Can you see the Euro surviving beyond this crisis?

A year ago I was saying the Euro might not survive but I thought it was very, very likely that it would. The debate has changed now. Partly, Eurozone leaders have broken a taboo by suggesting that Greece might leave. Partly there is the sense that voters in places such as Germany simply won’t back governments who do what it takes to keep the Euro together. I still expect the Euro to survive but it’s easier and easier to imagine that it will not.

What would be the consequences of Greece being forced to leave the Eurozone?

Some years ago we economists might have been quite sanguine about the idea: it would mean a Greek devaluation, which would make Greek exports more competitive and discourage imports, and so create room for the Greek economy to grow – a kind of cut-price sale for all Greek goods and services. The recent history of Argentina points to this kind of experience. But now we’ve learned the hard way how much the details of the banking system matter. The threat of Greek exit is already crippling Greek banks. The reason is that nobody wants to hold euros inside Greece – with the threat of devaluation – when they could be holding them in Germany instead. A Greek Eurozone exit would be extremely painful for Greece and for the broader Eurozone as a whole.

How likely is that to happen?

It’s clearly quite possible now. This is less about the debt – Greece’s debt cannot be repaid and a Eurozone exit could not change that – and more about Greece’s lack of competitiveness without a devaluation. Ireland has managed to cut wages and prices without a devaluation, but it’s tough to do so, as anyone in Ireland will tell you.

Are any other countries likely to be forced to leave the Eurozone?

You’re asking an economist to make a forecast! History should tell you we’re pretty bad at that. Each exit makes a subsequent exit easier to imagine, which adds to these silent bank runs away from periphery banks. It could all become self-fulfilling.

Why do people talk about a ‘tipping point’ in the sovereign debt crisis?

When a country such as Italy wants to borrow money it does so by issuing bonds, which are a tradable IOU, a promise to pay a certain sum of money on a certain date. The price of those bonds, obviously, will depend on how likely investors feel they are to be paid. If Italy seems like a risky prospect then the price of its bonds will fall and the implicit interest rate charged when it issues new bonds will rise. But here’s the tricky thing: the risk that investors will not be repaid is intimately bound up with the price of those bonds, and therefore the interest rate. It’s perfectly possible that there are two equilibria: one in which interest rates are low, and rightly so because the money can be repaid; a second one in which bond prices fall (and so interest rates are very high), and  rightly so because investors are unlikely to be properly repaid. Both equilibria are internally consistent, but one’s good news and one is a disaster. The tipping point is about moving from the good equilibrium to the bad one, as Italy seems to have done.

Tim Harford writes the “Undercover Economist” column for the  Financial Times and presents BBC Radio 4’s More or Less. His latest book is  Adapt: Why Success Always Starts with Failure.

I am always gratified at this time of year when I see the sheer volume of people, both young and old alike, who are sporting a poppy on their lapels. Over 90 years after the idea was first conceived, the Poppy Appeal is one of the few charitable events that regularly captures the nation’s attention. Unlike others, such as Red Nose Day, it does so without television marathons and celebrity endorsements.

Poppies were originally worn in the aftermath of the First World War, which claimed the lives of 800,000 British soldiers alone. Indeed the Poppy Appeal and Remembrance Day can be said to have helped keep alive the enormous fascination and horror the conflict still holds in this country’s psyche today. From programmes like Downton Abbey drawing in millions of viewers, to the growing interest amongst people in the wartime service of their ancestors, the First World War continues to fascinate and repel. 

It is only right that its appalling horrors and vast slaughter are commemorated afresh each year; the scale of the sacrifice reflected in the swathes of poppies that flood our streets is a  ready reminder for a new generation of the futility of war. However, crucial to the poppies’ continuing success is the sad fact of their renewed relevance each year, as fresh blood is spilled in the name of the United Kingdom and elsewhere in different conflicts around the world. As we go about our everyday lives, it is all too easy to forget that people are fighting and dying in our names, whether we like it or not. While war and its terrors may seem a distant prospect to most of us, to all too many people around the world it is an all pervasive reality. 

Remembrance Day and the Poppy Appeal, and the build up to it, is the one time of the year where we as a society really stop and think about the sacrifices made by countless people for us to enjoy the world we do today. It gives us an opportunity to think about how war has shaped Britain, and in a society where negative images of young people are prevalent, it provides a chance to focus on young people who did their duty and are worthy of our total respect. Life is given to war memorials that stand unnoticed and unadorned in many places for much of the year, as they receive the attention they deserve. 

November 11th also provides a chance to reflect on the futility of war. All the young men and women who lost their lives prematurely, deserve not only our respect but also for us to learn the lessons of their deaths. Remembrance Day reminds us of war in all its destructive potential; of how it should only ever be a last resort.

Most importantly of all, the Poppy Appeal and Remembrance Sunday make sure that we us a society never forget. It makes sure we honour the promise made in Binyon’s famous poem, that ‘We Will Remember Them’.

There is a rather cynical air wavering off Michael Heseltine as I meet him in his large if spartan office at Haymarket publishers. Famously known as Thatcher’s nemesis, he nearly succeeded the Iron Lady in 1990, and there is still a decidedly Prime Ministerial whiff about him. He oozes confidence. In spite of myself, I’m quite impressed.

At Oxford Heseltine was an absolutely massive hack. There is a magnificent story about how as an undergraduate Heseltine jauntily wrote his career down on the back of an envelope: ‘Millionaire 25, Cabinet Minister 35, party leader 45, Prime Minister 55.’ Heseltine denies this. ‘I don’t remember it, I think it’s out of character. I don’t think I would have planned my life so meticulously, and I don’t think I was confident enough to believe that it would ever work out in that way.’

But he doesn’t deny the importance of learning how to arbitrarily acrue power even at university. ‘It’s an invaluable stepping stone. I mean, my first day as an undergraduate in Oxford I joined the Union, OUCA, and the University City Association. So it was quite obvious what my interests were and where my ambitions lay in my first day as an undergraduate. I treasure the memories.’ Did it teach him to be a politician? A chortle. ‘I suppose you learn the rough and tumble, the need to create alliances, the need to make a judgment, the ability to make your mind up on issues, the ability to stand up and speak to persuade people that you have merit and that therefore they should support you. Yes, without any doubt it was the most formative part of my early life.’

And like any hack worth the name he was heavily involved in Cherwell. Indeed his enormous top floor office is – ha, of course – directly descended from his days as a Cherwell director.  ‘My friend asked me to become a director of the newspaper, which I did, and that’s how I became involved as a publisher, albeit fairly remotely.’ He sort of gestures a bit towards the London power-skyline.

Enough of this self-indulgent prattle. Heseltine is much more interesting for what he says about Europe, his Big Thing. He denies euroscepticism is even possible in a party of government, ‘The fact is that when you get involved in active politics and you have to make the lonely decisions about British self-interest, you can’t escape the questions about British sovereignty that have been woven together for the past thousand years. It’s not like in opposition. You have the president or the chancellor on the phone, and you have to do business with them.

‘So it’s an interwoven relationship from which there is no escape. And shouldn’t be.’ Not surprisingly, when Heseltine was going for gold against Thatcher it was Europe that was the canyon between them. That and their unbelievable egos.

But what really strikes me about Heseltine is his complete lack of ideological charisma. He doesn’t pretend he believes in that much. Europe, yes. Free markets, double yes. But apart from that? I’m not convinced. Not that this is actually bad, because he doesn’t pretend otherwise; he doesn’t pretend he wants the world to be that different to how it is now.

When I put this to him it conjures a very long pause. Then he says, ‘Do you have to have an ideology to drive you? I think you could have an ambition to play a role in the conduct of affairs. You could have a certain set of values and a set of convictions as to how society should evolve based on your own morality, on your own convictions, on an understanding of history, on the relative opportunities of the underprivileged, the obligations of power. And if they all add up to an ideology then so be it. But it would be – a friend of mine from Oxford once said to me, ‘Politics is where you play on the wider stage’. And I think that says it all really. It’s so stimulating, so exciting, so potentially of value that once you’ve tasted there’s nothing like it.’

Mostly in it for the chase then it seems. Hmm. Interesting. That would explain a lot about his Oxford days. In fact he makes a very pregnant remark about this. The feeling at the top – of being Deputy Prime Minister, say – is apparently not much more brilliant than the feeling of winning an election to be President of the Union.

‘I mean a human being is capable only of certain degrees of feeling. I think it’s a fair point to make. The excitement of the summer of 1954 when I was 21, at the possibility of becoming President of the Oxford Union – I suppose in November of 1990 there was a similar feeling of exhilaration and opportunity. I think that you make a good point to ask about the comparison between the two.’ 

Well. What can I say. But being in power, says Heseltine, is not something you notice especially as you rise up the ladder. ‘You get used to it. It’s not like jumping into a bath of very hot water, you know. The temperature rises as the hot tap fills up the bath.’ Though I suppose thinking you’ll get to turn the hot tap on full, and then being thwarted by the limescale of John Major, must be pretty bloody annoying.

But what does he think of Cameron? First thing to note is that Cameron was a friend of Heseltine’s daughter when young Dave was at Brasenose. And disturbingly, according to Heseltine, ‘He was actually known as ‘Prime Minister’ by his friends at that time. When he was 20, 21.’ Blimey O’Reilly and all that, though perhaps it was merely banter since, as Heseltine points out, ‘You don’t see your daughter’s friends as future Prime Ministers.’ Anyway, now that he is Prime Minister, Cameron has been ‘extremely successful, in the most difficult circumstances. He’s coping with first, the legacy. Secondly, the economic situation, the worst in 80 years. I have no doubt he will win the next election with a majority.’ 

As for the effect of the coalition, it isn’t a problem for Cameron, ‘because there is a feeling amongst some  elements of the Conservative party that they would like to have seen what they call a more virulent or more genuine Conservative party. But in fact in [an all-Tory Government] they would have been up against realpolitik and the balancing nature of the Conservative party itself. There would have been this extraordinary lurch to the right, which Cameron wouldn’t have allowed and doesn’t want and doesn’t believe in and rightly so.’

Heseltine is distinctly optimistic towards the European ideal, especially with regards the Conservative party. ‘I think if you observe what is happening, the determination to preserve the Euro is immense. The British government want to see it survive, the Americans want to see it survive, the Chinese want to see it survive, and the Europeans want to see it survive. So who’s on the outside of the argument?’ Well the right wing of the Tories I suppose. ‘We have lined up two somewhat disproportionate forces.’ 

He smiles. But he isn’t entirely pro-Europe in everything; his opposition to the bureaucracy of it is somewhat trenchant. ‘We have a very orderly world, a very official world, but it doesn’t like stuff that’s untidy or a mess, and so when it sees something that’s a bit vague it tidies it up. Bureaucracies are bureaucracies and they all have this instinct of self-survival and self-enlargement. Human nature, you know.’ 

It was something perhaps he’d liked to have worked on, though he isn’t hugely sure what would have been different if he’d been PM. But the time has come, to use the cricketing metaphors so beloved of eighties Tories, for the bats to be tidied away and the fielders to come in for toasted teacakes. ‘There are people around who say nice things. I’ve had a good innings, and I’m very busy. I don’t sit here working out whether my scorebook has been properly marked.’