Hutton on the Euro-crisis

Clever and persuasive piece by Will Hutton from Sunday’s Observer about the crisis produced by the French and Dutch ‘no’ votes. He provides a very neat pair of scenarios (one rosy, one gloomy) for the post-referendum period, which I’ll reproduce here because they’re so good (and because I can’t link to them directly).

The rosy scenario …

Ratification process halted at EU summit on 16 June for period of ‘reflection’.

Agreement reached on EU budget. Britain agrees phased withdrawal of its budget rebate in return for phased ending of Common Agricultural Policy.

German economy starts to improve in autumn 2005 as reforms kick in.

German success seen as victory for Blairism and the value of British economic and social model.

Political revolt in France against Chirac, and insistence that it follow German reforms which are now clearly working.

2006/7: European economic growth rises to 3 per cent. European Central Bank lowers interest rates.

2007: Proposals for streamlined, democratic EU introduced with fewer powers.

Proposed treaty agreed in 2008. Ratification starts 2009 against background of falling unemployment.

Referendum won in Britain by Prime Minister Brown and in France by President Sarkozy.

2010: European economy booms on rising consumer and investor confidence. Turkish accession talks now begin.

… and the gloomy outlook

2005/6: European Summit ends in disarray. No agreement on European Union budget, ratification process or what to do.

Italy’s Prime Minister Berlusconi declares he will hold referendum on leaving euro in spring 2006. Italians vote to quit currency.

Euro in free-fall as France and Germany prepare contingency plans for return of franc and mark. European Central Bank (ECB) forced to raise interest rates.

2006/7: German and French economy move into deep recession as ECB puts up interest rates to save euro. Extremist left and right parties make big advances.

Summer 2007: Incoming left-wing French government under President Laurent Fabius suspends euro membership, raises tariffs and leaves World Trade Organisation.

Spring 2008: German Chancellor Angela Merkel declares European Union dead. Germany will no longer recognise European law, but instead will work for a European common market with floating European exchange rates.

2009: British unemployment tops 2 million. House prices crash. British National Party predicted to win 50 or more seats in 2010 General Election.