The eurozone crisis and the ambitions of the European Commission will cost us dear, says Daniel Hannan.
Politicians sometimes use the word "crisis" vaguely. Crisis is, appropriately, a Greek word. It means a moment of decision, a crossroads.
The EU faces now a crisis in the most exact sense. There are two ways in which it can treat the economic cancer that has taken hold in Greece, and which now threatens to metastasise across the Mediterranean. One is through amputation. Greece could be allowed to leave the euro and devalue, thereby pricing itself into the market and winning time to carry through economic reforms.
Another version of amputation, runs the rumour in Brussels, would be for Germany and its neighbours to create a new, hard currency among themselves, bequeathing the legal carcase of EMU to southern Europe. The effect would be the same: Greece and the other Club Med states would benefit from an immediate economic stimulus, and northern taxpayers would be excused having to fund a bail-out.
Most Eurocrats, however, regard amputation as a final resort. Instead, they prescribe a lengthy, debilitating and uncertain course of chemotherapy. The 16 members of the eurozone are putting up vast sums in what are euphemistically called loans, though few expect them to be repaid. German taxpayers, who were assured when the euro was launched that such aid would be illegal, are understandably furious.
Even angrier are the people of Ireland. Unlike Greece, Ireland has tightened its collective belt, with everyone from the Taoiseach to welfare recipients taking cuts. Irish voters now learn that, had they been less self-denying, they might have qualified for a bail-out of their own. Worse, they find themselves, as eurozone members, having to join the rescue consortium. At a time when their public-sector workers face pay reductions of between 5 and 20 per cent, the Irish must borrow an extra 800 million euros to send to Greece.
EU leaders know that they won't get away with this again. It will be politically impossible to ask the voters of Germany, Ireland or anywhere else to fork out for a second rescue package. So they are devising a mechanism where such fiscal transfers will happen automatically. On Friday, the European President, Herman Van Rompuy, will chair a meeting of EU finance ministers aimed at establishing what he calls "European economic governance".
Part of this governance involves creating a reserve account: a European Debt Agency, or European Monetary Fund. Part involves the harmonisation of financial supervision: a process especially damaging to Britain, and one which began last week with the almost unanimous approval of a new scheme to regulate investment funds, which are overwhelmingly based here.
Above all, though, Eurocrats want more moolah. Although Brussels has considerable executive, legislative and judicial power, it lacks fiscal clout. The EU budget accounts for 1.24 per cent of Europe's GDP, the US federal government for around 35 per cent of America's. The key ambition of most Euro-enthusiasts is to make themselves financially independent of the national governments through what they call "own resources": that is, money levied directly by Brussels. Own resources already exist, in that the EU automatically receives a component of VAT revenue from its member states, but almost every Euro-integrationist regards the amount as insufficient.
How to get the money? Some federalists dream of a pan-European income tax, to be levied by MEPs: the policy of, for example, the European People's Party. Other ideas include a levy on emails and a duty on international phone calls. Several member states like the idea of carbon taxes, or other green imposts.
In the present mood, there is especially strong support for a tax on financial transactions. Most EU financial transactions, of course, take place in London, which makes the scheme attractive on the Continent. Rather as happened with the Common Fisheries Policy, Britain would find itself disproportionately filling a pot from which others could draw.
Until now, our decision to keep the pound has sheltered us from the worst of the storm. (Isn't it time, by the way, that those who supported euro membership in the 1990s apologise to William Hague? His determination to see the single currency working "in good times and in bad " suddenly seems eerily prescient.) Being outside the eurozone, however, won't shield us from the negative consequences of Mr Van Rompuy's economic governance. EU supervision of financial services, a larger Brussels budget, a Europe-wide tax on banking transactions: these things will fall more heavily on Britain than on the states that abandoned their currencies.
What we are seeing, 11 years after the launch of the euro, is a vindication of what opponents of the single currency – and, indeed, its more honest supporters – argued all along, namely that you can't have monetary union without political union. If a state can't accommodate an economic shock in its interest rate or exchange rate, it will need to be bailed out. Common taxes mean common government – or, as Romano Prodi, the former head of the European Commission, put it last week, "fiscal federalism".
The EU has a way of thrusting itself uninvited into our affairs. Most ministers would gladly do without the distraction, but the ambitions of Brussels directly threaten the coalition's newly agreed domestic programme. Last week, for example, Nick Clegg spoke about the need to diffuse and democratise power in Britain, starting with a Great Repeal Bill. I cheered him lustily, having proposed precisely these things two years ago. The trouble is that his agenda will run up against the brute fact of the supremacy of EU law.
You can't decentralise power in the UK while centralising it in the EU. You can't object to the quango state while submitting to the biggest quango of the lot, namely the unelected European Commission. You can't ask for across-the-board budget savings while increasing our net contributions to Brussels by 60 per cent. You can't strengthen parliamentary control over the executive when orders-in-council simply implement EU rulings. You can't, in conscience, give people a referendum on how to elect their MPs while denying them a referendum on whether those MPs are sovereign.
When the Lisbon Treaty was adopted, many thought that the EU would try to digest it before consuming additional powers. But the crisis in Greece has whetted its hunger anew. Satisfying that appetite will be expensive for all of us.
Daniel Hannan is a Conservative MEP and writes every day at