By Matthew Barrett
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David Cameron's speech at the World Economic Forum in Davos yesterday focused squarely on European economic issues. Mr Cameron strongly criticised the way European leaders have responded to the €urozone crisis, and condemned the "madness" of European regulations like the proposed Financial Transaction Tax.
The theme that ran throughout Mr Cameron's speech was his desire for Europe to take bold action to combat the economic crisis facing the continent. At the beginning of his speech, he outlined the bleak economic circumstances facing Europe, and told members to stop "tinkering here and there":
"[I]n more than half of EU Member States, a fifth of all young people are now out of work. So this is not a moment to try and pretend there isn’t a problem. Nor is it a moment to allow the fear of failure to hold us back. This is a time to show the leadership our people are demanding. Tinkering here and there and hoping we’ll drift to a solution simply won’t cut it any more. This is a time for boldness not caution."
Mr Cameron strongly condemned regulations supported by many European politicians – especially the Financial Transaction Tax, which he vetoed at the end of last year:
"In the name of social protection, the EU has promoted unnecessary measures that impose burdens on businesses and governments, and can destroy jobs. The Agency Workers Directive, the Pregnant Workers Directive, the Working Time Directive. The list goes on and on. And then there’s the proposal for a Financial Transactions Tax. Of course it’s right that the financial sector should pay their share. In the UK we are doing exactly that through our bank levies and stamp duty on shares… But look at the European Commission’s own original analysis. That showed a Financial Transactions Tax could reduce the GDP of the EU by 200 billion euros cost nearly 500 thousand jobs and force as much as 90 per cent of some markets away from the EU. Even to be considering this at a time when we are struggling to get our economies growing is quite simply madness."
Mr Cameron moved on to criticise strongly the underlying structural faults of the €urozone:
"Look at America. Or the United Kingdom… there a number of features common to all successful currency unions. A central bank that can comprehensively stand behind the currency and financial system. The deepest possible economic integration with the flexibility to deal with economic shocks. And a system of fiscal transfers and collective debt issuance that can deal with the tensions and imbalances between different countries and regions within the union. Currently it’s not that the Eurozone doesn’t have all of these it’s that it doesn’t really have any of these."
He summarised his criticism of the €urozone by pointing out that the difficulties currently facing members of it are precisely why Britain did not join up:
"But when imbalances are sustained and some countries do better than others year after year, you can face real problems. That’s what the current crisis is demonstrating. Of course private capital flows can hide these problems for a while. In the Eurozone that’s what happened. … Yes, tough fiscal discipline is essential. But this is a problem of trade deficits not just budget deficits. And it means countries with those deficits making painful decisions to raise productivity and drive down costs year after year to regain their competitiveness. … I’m not pretending any of this is easy. … Knowing how necessary but also how hard they are is why Britain didn’t join the Eurozone."
Finally, Mr Cameron addressed European leaders who disagreed with his treaty veto, by firmly sticking to his position:
"Of course some people will say, it’s all very well Britain making these points, but you’re not in the Euro and last month you even vetoed adding a new Treaty to the EU. Let me answer that very directly. I understand why the Eurozone members want a Treaty inside the EU but if they do, there have to be safeguards for those countries in the EU but who have no intention of joining the single currency. I didn’t get those safeguards so the Treaty isn’t going ahead inside the EU."
The full speech can be read here.