David Cameron’s veto of the proposed new European constitution was the right decision, possibly for the wrong reasons. As has been explained ad nauseam, the British prime minister was heavily influenced both by the perceived need to satisfy his Tory backbenchers and by one interpretation of the needs of the City of London. It is difficult to say whether the proposed rules would have done more to promote much-needed banking reform or to harm the legitimate interests of the City as a top export earner and source of employment. But as the European Union has been lurching for years in the wrong direction, a line had to be drawn somewhere and this is where the opportunity arose.

A statement frequently repeated by Nicolas Sarkozy, the French president, and Germany’s chancellor, Angela Merkel, is: “Without the euro there can be no Europe.” This is a banal untruth, uttered with an air of spurious profundity designed to embarrass people not on board for their project. Europa in Greek mythology was a beautiful princess carried away by Zeus, who approached her in the form of a white bull. Early medieval scholastics attached her name to the western end of the Eurasian land mass. Despite the attempts of conquerors, Europe has never for long been united under a single leadership. The nearest approach came with the largely Germanic Holy Roman empire of which it was famously said that it was “neither holy, nor Roman nor an empire”.

I am not an archetypal eurosceptic. My father was born in Vilnius, the capital of Lithuania, and my mother in Kaunas, the temporary capital of that country when Vilnius was occupied by Poland. I draw my inspiration from the more sceptical and empiricist European thinkers. And for choice I prefer to take my holidays in continental Europe. These personal details need not in themselves be decisive. Nicholas Kaldor and Thomas Balogh, the two Hungarian economists who advised the UK’s Wilson government of 1964-70, were notoriously opposed to the EU (even though that government applied unsuccessfully to join). They feared that it would be an obstacle to socialist planning. In fact, it has proved even more of an obstacle to genuine free market reform.

The selling point of the original Common Market was that it would bind the basic industries of Germany and France so closely together that the wars that had split Europe asunder would become inconceivable. Oddly, the economic logic was less clearly spelt out; but the thought was that, at a time when the future of world trade was in doubt, here, at least, was an area where trade would flow freely; and production take place in the most efficient centres with a strong safety net to protect the victims of change. It is not a coincidence that this was also the guiding philosophy of the German social market; nor that agriculture was subject to a different and more protectionist regime. Some of the most job-destroying rules came from the later social charter, from which John Major’s government secured an opt-out; even Tony Blair dropped it.

The enlarged EU has moved in a perverse direction. Its ruling spirits combine a penchant for micro and industrial policies that destroy jobs with an espousal of deflationary macro policies. Blaming Brussels for what has happened is just shorthand. Quite often the worst decisions originate with national governments. But one mindless slogan uttered too often is that the solution to problems is “ more Europe” rather than less.

If I had to give a snap judgment on the embryonic plan to “save the euro”, I would say it is deflationary in the short term and inflationary in the long term – the opposite of what is needed. If the Republicans do well in the 2012 US elections, the stage will be set for a repetition of many of the economic errors of the 1930s, when countries tried to fight depression with cuts of all kinds.

I will end by citing Lombard Street Research’s Charles Dumas. The “eurozone rot is caused by divergence of competitiveness over 13 years, not budget deficits”. Italy is seen as “lost” compared with Germany. As with the futile struggle to prevent the UK devaluation of 1967 and the dollar’s departure from a fixed peg the following decade, some preparatory work will no doubt have been done in secret to prepare for a disintegration of the euro – but not nearly enough to stop that disintegration being unnecessarily messy and disruptive.

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