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SIMON HEFFER | Greek bailout: we are all losers

The renowned political commentator and historian, turns his gaze to France and the French

Simon Heffer, the renowned political commentator and historian, turns his gaze to France and the French

One of the more telling remarks made about the British economic crisis earlier this year was that there was "too much politics, and not enough economics" about the attempt to improve things. That phrase is even more appropriate for the tombstone of the euro, a piece of monumental masonry that cannot, surely, remain uncarved for very much longer.

For months now the euro has defied gravity: its plunge to earth is long overdue. Expatriates living in France, with income in sterling, know all too well the pain of a ridiculously overvalued exchange rate. But so too do many French businesses and their employees - especially the ones that rely for their profits on exports to outside the eurozone.

The latest figures show there is hardly any growth in the eurozone, and that cannot be a surprise. Countries often export their way out of a financial crisis: but if a forbiddingly high exchange rate prevents potential customers from buying their goods, that export-led recovery simply won't happen. La croissance is much talked about in France, but it cannot happen within the present economic straitjacket that is the eurozone.

On July 21 an emergency summit in Brussels made arrangements to bail Greece out - again. But this was only a sticking-plaster, applied as a result of too much politics and not enough economics.

The night before the summit President Sarkozy and Angela Merkel, who as Chancellor of Germany has become the lender of last resort to Europe's bankrupt nations, agreed a deal to 'save' Greece, including allowing a partial default on Greek debts. This, though, is madness. First, Greece will be back with its begging bowl soon enough: its economic culture and lack of productivity mean that it is never going to be able to keep up with the Germanies and Frances of this world. Second, the German electorate will not indefinitely tolerate paying taxes to subsidise a country - indeed, several countries - whose "wealth" is illusory and whose work ethic is pathetic by comparison with theirs. When Germany has enough, then who pays? Are French citizens, who already feel grotesquely overtaxed, likely to welcome being asked to subsidise not just the Greeks, but also the Irish, Portuguese, Italians and possibly also the Spanish?

In his last new year message, Sarko rather dramatically said that without the euro there could be no Europe. He may live to regret those words: he will certainly, I suspect, live to revise them. It was another example of the political rhetoric that politicians spew out from time to time to reassure the markets. Just before Britain was
ejected from the Exchange Rate Mechanism in 1992, on Black Wednesday, the then British Prime Minister, John Major, spoke recklessly of "the fool's gold of devaluation". Within days there was a 30% devaluation of sterling against the deutschmark, Britain was humiliated (but its economy saved) and political rhetoric was exposed for the flannel it actually is.

What was true then, and is true now, is that the will of the international markets is stronger than any government. Greece cannot pay its debts not merely because it
doesn't have the capital to do so, but because there is no confidence in its government's or its people's ability to turn the economic culture around and live within their means. The ugly truth - as eurocrats in Brussels would see it - is that despite all the attempts to create a United States of Europe, with a single currency, national identities and cultures within the 27 states (and especially within the 17 countries using the euro) remain too strong to make the political project of unification possible.

This is as true in France as it is anywhere else. French taxpayers have a clear idea of themselves, their country, their culture and their economy. Even though France struggles to keep up with Germany, it has a sense of itself that is far different to that of the Greeks, or even most of the Italians. In the end, that is why many French people would prefer a return to the franc than to remain in a currency union whose price is a constant subsidy to less efficient parts of the economic area, and an exchange rate that suppresses growth. It may be premature to say that the European project has failed, but the argument that says a single currency is an essential part of that project has certainly done so. This is partly why, as I have noted on this page before, Marine Le Pen enjoys as much popularity with the French electorate as she does: her promise to get out of the euro is appealing to millions in France who, unlike their president, see the single currency as nothing but trouble and expense, and deeply damaging to the French economy.

Yet the euro defies gravity, not least because the Chinese, who are stealthily economically colonising Europe, have been buying billions of them for their various purchasing schemes and for their reserves. This has had the effect of keeping the value of the currency high against the dollar - which given the parlous state of America's economy is not too surprising - but also against sterling, which, for all its troubles, is the currency of an economy with better fundamentals than either the US or the eurozone. That is why expatriates have had the paradox of living in an economy that is apparently in deep crisis, but which has a suffocatingly expensive currency.

Sarko's European credentials are intact and shining bright: but all he and Mrs Merkel have done in trying to come to Greece's aid again is postpone the inevitable, and engage in too much politics at the expense of economic reality. He has an election to fight in eight months' time, and would do well to consider whether such profligate of France's money is entirely wise.

Simon Heffer is also a columnist for the Daily Mail

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