Labour’s European quandary

by Alan Lockey

“There is no subtler, no surer means of overturning the existing basis of a society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.” John Maynard Keynes The Economic Consequences of the Peace (1919)

And so the Eurozone crisis lurches on. Of course it has been a long time since we wondered whether anybody at the European Central Bank has read any Keynes.  If little else we can be certain of that. But as the crisis moves into a new and potentially decisive phase, with the possibility of ‘Grexit’ openly discussed, it is time to ask: what are the political implications for Labour’s policy on Europe?

The economics themselves remain as intractable as ever. Indeed, in a startling interview on Tuesday’s Today programme, Dr Michael Fuchs, vice-chairman of Angela Merkel’s CDU, practically admitted as much, suggesting that restoring Greek competitiveness through lowering their cost base was “impossible” but that Greece “must follow the rules” set out by the so called ‘troika’ of the IMF, ECB and EU.

But aside from shouting from the sidelines, Labour can do little to affect any of this. If the next election comes in 2015 then this crisis, for better, or more likely for worse, will have been resolved. What we might have done differently will be largely irrelevant. Of course it helps to associate the government with a reputation for austerity’s failings – but we need little impetus from Europe to do that.

And yet the sheer volatility of the crisis means we should not take anything for granted, particularly when it comes to Europe. It has long been conventional political wisdom that Europe represents promising terrain for Labour. This is based on two assumptions.

First, that whilst basic polling data might indicate that public opinion on Europe is, at best, divided, the Tories repeatedly fall into the trap of over-exaggerating its importance.

Second, that it can be used as a ‘wedge issue’ with which we can drive our opponents into a factional, frothy-mouthed frenzy, as we look on with united, pragmatic glee.

In the current context, both of these assumptions are complacent. The crisis will inevitably make Europe a more prominent issue at the next election, its connection to the economic bread and butter issues, jobs and growth, strengthened in voters’ minds.  And it is not hard to imagine how a desperate coalition might try to harness hardening attitudes to leave Labour dealing with a very different sort of ‘squeezed middle’.

But perhaps most importantly it overestimates our own unity. Because attitudes to Europe expose an infrequently discussed divide within the Labour movement, between those of cosmopolitan, progressive or anti-jingoistic persuasions and those who see the common market as an economically conservative club formed to export elite capitalism. Indeed it was arguably this more than any other rift that finally led Roy Jenkins to create the SDP in 1981, thus dividing the left for a generation.

Largely subsumed in the New Labour era, the sceptical position is gaining more traction. Existing EU legislation, on state aid for example, is increasingly found to be intellectually out of step with a new era of interventionism.  And then there is Angela Merkel’s hardwiring of austerity into the EU’s DNA.  So, the sceptical argument continues, why bother? After all, if the modern EU was supposed to do two things – spread prosperity and prevent far right nationalism – then by any measurement it is currently failing.

Such thinking is short-sighted. Even before cuts (to the BBC world service in particular) weakened our soft power reach, the government’s dream of a Salisbury-lite ‘splendid isolationism’ combined with an aggressively mercantilist foreign office open for bilaterals with any country prepared to throw us a dime, was just that – a dream. Outside of the EU trading block we offer little of interest to the BRIC countries. We still need a Europe that works.

Making the pro-European case in an era where Europe has unleashed Keynes’s forces of destruction will not be easy. We should not underestimate the extent to which an anti-European sentiment might grow, in the country and in our party. Nevertheless it is a case we must make. Our starting point must be an acknowledgement that the current European model is broken and needs reform. With Labour the only party sensible enough to carry out such reform this represents our best chance to reclaim the hard-headed middle ground.

It was this argument that Peter Mandelson and Ed Balls, undeniably two of our best strategists, began to flesh out in Monday’s blockbuster Guardian article. They were right to do so.  Because if we allow the pragmatic horse to bolt from the European stable, it will take a truly herculean effort to clean up the mess.

Alan Lockey is a Labour campaigner and works at the House of Commons

Tags: , ,

9 Responses to “Labour’s European quandary”

  1. Nick says:

    Our starting point must be an acknowledgement that the current European model is broken

    It’s not the European model that is broken. It’s far simpler. It’s that states are bankrupt because they have been running Ponzi scams left right and center.

    The intelectual justification for those scams is Keynes.

    e.g. If you borrow and spend, you won’t have a problem.

  2. swatantra says:

    The fact is that Greece will have to leave the Euro in the end so it might as well be now; sooner rather than later. The Greeks have chosen not to listen to common sense and rein back on their spending and extravagant lifestyle.
    Well its their choice so let them make their own way. The IMF and World Bank should not pour even more money in to shore up a failing State. Merkel is right to stand firm; the alternative is that Greece goes down, and the rest of Europe inc Britain goes down with her.
    But the Labour argument that the G8 talks should be focusing on growth at the same time as reducing spending, has no been won. The past 2 years have been wasted 2 years because Cameron refused o listen.

  3. Alan Lockey says:

    Swatantra, focusing on Greece leaves some of the bigger questions unanswered. They are the only country where this crisis is as simple as they spent far too much. For countries like Spain, Italy even Ireland it is far more complex. Before 2008 Spain had the lowest structural deficit and low amounts of government debt. So, Nick, it’s not about government spending at all – Germany was in worse positions than a lot of the countries it’s now propping up pre-crash. And a proper understanding of Keynes’s demand management is meant to include restraint and belt tightening in good times. Spend in bad, save in good. People often forget the latter part.

    There are a cluster of problems. One is personal indebtedness. Two is reliance on banking as a means of generating wealth. Three is the lack of monetary policy levers for different fiscal regions to readjust their competitiveness. Four is Germany’s strength in competitiveness – a £19.8bn trade surplus is unhelpful. If they really want to keep the Euro they have to realise that running that surplus and maintaining such low rage rates is inevitably going to turn the screw on other countries which are, monetarily, the same as them.

    It’s difficult to see a way out that isn’t anything other than massively painful.

  4. Anon E Mouse says:

    It didn’t matter what Cameron did or didn’t do. This government is borrowing more than the last one and the sooner they stop doing that the better.

    Europe is a busted flush – forced on the poor working classes by a load of middle class technocrats who don’t live in the real world and sponge off the poor.

    The way forward for Ed Miliband and his bunch of millionaire chums in the shadow cabinet is to offer a referendum and mean it.

    By constantly insisting on the importance of Europe for trade and the doomsayers over the Euro collapsing all that is happening is people are getting even more sick of the undemocratic methods those foreigners use to control people.

    Get us and the Greeks out of Europe – the world won’t collapse any more than when the ERM was vacated and we might be able to move on.

    For swantantra to suggest the Greek people should listen to common sense – when every single commentator has been speaking anything but shows a breathtaking arrogance only usually seen in a Labour supporter.

    To keep the unwanted European project with it’s unelected buffoons in power sucking money from the poor in Europe is frankly disgraceful and I bet swantanta hasn’t had to beg for food to feed his family as some greeks are doing.

    But then as long as the public in Europe are lead by a bunch of millionaire out of touch prats like Ed Miliband and his pals we shouldn’t be surprised….

  5. swatantra says:

    I can see the Greeks wheeling barrowloads of drachmas for a pitta and a pint of milk. Thats what happens if you exit the eurozone, and there’s no one from the Club there to support you. But you have to keep to your end of the deal which the Greeks have just torn up.
    Whats that? Is the Exchange Rate really 10 000 drachma to the £. Cheap at the price I’d say.

  6. Anon E Mouse says:


    Argentina got through something similar and you don’t know anymore than anyone else what happens when a country leaves the Euro – not the Eurozone.

    What if the currency devalued and everyone went there on holiday and bought property causing a housing boom and jobs – you get it.

    If a country makes a substantial profit from exports like Germany then stay in the Euro. If not what is the point?

    This “club” is just too expensive, crushes democracy and simply will not work in the long term because the people don’t want it.

    Why on earth don’t politicians start representing the will of the people instead of their own delusional wishes such as for a “United States of Europe”?

    I am English not European and in common with a huge majority of people on these isles I do not want to be governed from overseas by people I cannot get rid of.

    If Greece wisely chooses to leave the Euro I can only hope it hastens the end of the whole European project and we can get back to being an individual country instead of a bland collection of nations with no identity.

    So Greece first, then Ireland in their referendum, then Portugal and finally Spain and with luck that will stop people starving without jobs and will lead to the German taxpayers finally saying enough is enough….

  7. wg says:

    What Anon E Mouse said – on both occasions.

    Greece’s unsuitability and unpreparedness for the euro project were well documented at the time of her joining.

    As Lord Lawson remarked to Peston last night, and I paraphrase – “the euro was a political project to bind the countries of the EU more tightly together”.

    The European Union also has a very nasty weapon that it uses to achieve what it wants – it creates a crisis to present the cure it already possesses.

    If a few youngsters are beaten up by police or people actually shoot themselves because of the shame of poverty – the political elite just don’t care; they, and they alone, know what’s best for the people of Europe.

    I’ve always understood why the Tories bought into the EU – but, other than the fear of another Thatcher, I’ve never known why the left went along.

  8. Anon E Mouse says:


    Agreed. I cannot find a point at which the left suddenly started to support the Tory Party and it’s love of Europe.

    Tony Benn was right about the perils of Europe and why Labour love it so much must be because it is a way of punishing the poor to make the richer richer which despite it’s original intentions is something the party always does.

    Ed Miliband and his millionaire chums in the shadow cabinet should realise people are not like them and eitehr start to represent us or get out of politics…

  9. james says:

    In the meantime we have learnt today that Labour failed to assist agricultural products to be exported to the BRIC countries and apparently when they left office we were exporting more to Belgium than to BRIC – absolutely ridiculous.

Leave a Reply