Godfrey Bloom: Europe in denial over currency apocalypse

I was marked down as a harmless eccentric by many. Much as I was two years ago when I queried East Anglia University's data on climate change and last year the suspicious hype of swine flu. No matter we all know the problems for a prophet in his own land.

Let me therefore outline again the position on the euro as I did 15 years ago – with no amendments.

The euro is a political currency. Yes, I know most fiat currencies with state banking and fractional reserves are to an extent political. None so overtly political as the euro.

The fig leaf covering the pretence it was anything else was the Maastricht Treaty criteria based on debt /GDP/ budget deficit benchmarks. These, in themselves, were absurd to anyone with even a working knowledge of international economies.

Even the most chinless private client stockbroker "relationship" manager understands a portfolio valuation is a snapshot of the position at that time, that nano second when the computer delivers it. A portfolio produced on a Monday for a lunch meeting on a Wednesday can bear no relationship at all, and, okay, it saved my bacon once or twice when I was presenting funds for Mercury Asset Management many moons ago. A clever statistician on the team is worth his weight in gold.

In short, it does not matter where the Italian economy was in "the cycle". Locking it into the same interest rate and currency as the deutschmark was doomed to failure. True of all the Mediterranean economies. Boiling a tin of beans without puncturing the lid will eventually lead to an explosion. No point in watching it bubble away

for the first few minutes and persuading yourself all is well.

Unemployment, especially among the under-25s in the Iberian peninsula, Italy, France and Greece is rising alarmingly. The Spanish property market is beyond redemption. These socially volatile economies are already starting to fracture. The only hope is severe fiscal reform, impossible without democratic support. The euro, while considered essential to the political class in the Eurozone, is deeply resented by almost all ordinary people in it.

Admittedly for quite different reasons. Markets have for too long pretended that the euro is a proxy for the old mark. It is not, it never has been. It is an appalling confit of peseta, lire, franc, drachma, punt et al. The only solvent, significant economy in Europe is Germany and, politically, they are at the end of the line for bailing out the spendthrift socialist economies that infest the zone. Incidentally, did you know that 15 of the new 27 EU Commissioners are communists and socialists?

The common currency is unsound. Who is the lender of last resort? What or where is the equivalent of the Fed or Bank of England? How can capital transfers be democratically agreed and why should they? The recent bailout is just that, there is still a hole in the boat below the waterline.

Of course, the European Central Bank has underwritten Greek bond

issuance, albeit at a hefty 6.5 per cent coupon. This is simply

monetisation of their debt, spread across the zone.

Yet here is the moral hazard, where is the incentive for recalcitrant members to put their house in order? Underwriting Greek debt is a green light for Spain and Italy to remain unreformed. Ireland, making noble efforts to bite the bullet, must wonder why they bother. The German public are shouting "enough".

The whole silly political idea will come tumbling down; sadly, as always, it will be the "little people" who bear the pain.

As a member of the Economic and Monetary Affairs Committee in the European Parliament, I sit cheek by jowl with the likes of Monsieur Barnier and Ollie Rehn, now responsible for City of London regulation. I attend "in camera" presentations by the board of the European Central Bank.

After a 35-year career in financial services, some of which as a fund manager in the City, my antennae strongly tells me I am dealing with people badly out of their depth.

Worse, they are in denial of the apocalypse which awaits international bond and currency markets. This crisis is not going to go away. As it is historically unprecedented, no-one knows how it will play out.

When it is over there should be a financial crimes tribunal, those who got us in to this mess must not go unpunished. They must not be allowed to fade away on an enormous public-funded pension plan and comfortable obscurity.

Godfrey Bloom is a MEP for Yorkshire and the Humber.