Closer links with Europe could prove catastrophic for Britain, warns expert

FURTHER political and economic integration of the eurozone is highly damaging for Britain’s long-term interests, a leading economist has warned.

Roger Bootle, the managing director of Capital Economics and one of the few experts to foresee the banking crisis in 2008, told members of the Treasury Select Committee in the Commons that the UK government was wrong to push for greater integration in the eurozone.

While Mr Bootle accepted that the collapse of the eurozone could be “catastrophic” for Britain in the short term, the long-term implications of stronger fiscal and political union would be worse.

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He said: “What is disturbing is that the British government seems to think that British self interest is best served by consolidation of the eurozone.

“Britain’s interests are actually best served by a break-up of the euro which is actually part of the problem rather than the solution.”

He said that the consequences of keeping the euro in its current form meant that southern Europe would remain uncompetitive and would see very low growth.

He pointed out that the struggling southern European countries are “larger than Germany” representing a third of the European Union’s GDP.

He also said that the currency was a political project not an economic one which meant it was unable to cope with the problems in the world economy.

His comments come as many Conservative back-benchers fear that a more integrated eurozone will effectively leave a large European state on Britain’s doorstep dictating British trade.

Mr Bootle was one of three leading economists to be grilled on the economy and last week’s autumn statement by the Treasury select committee, alongside Paul Johnson, director of the Institute for Fiscal Studies, and Jonathan Portes, director of the National Institute of Economic and Social Research.

All three agreed that the government needs to boost growth more with a “moderate economic stimulus”.

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While there was praise for the new capital projects being funded by the Coalition government, they warned that there is a danger of the UK economy stagnating.

They also criticised the EU for failing to follow Britain’s lead by flooding more money into the economy through the process of quantitative easing.

Asked whether the eurozone was wrong not to print more money, Mr Portes said: “Basically, the answer is we are right and they are wrong.”