Crisis in the Eurozone

The outlook for Britain is difficult this year and made more so by the crisis in Europe. Nevertheless we shall get through and Britain continues to be a place the financial markets trust.

When William Hague likened the single currency to a burning building with no exits, he was hardly exaggerating. Thanks to the huge borrowings under the last government, we share the same problems of ‘sovereign’ – that is government – debt. But, unlike the countries in the Euro, our currency is our own so it has settled at a level where we can compete in international markets. The weaker countries of Southern Europe, however, cannot compete. This is because they share a currency with the powerful German economy, so the Euro makes their goods and services too expensive to export.

Furthermore, many banks in the Eurozone have lent heavily to Eurozone governments, so they are heavily exposed to the sovereign debt crisis. French banks for example have lent five times more money to Greece than their British counterparts. Yet negotiations on rescheduling Greece’s debts have broken down. It is my belief that the Eurozone will break up, with the weaker countries devaluing, so they can compete.

That said, Britain needs the European Union. We are a trading nation and need access to, and a voice in, the EU’s single market – millions of jobs depend upon this. What we do not need is the tidal wave of red tape – especially for our largest industry, financial services – hence David Cameron’s veto.

In a crisis, Britain thinks out of the box and does things better. America’s top World war Two General, Douglas MacArthur, once said, “There is no such thing as security, only opportunity”.

The Euro club cannot grasp this important moment in history. Bureaucrats are now increasingly running Eurozone countries. In contrast we are cutting borrowing and ministers are working hard to help exporters to sell beyond Europe.