It’s time for a radical blueprint for a new Europe

by David Owen and David Marsh

Financial Times
October 10, 2011

The two-year old euro sovereign debt crisis is entering a very dangerous phase. Whatever happens in the stand-off pitting Greece and other indebted countries against their creditors, the relationship between the European Union’s members and non-members of economic and monetary union seems set for far-reaching change. Given the great uncertainties facing the eurozone, it is time for Britain, Poland, Sweden and the other Emu non-adherents to formalise their position by establishing the “Non-Eurogroup” (NEG) as a central, constructive element of the EU.

This move to enshrine the 10 EU countries outside the euro in a definitive group would bring many benefits. These are well-run economies, at least as stable as those in the euro. The UK, Sweden and Denmark have lower long-term interest rates than most eurozone countries; Sweden’s 10 year government bond yield is lower than Germany’s. The Czech National Bank has lower short-term interest rates than the European Central Bank. Poland’s growth record in recent years is the best in the union.

Setting up the NEG would establish rights and responsibilities for non-eurozone members, ending the long-held European position that non-membership of the euro represents a form of second-class EU citizenship. It would protect these countries from political and economic discrimination. It would allow a formal mechanism for countries to move between the two groups, calling a halt to to the absurd interpretation of many eurozone governments that if a country such as Greece were to leave the euro, it would have to quit the EU altogether. A separate group for the non-euro states would not mean that they would remain permanently outside the euro, but it would recognise the reality that, in most cases, this state of affairs will last for longer than many had previously thought.

More