Monday, 5 November 2018

The EU’s defective fiscal rules assist the “far right”?

Jeremy Smith (co-director of PRIME) complains about what he calls the EU’s “dysfunctional fiscal rules” harming economic growth in EU periphery countries and helping the rise of the far right. There are several flaws in that argument.

First, in Germany (where the fiscal rules do not seem on the face of it to have dented economic growth), the “far right” is on the rise as much as anywhere else in Europe.  That rather suggests it is not those fiscal rules or any harm to economic growth that is causing the rise of the “far right”.

Second, it’s entirely unclear who the “far right” are, and for the following reasons.

1. In the UK it was the main left of centre party, Labour, who implemented the jingoistic policy of invading Iraq for no good reason. In contrast, the two supposedly “far right” parties, the BNP and UKIP opposed the Iraq war from day one. 

2.  Labour is riddled with anti-semitism.

3. It’s the political left which is in love with arguably the most conservative, “far right” and backward organisation in the World, namely Islam.

Third, it is fatuous to complain about the EU fiscal rules unless you can produce a better alternative. Those fiscal rules exist to deal with changing relative competitiveness of different EU countries: that is, if a country becomes uncompetitive, it has to undergo a period of deflation (in both senses of the word) so as to regain competitiveness, rather than devalue, which was an option before the Euro was introduced. Of course you can argue the above deflation is a barmy way of dealing with the latter competitiveness problem. But that’s common currencies for you. I.e., and to repeat, people who complain about that barmy system should keep quiet unless they can think of a better alternative.

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