted the UK to go along with the major European powers. My only reservation was based on a distant memory of decimalisation. It began on St George’s Day 1968 and the changeover was completed at the end of Valentine’s Day 1971.

That process was quite an exciting one though one Londoner reported that when the 50 pence coin was introduced in 1969 he had accidentally left a 50p tip for a waiter in a saucer full of 10p coins.

“Fortunately, the waiter was dead honest, and he told me,” the man reported, reminding me of the days when a ten bob tip would have been considered excessive.

What troubled me about decimalisation was that the Chancellor at the time, Jim Callaghan, decided to base the new pound on the old pound, making the new penny worth 2.4d, thereby immediately building in price inflation.

It was this process of “rounding-up” as it was called that disturbed me: prices would rise to accommodate the new currency. The same was equally upsetting with the Euro thirty years on. My son tells me that prior to the Euro, the price of a coffee in Italy had always and everywhere been 980 lire. Overnight, it became 50 cents, half a Euro, 1000 lire in old money. Thus the price went up in a flash by two and a half percent. Not much but then it was just one of thousands of invisible price rises that would happen across the board.

But whatever my personal convictions/prejudices, it is clear to me that our future is inextricably tied up with the EU and the Euro.

David Cameron’s approach is largely conditioned by the Euro-scepticism of his Conservative Party. The extremists want out. They favour a referendum to get us out. Full stop. Cameron is less extreme but wishes to re-negotiate our terms of membership to wrest back power from Brussels.

I think he is a little disingenuous for our fellow-Europeans are hardly likely to cede back anything that will help us to be wealthier and yet remain a full non-Euro member. Moreover, since 50 percent of our trade is currently with Europe, it is inconceivable that our partners would allow us to retain that share of trade on better terms than we currently enjoy.


What complicates matters more is that the Euro-zone seems to be splitting in two: the wealthier more economically sound northern nations, headed by Germany and France, and the rest. Angela Merkel and Nicholas Sarkozy are moving closer together and are openly resentful of Cameron expressing views about the future of the Euro. That trend seems likely to continue, pushing Britain ever further into the cold.

If we could join the wealthier states without adopting the Euro, that might be a solution, but they are now considering closer political union. That would definitely not find favour in Britain any more than they would welcome our pound into their Euro-fold.

The brutal truth is that whether we are in or out of the Euro currency area is immaterial. If Greece should default on its debt repayments (or Ireland or Portugal, for that matter), the pound will not escape. Our exposure to those countries’ debts will be quite significant. If Italy – or Spain – goes belly-up then we shall be deep in the mire, as deeply enmired as any country in the Euro but, of course, without the comfort of seventeen others.


Keep an eye on Spain, by the way. I had a conversation back in June with a Portuguese taxi-driver who was bemoaning the supine responses of his compatriots in the face of the Euro crisis. “The Spanish won’t put up with it,” he warned. “They are very strong.”

One of the things that mystifies me is the exchange rate between the pound and the Euro. Back in 2008, the Euro was worth about 70p. Today, it stands at 86p and has not budged below that for three years. No matter how well we do, or how badly the Euro does, the rate is seemingly fixed there. It may keep our exports up in Europe but it costs as much to holiday in Greece and Portugal as it does in Germany and Italy. And that hardly makes sense.

And so we turn to 2012. Before that arrives, we shall all have Christmas to distract us and I would like to wish all UJ readers compliments of the season. Beyond lies the New Year.

Throughout the year, I have really enjoyed hearing from so many of you and I sincerely hope that this will continue as we head towards the Olympic Games, surely the highlight for Britain of 2012.

Happy New Year to you all!

John Polley


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