I was tempted to write a post today on Johann “Wee Things” Lamont, but decided others had already covered her gaffe far better than I could. There are also far more important things to talk about. Like the implications of Mark Carney’s “technocratic” speech on currency unions. The new Governor of the Bank of England gave a master class in outlining the advantages and disadvantages of currency unions. The advantages are clear – elimination of transaction costs, promotion of investment, reduction in borrowing costs etc. But as with all good things in life, they come with a price. For Carney this price involved some ceding of national sovereignty.
This notion that Scotland would have to cede some sovereignty was of course picked up with alacrity by Unionists and magnified into giving up just about all sovereignty. This in turn is what got Johann “Wee Things” Lamont into a spot of bother and ridicule. But it was not just Johann Lamont who indulged in this wilful exaggeration. Our well known friend and leader of Better Together, Alistair Darling was at it as well. He appeared on radio and TV to warn us of the lessons from the Eurozone. He decided to take Portugal as the subject for his exemplary tale. He rhetorically asked in his half shrieking voice “when Portugal and Germany sit down at the table together, who calls the shots?” The message is clear – the smaller country has to do what the larger country demands and thus the implication is that Portugal is not really sovereign or fully independent.
Now this is very naughty of Mr Darling who should know better, he was Chancellor of the Exchequer after all. Portugal and Germany do not sit down at the table together. At least they do not do so on their own, which is the clear impression from Mr Darling’s rhetorical question. Both countries are part of the Euro currency union and along with everyone else in that union have signed up for the Fiscal Stability Treaty in 2012. So when Portugal and Germany do sit down at the table they do so with the other 16 countries in the Eurozone. Is Mr Darling just trying to mislead or is he wilfully lying? And why pick on Portugal? Does Mr Darling suffer from some post traumatic stress factor arising from a previous visit to that country?
As regards the Fiscal Stability Treaty, what does it involve, or what restrictions does it impose on the Eurozone countries. The two key restrictions are that countries resolve to keep their budget deficit below 3% of GDP and to keep their national debt below 60% of GDP. If a country exceeds these limits it is required to introduce balancing measures. It is worth noting that there are exemptions if a country suffers from a significant recession. Now clearly this treaty involves some ceding of sovereignty. But I doubt if any of the 18 countries in the Eurozone would regard these restrictions as meaning the complete loss of all sovereignty. After all there are significant differences in tax rates and systems in all these 18 countries, not to mention different pension and welfare policies. Methinks Mr Darling doth protest too much. Just a pity that none of his interviewers were sufficiently informed to challenge Mr Darling on his absurd assertion.
The reality is that no country is completely sovereign in the sense that it can do whatever it wants without suffering any consequences. This is especially so when it comes to finance and government debt and borrowing, as Mr Darling must well know. In these matters it is the global financial markets which impose restrictions on sovereign states. And it is precisely to avoid the punishing restrictions that these financial markets would impose, that sovereign countries freely decide to come together and agree on their own Fiscal Compact. Here we have independent countries agreeing to cede some sovereignty in oder to avoid an even greater loss of sovereignty to the global financial markets. Just ask Ireland or Portugal. In this respect it is worth noting that two non Eurozone countries, Denmark and Romania, have decided to be bound in full by all the requirements of the treaty, while a third, Bulgaria, has declared itself bound by the deficit and debt restrictions.
These latter three examples show that even countries outwith a currency union and countries as proud and long standing as Denmark are willing to cede some sovereignty when it is felt to be in their national interest to do so. The essential point in all this is that you need to be independent in the first place in order to cede some sovereignty if you choose to do so. Which is why independence is so staunchly valued and defended by all the other countries in Europe and the wider world. Just why would the likes of Darling and Lamont not want Scotland to be in this position?