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00:00On the 1st of the month, at the beginning of the year 2026, Bulgaria, a small and one
00:09of the poorest countries in the European Union, entered the Eurozone.
00:14It traded its own currency, the LEV, for the Euro.
00:17Now, the orthodoxy that I want to take a shot at, with great fervour I have to say, is this
00:27remarkable manner in which we have managed to lobotomize all discussion in the European
00:34Union, in Europe, by assuming, taking it for granted, that any country like Bulgaria that
00:40enters the Eurozone and trades its own currency, its national currency, for the Eurozone, single
00:49currency called the Euro, that this is by definition a good thing, that only good things can come
00:55to the people of the country that has made that decision.
00:59If you look at the way in which it was reported in the press, in the Financial Times, for instance,
01:04it was reported as a contest between Bulgaria's common interest, which is by definition taken
01:11to be absolutely intertwined with entering the Eurozone, against Russian disinformation.
01:18Now, this is quite astonishing.
01:21Now, is there a Russian disinformation?
01:24I'm sure there is.
01:25But the most appalling aspect of all this is that we are not holding any economic discussion
01:32on these things.
01:33There was not even an attempt to discuss the pros and the cons of entering a monetary union,
01:38any monetary union, not an iota of a smidgen of an attempt to learn from the past, to ask,
01:45what did the Euro crisis teach us about the benefits and the costs from ditching your currency
01:50for a currency like the Euro, that is controlled and managed in a different country, outside something
01:55like a federation even?
01:57Now, the whole thing, Wolfgang, reminded me of the moment I realised in the Eurogroup,
02:02when I was finance minister, in the Council of Finance Ministers of the Eurozone member states,
02:07that you were not allowed to talk about economics in the Eurogroup.
02:12We never engaged in a single economic argument.
02:16And when I dared, as was my duty to raise economic questions, I remember trying to have a conversation
02:22about how we should calibrate our budget deficit targets in conjunction with other targets on
02:30investment, because the two go together.
02:32I was ignored. And the Financial Times that very same day, following leaks from the Eurogroup,
02:38lambasted me for daring to grandstand discussing macroeconomic issues in the Eurogroup.
02:44Now, the questions we should be asking when we hear in the news or reading the newspapers that
02:49Bulgaria is entering the Eurozone, a rational debate would revolve around one or two or three questions.
02:55First, if Bulgaria had joined the Eurozone, let's say in 2007, the year when it entered the European Union,
03:04would it have been better off or worse off today? That's one question that would make something
03:09interesting transpire from the conversation. Now, there's no doubt that Bulgaria is a special case,
03:18because it's been using a currency board system to peg its currency to the Euro. Still,
03:22it had the capacity to devalue all those years since 2007. And this capacity prevented a tsunami
03:30of loans from flooding the country. The result is that when the crisis came, it was much milder than
03:36it was here in Greece, for instance, where we had no such even possibility. Another question is,
03:42is Bulgaria better off or worse off today compared to other countries like Greece that did enter
03:49in 2000? Now, if you care to check, you'd find that since 2007, which is when Bulgaria entered the EU,
03:58its disposable per capita national income in PPP terms rose by 20%. In Greece's case, it collapsed by 10%.
04:0810%. And then the other question I would like to see people discuss very seriously is,
04:15which of the poorer countries that entered the EU did better after entering, joining the EU?
04:22The ones that also joined the Euro? Greece, Portugal, Slovenia? Or the ones that entered the European
04:29Union but stayed outside the Euro? Poland, Hungary, the Czech Republic? I think that
04:34simply by stating that question and make the point. Another question that we should be discussing,
04:39have the new institutions of the Eurozone since the Euro crisis, the European stability mechanism,
04:44the common banking supervisor, the common resolution scheme for what you do with failing banks,
04:51did these make the Euro a safer place for a country like Bulgaria? I truly, deeply think that they
04:59haven't. But this is a discussion we should have had. And we have not had it.
05:05Especially when it comes to a vulnerable country like Bulgaria. I think this is just a crime against
05:09logic not to have this discussion. I supported the Euro membership of EU accession countries.
05:15I also supported the Euro itself. I would agree with you, Janice. I would no longer do so.
05:21The reason I supported this at the time was that I thought, back in 1999, the Eurozone would
05:26develop into a fiscal union. Probably my biggest misjudgment. I was quite optimistic that it would.
05:34And I felt that if it was a political union, then it would become a political thing. So the Euro would
05:41not just become the currency of the Eurozone, but the currency of the EU. And therefore, a political
05:47union would be created. A small political union would be created. So the ECB would have its counterpart.
05:52That would be a sort of a European treasury. That would be European finance minister. That didn't happen.
05:58And now that it didn't happen, the Euro is not a really monetary economic union. The Euro is a currency union.
06:05Essentially a permanent fixed exchange rate mechanism. And that's how we should see this.
06:09And then it's a purely economic thing, not a political thing anymore. And it's a purely economic
06:14thing. I completely agree with you, Janice. It's a purely economic thing. It's completely mad for
06:19Bulgaria to join the Euro. In fact, it's even mad for Bulgaria to tie its currency to the Euro in the
06:27way it did before through the ERM, the exchange rate mechanism. These arrangements are not ideal.
06:34The best arrangement for a country like Bulgaria is the one that Poland, the Czech Republic chose,
06:39which is a floating currency. I mean, Poland has been an example of a very, very successful
06:45economy. Their living standard measured in euros and dollars would still appear to be very low. In
06:50fact, these numbers underestimate, understate this, because the currency is relatively devalued.
06:56So Poland has in generally had a very good sort of macroeconomic setup. But I agree with you on the
07:02essence of the argument that, you know, for us to think of Bulgaria's accession in political terms,
07:09especially in terms of our relationship with Russia, is completely nonsense. Because, I mean,
07:15Bulgaria's accession to the EU will not make it easier for us to win the war against Russia,
07:21if this is how you like to phrase it, or to help Ukraine win the war against Russia, or help Ukraine
07:27seek a good settlement in the war. It is completely irrelevant, but it is part of our imagination.
07:33A lot of what we're talking about, about, you know, in our sort of European political discourse,
07:39it's very much imaginary, you know, like we're going to fight the Americans in Greenland. This is fantasy
07:45stuff. And a lot of politics these days, like also the sequestration of Russian assets that we
07:49talked about before Christmas. This was stuff that was, yeah, it was technically possible,
07:53some technocrats thought about this. But the politics of it is mad. If you think about it,
07:58if you think it through, if you think it beyond, you know, month one, it's mad. It's not only mad
08:03in the sense that I disagree with it politically because I'm on the other team or something. No,
08:06it's not that. It's just unsustainable. It's not possible. You're not gonna get into, you know,
08:11month two or month three. There isn't a, you know, this is like a chess game where you only care
08:16about your next move and not, you know, not the next moves ahead. And
08:19that you need to make. And there's an awful lot of this in Europe, European politics at the moment,
08:24where political decisions like Bulgaria's membership of the Euro are discussed in very sort of
08:29abstract terms with no strategic thinking whatsoever. It will weaken the Eurozone,
08:36having another weak member. In the end, I don't think it will matter much. I don't think it will be
08:39a catastrophe for anybody, but it's certainly not something I would celebrate.
08:45I'm not sure it's not going to be a catastrophe. If there's a flood of money going into countries
08:51like Bulgaria or Romania, after the accession to the Eurozone, like there was when Greece entered,
08:57then it doesn't matter whether they devalue or not. Once they start having a banking crisis,
09:02what matters is that they're going to have a huge debt crisis, whether it's a private
09:05sector or a public sector one, very much like the ones we had, you know, 10, 15 years ago.
09:11But look, you mentioned the mistake, you confessed to having made it, of going along with
09:19the orthodoxy that, okay, monetary union maybe on its own is not such a great idea, but it is a first
09:26step. And I remember it was Jacques Delors who had said in my presence many, many, many years ago,
09:33I was very young back then, that the objective was to create a monetary union. The monetary union
09:39was very badly designed, so it's going to have a major crisis. And what Delors said,
09:45and François Mitterrand, his president went along with that, was that, yeah, when the crisis takes
09:50place, then we are going to be forced to have a fiscal union. That was a, you know, a very common
09:55mistake. People thinking that the monetary union was a precursor, a stepping stone towards the
10:01accomplishment of a fiscal union, a federation. Now, we had good reason to mistrust that assumption.
10:10Nicholas Calder, the famous Cambridge economist, published an article, I believe, in the New
10:16Statesman in 1970, very early on. And he was not a Eurosceptic, remember, Volkan. Nicholas Calder was
10:25very much a pro-European. And he actually warned Europeans, he said, if you make the mistake
10:31of putting the cart before the horse, of creating a monetary union, hoping that that would be a
10:37stepping stone towards a fiscal union, what you're going to do is you're going to make a fiscal union
10:42impossible. Because the monetary union, that was the gist of his article in the New Statesman in 1970,
10:47if you create a monetary union, the monetary union is going to spawn such a gigantic crisis,
10:53that it will be toxic, it will toxify, poison politics. And then the European unions or communities
11:00of politics will not be able to create the momentum for the fiscal union that you want.
11:05So, you know, we had that discussion by Nicholas Calder, but he paid attention to Calder.
11:11Others warned as well, Darendorf was most of contemporary in the 1990s, who, you know,
11:17I remember Delors making this case and Brody made this case and, you know, many people made that case
11:22that maybe we can turn this around. The Bundesbank was sceptical, they wanted it the other way around,
11:27but we always knew they didn't really want it. Lord Darendorf, who started his life as a German liberal,
11:33he was a European commissioner in the early 1970s and later, you know, became a British citizen when
11:42he moved to the United Kingdom and he pursued an academic career in the London School of Economics
11:46and at Oxford University. He was a great European, pro-European, but he warned about regulation,
11:51the EU becoming a regulator, a regulatory monster, and about the impact of the single currency very
11:57much in the way that you just described. So yeah, I agree there were warnings and it didn't happen.
12:02And the sceptics were right. And the optimists and, you know, I was one of them, we were wrong.
12:06I saw it coming and it was actually, you didn't have to wait until the end of the Eurozone crisis.
12:12I think you already saw it in 2008 when Lehman Brothers collapsed and the Germans said everybody
12:18rescued their own banking system. That's when it happened. This is where the Greek crisis started.
12:23It started in 2008. It was at that point that I realized that this game was up. I would support
12:28still the Euro if it, you know, today I would not, I would not know with the hindsight, I would not
12:33support it anymore. With the hindsight knowledge that it would not create a political union.
12:38And I think in contrast to many sort of, you know, people, you know, who agreed with me at the time,
12:44I have concluded that the political union is now not going to happen. It's not a matter of the next
12:49crisis or something needs to happen or Russia needs to do something. I think it's over. I think the
12:54Eurozone crisis was the moment and we missed it. Yeah. And also with the pandemic, that was the
13:01final straw, I think. Look, let me try to lighten up the proceedings a little bit with a statement.
13:07If European leaders truly, really wanted to subjugate Russia, to subjugate Russia to Europe's will.
13:16Here's my statement. Europe should have inducted Russia into the Eurozone back in 2000.
13:21I want you to think about it. Suppose that Russia had entered the Eurozone, like Bulgaria did.
13:28One nasty word from the European Central Bank in Frankfurt, and there would be a bank run in Moscow,
13:35in St. Petersburg. The Kremlin would immediately face ballooning borrowing costs. Russians would send
13:43their cash to Frankfurt banks, pushing down German interest rates and pushing up the interest rates that
13:50the Russians would have to pay. In the end, Europe wouldn't need to spend money on armaments
13:56to subjugate Russia. In the same way that they, in the end, took over every asset worth having from
14:04my country, from Greece, following the blackmail centered around the Euro, they would now own Russia.
14:09And one slightly more serious. Not that the first one about Russia is not serious, but it was meant to be
14:19more humorful. Here I want to make a sojourn into the debate on Scottish independence. I'm not going to take
14:26a position on Scottish independence, but let me state along the lines of what I was saying regarding
14:32Bulgaria, Greece and Russia. My advice to Scottish friends who care about the independence project is,
14:40folks, learn from what's happening here in Europe. Drop your independence dream, unless you want to
14:48unpeg the Scottish pound from the English pound. There can be no independence, genuine independence,
14:54if you don't have your independent currency. Now, it may be difficult to imagine doing this,
14:58but, you know, you have to drop two fantasies, two orthodoxies that are competing in Scotland. One is
15:06the orthodoxy that, well, you can swap the English pound for the Euro if you have Scottish independence.
15:12You don't want to do that for the same reasons that Bulgaria should not be entering the Euro.
15:17And the second one is that you can maintain the currency union with London and call yourself
15:22independent. OK, so I'm not saying that you should forget about independence. This is for you to
15:27decide. What I'm saying is that unless you're willing to create your own currency, there's no
15:32point in struggling for an independent Scotland. And I completely agree on this point. I also advise
15:37my Scottish friends not to adopt the Euro. The idea that you can just join the Euro, in fact,
15:43is technically not even possible because you have to have a currency before you can join the Euro.
15:47And that cannot be the pound. But apart from these technical requirements, it makes no sense.
15:53The sovereignty is about the right to issue your currency. So, yeah, absolutely. Don't join the
15:57Euro. This is not the way forward. This is also what weakened the argument during the Scottish
16:02independence referendum campaign. One always had the sense that they didn't think about this.
16:07It was something like a cheap shot, something like you say in some kind of a TV debate, like question
16:12time, saying, oh, yeah, I need an argument. And this is the argument. I will join the Euro. There was no
16:17serious consideration paid to the question. What are our monetary arrangements after independence?
16:22Because the people who pursued independence were not sort of people who discussed monetary
16:27policy and economic policy. It was just a political, purely political thing. With any revolution,
16:32you need your army, but you also need your central bankers.
16:36And what we see on both sides of the Atlantic, within the West, not so much in the rest of the
16:41world, but within the West, is this incapacity, inability, reluctance to have a genuine discussion
16:47about economic matters. This is, I think, you know, what we as the econoclasts have a duty to do.
16:53In the United States, they are caught up in lawfare and debate about the, you know, the rebuilding of
16:58the building of the Federal Reserve instead of talking about serious issues like, you know,
17:04who does what to whom by choosing to drop interest rates or not to drop them.
17:09No serious conversation about the effects on real people of economic policy. And as we were just
17:20saying, in the European Union, there's effectively a ban on economic debates. And, you know, if you
17:25don't toe the line, which says that everything is happening in the best of all possible Europe,
17:30then you are Putin's handmaid. And the result, of course, is that Putin is loving it, along with
17:36all sorts of little fascistoids and recalcitrant centrists in Europe who are together, together,
17:45supposedly in conflict with one another, ensuring that there is absolutely no discussion on the
17:50things which need to be discussed if Europe is going to get out of the quagmire. So here, here we are,
17:55as iconoclasts, trying to bring up, or bring back, I should say, the most basic of
18:02old liberal ideas that, you know, a serious debate of the issues is a prerequisite for moving ahead.
18:25So, here we go.
18:28So, here we go.
18:30So, here we go.