Last weekend’s vote in France in the municipal elections returned a very positive result for the far right party, which has the policy to exit the euro.
In Italy parties that support the exit from the eurozone gained 30 per cent of the vote at the last political elections. In the UK,support for UKIP (which is also very anti-EU) has been increasing at the expense of government coalition parties.
Other countries may be out of the news, but they also have their own eurosceptic parties. This growth in euro scepticism will probably have an impact on the forthcoming elections for the European Parliament in May.
However, the title of this week’s contribution split the word euroscepticism into two as what really counts is not so much an anti-EU feeling but an anti-euro feeling. I am quite sure that there would be very few people in France or in Italy who would advocate an exit from the EU, even if trust in the institution is low. However, there is a significant proportion of the population that would willingly exit the common currency.
The answer to euro scepticism is not necessarily relaxing the rules on the fiscal deficit and other rules, but rather introducing reforms that bring about effective empowerment and subsidiarity
With the value of the euro being around its highest levels when compared to other currencies such as the US dollar and the Japanese yen, the popularity of the currency has never been so low.
I have always believed and stated publicly my support for Malta to join both the EU and the eurozone. If we had not done so when we did (2004 for the EU and 2008 for the eurozone), we would have had an economic catastrophe.
The costs for Malta of non-membership would have been too high for us to sustain. I believe that this is today generally accepted and, as such, we are not experiencing the large dose of scepticism other countries are experiencing. On the other hand, such scepticism is bound to have an effect on our country.
Why is there this rise in scepticism about the euro?
There is probably a very fundamental reason. It is the failure of the EU leaders to address the financial, economic and sovereign debt crisis successfully. It can even be claimed that the cause of the economic recession of the last couple of years and the hardship caused by the sovereign debt crisis has been the very orthodox approach taken by the EU; mainly led by Germany and countries close to it.
The insistence of the EU to address the fiscal deficit at the expense of economic growth and employment has led large sectors of the population across the eurozone to lose trust in the ability of the political leaders to resolve the issue.
Moreover, countries that were pushed into a crisis cannot help feeling that in resolving the financial crisis, there was no solidarity between the weak and the strong economies. There is the belief that Germany sought to make sure to protect its banking sector with solutions that plunged other countries into economic problems.
While individual members of the eurozone were seeking to get themselves out of the recession, and at the same time fulfilling their obligations regarding the fiscal deficit, they were certainly not aided by the high value of the euro. This made it even more difficult for businesses in the eurozone to export their goods and services. Add to that the unwillingness of banks to provide credit to businesses, which is partly attributable to new rules imposed by the EU, and one starts to understand why there is so much opposition to the euro.
Essentially, an exit from the eurozone on the part of some countries is a shortsighted policy. For example, if the French franc were to be reintroduced, it would have a much lower value than it had when it was converted into the euro. So in effect, the French would have to suffer the consequences of devaluation of their currency. So the solution to such euro scepticism lies somewhere else.
Fiscal consolidation and economic growth can no longer be seen as conflicting policies. A reduction in public expenditure through the elimination of waste does not necessarily mean lower economic growth. Maybe political leaders still need to understand that the public sector in a number of countries has crowded out the private sector through its wastefulness, and this has not allowed the private sector to operate as efficiently as it should have.
The answer to euro scepticism is not necessarily relaxing the rules on the fiscal deficit and other rules, but rather introducing reforms that bring about effective empowerment and subsidiarity.