28 September 2011

UK Foreign Secretary Hague: "The euro is a burning building with no exit"

In an interview for Spectator magazine interview, Hague said: “It was folly to create this system". The interviewer reported: "The logic of Hague's words is stark: those inside are going to die, or at the very least be seriously burned". However, Hague clarifed "but you can put the fire out".

Politicians normally have to wait for the history books for vindication. But for William Hague it has come early. All his warnings about the dangers of the euro, so glibly mocked at the time, have come to pass. But, as he makes clear when James Forsyth meets him in his study in the Foreign Office days before the start of the Tory conference, he is not enjoying this moment. Rather, he is absorbed with trying to sort out the mess that others have created.

Leaning back in a red leather chair in, what he readily admits, is ‘the grandest room in government’, Hague tells me that: “It was folly to create this system, it will be written about for centuries as a kind of historical monument to collective folly. But it’s there and we have to deal with it”.

When Forsyth puts it to him that Greece defaulting without devaluing — as the bailout plan apparently dictates — would be the worst of all worlds, he replies: “I described the euro as a burning building with no exits and so it has proved for some of the countries in it. But there are no exits”. The logic of Hague’s words is stark: those inside are going to die, or at the very least be seriously burned.

Hague, though, quickly realises the implications of what he’s said and tries to clarify it. “You can have burning buildings where they manage to put out the fire or control it or get more room or something. I might take the analogy too far but it’s not built with exits so it is physically a difficult thing to leave a currency without any plan to do so. I don't think we can advocate that, but they are on very unpalatable choices and it clearly means that being in the euro, Greeks, or Italians or Portuguese have to accept some very big changes in what happens in their country, even bigger than if they weren’t in the euro, and Germans will have to accept that they are going to subsidise those countries for a long time to come really, for the rest of their lifetimes.”

Hague clearly thinks that many of the single currency’s problems stem from having fudged the rules to let some of these countries become members in the first place. He remarks ruefully that “there are lots of lessons for the future in not including in currencies, or in other groupings, countries that do not meet the standards but those are the lessons for the future".

But the Foreign Secretary is adamant that Britain should not hope for the break-up of the single currency. “We are very concerned about what would happen if the euro broke up and so despite all our opposition to it, and our opposition to it has been completely vindicated, now the government is in it, and has to face up to the unpalatable choices which we always said they would face. We must support them in doing that but also protect our own national interest at the same time which we absolutely will do.”

George Osborne recently set the eurozone countries a six-week deadline to push through already agreed measures to try to protect the euro. But Hague refuses to be drawn on what will happen if this deadline is not met, simply saying that if this happened “then we’ll be even more worried”.

When it comes to Britain’s own relationship with Europe, Hague is clear: “The EU does have too much power, I haven’t changed that view from being in government, in fact if anything being in government has reinforced that view and there should be powers that are returned to this country”.

But he is far less clear about what he is going to do about this. Forsyth asks him if there was a new EU treaty before the next election, would the coalition push for the repatriation of powers. He replies that “the answer to any hypothetical question about what the coalition would do is we’ll have to discuss it in the coalition”. Considering that the Liberal Democrats’ policy point person in the coalition is Danny Alexander, who was the head of communications for the campaign to take Britain into the single currency, this is not an answer that is likely to reassure the Tory delegates gathering in Manchester next week.

Hague seems to see bringing back powers as very much a second term issue. He speculates that it could be “in 2015 one of the dividing lines between the coalition parties, put forward at the next election”.

Full interview

© The Spectator