Daily Politics Soapbox: Daniel Hannan MEP on UK propping up euro

The Conservative MEP, Daniel Hannan says the UK should wake up to how much it is paying to support the euro currency and EU countries struggling with debt.

Each week, the Daily Politics offers a platform to a famous person to make a film with their personal views on a subject, before debating them in the studio. Here, Conservative MEP Daniel Hannan explains why the British should wake up to how much the UK is paying to support the euro currency and nations which are struggling.

Imagine that you had £500 to spend? What would you spend it on?

Would you squirrel it away for a rainy day? Would you use it to pay off the mortgage? Would you give yourself a treat?

One of the things I am guessing you would not spend it on is propping up a currency that Britain declined to join.

Something strange has happened to our sense of values - 400,000 people marched through London against domestic cuts, but we are spending twice as much on supporting the euro as we have saved through domestic expenditure reductions.

That's £6.2bn with all the domestic cuts put together, yet £12.5bn to bail out the euro.

Start Quote

if the Eurozone countries want to bail each other out, that's a matter for them, but why should they send us the bill?”

End Quote Daniel Hannan Conservative MEP for South East England

Make no mistake. It is the euro that we are bailing out.

I know you read a lot of British commentators talking about rescuing Ireland, or assisting Greece, or helping Portugal, but that is not how the people of those countries see it.

They did everything they could to avoid the bailouts for good reason.

They understand what it means in practice, which is that the money goes to European bankers and bond holders, but the repayment comes from ordinary taxpayers.

The truth is, you do not help an indebted friend by pressing more loans upon him.

If you want a measure of quite how bizarre these bailouts are, ponder this - Ireland and Portugal are now having to borrow money to send to Greece.

At the same time, Ireland and Greece are having to borrow money to send to Portugal.

Of course, if the Eurozone countries want to bail each other out, that is a matter for them, but why should they send us the bill?

Debt burden overview

Country Debt-load* Deficit* Borrowing cost**

Greece

143%

10.5%

24%

Rep of Ireland

96%

32.4%

11.6%

Portugal

93%

9.1%

10.3%

Spain

60%

9.2%

3.3%

* in 2010 as a percentage of annual economic output (source: Eurostat)

** two-year government bond yield (source: Bloomberg)

The euro was only launched in the first place on the basis of a treaty promise that there could be no bailouts of indebted governments.

In order to get around their promise, what the eurocrats have done is to invoke a clause that provides for financial assistance in the case of natural emergencies such as floods and forest fires.

And don't give me any nonsense about how we are going to get our money back with interest.

On the very day that it became clear that the Greek bailout had failed and it would need another bailout, finance ministers agreed to a new 80bn euro bailout of Portugal.

It is the very definition of madness to repeat the same action, hoping for a different outcome.

And remember that all these sums are on top of our regular contributions to the EU budget which rose by an almost incredible 74% this year.

Our gross contributions now stand at £19.2 bn a year. Even in the couple of minutes that you have been reading this, we have handed over to the EU budget around £90,000.

We will not see the money again. It is becoming increasingly clear that Greece will renege on its debts.

International loans are always arranged so that the IMF gets its money back first, which means that the EU will take the hit.

flag graphic with question mark Will Europe remain united through the financial troubles of some members?

We can't afford it.

The British contribution to the latest bail-out is £4.3bn - on top of the £7bn already committed to Ireland. Why no TUC march about that?

The euro was only agreed in the first place on the basis of a "no bail-out clause" inserted into the Maastricht Treaty in the clearest language that lawyers could devise.

Such loans, in other words, don't simply lack a legal base - they are explicitly prohibited.

Truest friend

There is an argument for helping Portugal by restructuring its existing debt. There is no argument whatever for increasing its liabilities.

The people of one of the poorest states in Western Europe are being burdened with the cost of propping up the entire European banking system.

Portugal will not recover until it leaves the euro. Only when Portugal starts tailoring its interest rates and exchange rates to suit its own needs, will it be able to price itself into the market.

Portugal is our oldest and truest friend in Europe, and has ranged itself alongside us in quarrel after quarrel.

We were prepared, through the centuries, to support our allies against pressure from Madrid and Paris. If we will not now support them against pressure from Brussels and Frankfurt, who will?

Daniel Hannan challenged over euro currency bailout in studio debate with MPs Margaret Hodge and Chris Grayling

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