Wilkins Micawber, new Labour economics guru

Before spreadsheets enabled geeks to assume they could manipulate the economic weather, we knew that if we spent too much, we’d run out of money. If we ran out of things to sell or do in return for more money, we’d be in trouble. If we borrowed money at unrealistic interest rates, we’d be in even more trouble. If we borrowed money with no intention of paying it back, we’d be beggars and pariahs.

If we intend to borrow money for a ‘fiscal stimulus package’ when most of the developed economies are scrabbling to do the same, we will need to demonstrate that we’re a better bet than the other guys, offer a higher yield to the lenders or form an international syndicate – effectively what Brown is trying to do. Going it alone is risky. According to the IMF, British external debt is hovering around £UK 6 trillion. Net assets are around £350 billion. Gross domestic product (GDP) is around £357 billion and falling.

Gordon Brown is hassling the part-nationalised banks, tied to a 12% interest rate, to repay their government bailout loans, to start lending to businesses without further ado before it is clear where the backstop cash is coming from. They are ignoring him: losers don’t lend to other losers. Meanwhile, who does he strong arm to lend to UK Plc? The Americans have £13 trillion debt and troubles of their own. They might need to turn a tad protectionist. We’ve been routinely horrid to Europe over the past eight years, even though we’ve been net EU contributors. Unsurprisingly, the majority of our trade is with the Eurozone.

Back to the syndicate idea. The European Central Bank is sort of a pompous mutual savings and loan organisation. The once-stern criteria for entry into the Euro – sound fiscal policy and limits on public spending as a proportion of GDP – have probably been breached by the majority of its members of late. Regardless, as a result of Eurozone membership, Greek bonds are likely to be more attractive than those offered by the UK and even the US. (Thank you, Stilpon Nestor, late of OECD, for this insight. We had lunch today. Thank goodness we didn’t drink or this would be even more mazy).

This might be a good time to start thinking about how to get back into the Euro club. It may require a degree of grovelling and scraping. Labour still has an outstanding election pledge to give the electorate a referendum vote on the Constitution (‘Treaty’) but the Irish have given us all a breather. Europe should be a big ticket item on the forthcoming election agenda. The Tories have a recent history of Europhobia, which is ironic, since Ted Heath took us into Europe and the Iron Lady signed the 1992 Maastricht Treaty. The UK took part in European Monetary Union from 1990 until recession and George Soros forced an undignified exit in 1992. Incidentally, Britain was the fifth, not the first currency to be forced out. It is a mistake to compare EMU, an exchange rate mechanism, with a merged currency such as the Euro and it was an accident waiting to happen to peg our exchange rate, at an all-time high, to a falling Deutschemark. But no such problems now. Sterling is so low we could enter with ease. They might even welcome us back, prodigal style. We are a big, if obese, economy with Europe’s best financial markets.

The alternative is to carry on pretending we have a special relationship with the US. The problem with this approach is that it implies continued reliance on a busted economy and a falling dollar. Or we can go cap in hand to the IMF. Remember 1979?

We will need to have some sort of ‘fiscal stimulus’ unless we want to do a Hoover (the president, not the failed vacuum cleaner company, although there are similarities) but to do that we need allies, since we’re basically skint. There is an obvious mutuality with our European neighbours, and the Euro makes for a better spread bet than a single national currency. Labour and Tory will need to be explicit about their respective positions. Both have been suspiciously tight-lipped. Make sure you ask them what they think about Europe when and if you are called upon to vote, which I think will be next November, by crisis more than design.

Feel free to tell me if some or all of this is wrong. I’m not proud. I’m not an economist, but I’m Irish and was educated by Jesuits. It’s what I’d do.