Rolf Englund IntCom internetional

Anthony Jay in The Darlington Economics Lecture, November 17, 1995

David Smith, Economics Editor of The Sunday Times, author of i.e. The Rise and Fall of Monetarism and From Boom to Bust, has written a new book "Eurofutures - Five scenarios for the next Millenium", Capstone, Oxford. From that book I quote:

Stephen King in Emu, Four Endings and a Funeral James Capel, p. 50

Some argue that most of the 'major' asymmetric shocks for Europe have already happened - the collapse of Communism, German unification. But this view is surely naive. There are plenty of potential upsets with important economic - and, particularly, fiscal ramifications. Civil war in Russia would raise the risk of a massive influx of refugees into Germany.

A rise in Islamic fundamentalism in North Africa could lead to a surge of refugees into France, Spain and Italy France or the UK might be forced to defend territories outside Europe, implying a one-off surge in military spending. Italy or Belgium could split in two. Parts of the Netherlands could be destroyed via a tidal wave from the North Sea.

A nuclear reactor accident could, potentially, wipe out thousands of square miles of one particular country. A sharp rise in oil prices would have a significant differential effect on the UK.

An exchange rate shift would not necessarily be the most appropriate response in all of these circumstances. However, the possibility of asymmetric shocks does suggest that exchange rate shifts can still serve a useful purpose.

In their absence, other mecharisms will be required. And here, serious problems arise.

David Smith: We come back to a familiar problem, that of the need for massive resource transfers within Europe once Emu is in operation, and the near impossibility, under present arrangements, of providing them.

Mica Panic: ... Given the limited volume of resource transfers that the Community can realistically be expected to mobilise, their /the weak countries/ long-term chances of remaining in the complete union are likely to be even smaller than those of the countries that found the much less demanding arrangements under the classical gold standard too costly.

Mica Panic: European Monetary Union, Lessons from the Classical Gold StandardSt Martins Press, p. 158)

In a study published by UBS, 'Labour Markets and Emu', George Magnus and Paul Donovan found that labour mobility within Europe had declined in the two decades from the mid-1970s. /They/ cited four principal reasons for declining labour mobility in Europe:

Those hardest hit by rising unemployment, the unskilled, will tend to find that opportunities are as limited in other countries as at home.

Anthony Jay: However much money and power the Commission have, it is improbable that they will be able to have any significant impact on the competitiveness imbalance problem which a single currency will pose.

This will leave the problem to nature's remedy - the migration of population. It seems hard to believe that the political, economic and social success of Europe, whether one approves or disapproves the objecfive, will be promoted by establishing at the heart of its economic fundioring a mecharism which depends for equilibrium on the enforced migration, on pain of destitution, of its population in the tens of millions:

If this is the character of monetary urion, conceived by politicians who saw it as little more than a trite gesture of nationhood, to go with a blue flag and a jolly anthem, then we can say that it is not in the long-term interests of Europe and very far from being a sensible economic sacrifice even for the sake of a large political goal.

Indeed, one may wonder that anyone who professes to hope for the success of political union in Europe could wish to implant in its foundations such an engine of mass destruction.

Anthony Jay in The Darlington Economics Lecture, November 17, 1995

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