We don’t belong in the EU’s evil empire

How scathing exposé The Rotten Heart of Europe revealed the true purpose of monetary union

A few weeks ago Gianluigi Nuzzi, an Italian journalist, published a book called Merchants in the Temple in which he explained that the Vatican isn’t the bastion of goodness people like to think. Instead, it is a place of corruption, greed and nastiness where you can buy a sainthood for £500,000. I imagine he’s had a pretty iffy time since.

Still, he isn’t the first to suffer unpleasant fallout for telling the truth about a hugely powerful and deeply arrogant institution: if he wants advice on how to handle the next ten or 20 years he could do worse than talk to Bernard Connolly. Twenty years ago, Connolly — at the time a senior economist with the European Union — published The Rotten Heart of Europe, a pretty devastating look at just how badly wrong he thought the introduction of monetary union was likely to go. It was immediately read by his colleagues and it wasn’t much liked. Within days he was barred from his office (with his picture posted at the entrances just in case he tried to sneak in), and then fired.

So what made Connolly’s employers quite so cross? He pointed out the flaws in the eurozone’s one-size-fits-all monetary policy. He forecast it would bring not growth, but financial collapse. He called the introduction of the euro a threat to Europe’s hard-won freedom and democracy and predicted a thoroughly unpleasant end game.

He sees two parts to the problem. The first is economic. You can’t have monetary union without fiscal union. And you certainly can’t implicitly suggest that bond yields can fall to the same levels across a huge group of divergent economies (from Germany to Greece) and expect to escape without a whopping credit bubble and then meltdown in the weaker economies. But within the EU, this shortcoming of monetary union wasn’t considered such a bad thing. Why? Because ‘its constraints would create such economic disaster in at least some of its member countries that they would be prepared to sign away their sovereignty in return for some supposed economic palliative’.

You’ll be beginning to see why so many think of Connolly as something of a prophet — note his prediction that Greece would go from being ‘the most civilised country in Europe’ to total chaos, not to mention the post-crisis ‘sudden impoverishment’ of Ireland. But these things weren’t so hard to predict, he said in 2012 in an updated introduction to his book. Even in 1995, all of this was ‘bleeding obvious’. The crisis was absolutely inevitable.

This brings us to the second part of the problem: democracy and freedom. It’s tough to force a group of wildly diverse countries into political union — to give up their sovereignty — without making them a bit more homogenous first. So Connolly also sees monetary union as part of a deliberate attempt to break down national identities across Europe, to dispose of traditions and institutions in order to subsume them into a United States of Europe — or, as he calls it, the New Soviet Union (NSU).

Human beings need a ‘focus of belonging’ and nation states work for that. Anarchic states (where people view themselves as ‘belonging to a religious sect… or a racial or linguistic group’) don’t, and nor do imperial states (those that try to extend their own laws beyond their borders). The NSU has turned into an unfortunate mix of the latter two — one in which an imperial overlord is pushing people to find their identity in extreme political parties and religions. That’s unlikely to end well.

In his introduction to the current edition, Connolly notes that the Union was supposed to be about peace and prosperity. But today ‘it is a continent of widespread misery, of financial collapse, of disappearing faith in mainstream political parties, of a loss of sovereignty and thus of legitimacy. And of the destruction of law… by the judicially larcenous European Court of Justice.’ But worst of all, he says, the trust between European states is gone, replaced with ‘mutual resentment’ and blame. Monetary union has turned the initial idea of the EU into a ‘collective bad’. An ‘evil’.

This is a book to read before you vote in the UK’s EU referendum, before you decide whether you want more Europe (which is what you will get if we stay in) or, as is the case with most of those who read The Rotten Heart of Europe to the end, rather less of Europe. Connolly’s final thought on that when I last met him is worth remembering: ‘If it started now, we wouldn’t join. So why stay?’


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