Bring back the Sterling Area – a British revival?

Bring back the Sterling Area – a British revival?

Opinion - by SIR ANDREW COOK

With more than two years of largely futile in-fighting, agonising and speculating behind it, Britain is set to leave the European Union in two weeks’ time. Those who encouraged this look on uneasily. Recklessly and with false promises, they uncorked the bottle and released the Brexit genie. Meanwhile, the Remainers prepare to flee or brace themselves to face a future at best uncertain, at worst catastrophic.  

A crypto-communist government waits in the wings, looking for an opportunity to seize power. This near-catatonic state of national navel-gazing is dangerous. It must stop, and it needs leadership and purpose to stop it.

I cannot do much about the need for leadership, but I can encourage a sense of purpose. If Britain could only wake up to its strengths – the international respect in which it is held, its historic role as a counter-balance to an over-mighty European power, its leading position in NATO, its language, its rule of law, its convenient location on the Greenwich meridian and its currency, then it could regain its status as a leading world power while simultaneously increasing its importance in preserving the peace and enhancing the prosperity of the European continent.

Did I say ‘currency’? Am I suggesting that the pound sterling, a currency historically prone to devaluation and weakness, is a ‘strength’? Yes, I am, and I will explain why.

At the end of World War Two the British pound was second only to the US dollar as a global reserve currency. A collection of countries as diverse as Iran and Australia, including much of the African continent and the Middle East and even parts of southern Europe, all linked their currencies directly to the Pound. This system was known as the Sterling Area. Within it, all currencies were freely convertible to sterling at fixed exchange rates. It lasted for 30 years and was abandoned in 1972 when it proved unequal to the oil price shocks of the time.

How is this relevant today? Well, I suggest that with the United States turning in on itself and Germany increasingly dominant in Continental Europe, many countries seek a third alternative. The Dollar works for the Americas, yes, but not worldwide. The Euro, which is little less than the old Deutschmark in different guise, may be suitable for France, Germany and Benelux, but it hinders many less prosperous European countries. Britain and its pound sterling offer the perfect compromise.

For let us not think that all is well in the Euro block. Greece, Malta, Cyprus, Italy, Portugal and Ireland are all suffering various degrees of economic discomfort caused by the traditionalist ‘dirigisme’ of the European Central Bank. Certain countries, including Poland, have wisely stayed out of the Euro, but let’s be honest, the Polish zloty hardly qualifies as a global currency, None of the countries I have mentioned is a natural ally of Germany. Folk memories are long, and friends beyond their immediate borders are needed. This is where Britain comes in.

For a country and its currency to prosper, it must be confident. Confidence breeds confidence. A confident Britain attracts investors, who appreciate its natural and historic advantages. Brexit has induced a worrying pessimism, a Brexit brought on not by underlying weaknesses, but by “knaves making a trap for fools”, to quote from Kipling’s ‘If’. Even so, I suggest there would have been no Brexit had Germany not frightened many UK voters by its uncontrolled admission of approximately 1 million refugees in 2015, and had weaker EU members like Austria, Cyprus and Malta, all historically hostile to the Ottoman but fearful of the Franco-German axis, spoken out and nailed the lie that Turkey would soon be joining.

I was sorry Britain voted to leave the EU, but that is in the past now. It is time to seize the opportunity to restore Britain to its position as the great European alternative. In the words of Winston Churchill, “We should brace ourselves to our task”: not, thankfully, to wage war, nor to sit around in a welter of moping self-pity, but to restore the nation’s status as a great liberal economic powerhouse, leading our historic European allies, attracting investors from worldwide and providing them all with a safe, stable alternative. A re-launched Sterling Area, with the member countries of southern Europe exiting the Euro in favour of resurrected national currencies – ‘new’ drachmas, lires, escudos, pesetas and so on - linked to and supported by the British pound, could be the key to this. With the New Sterling Area resolutely economic and non-political, dare I suggest that even Turkey could be a candidate for membership?

Some readers will dismiss this idea as unworkable, ridiculous or even a ‘spoof’. Unworkable? Possibly. Ridiculous or a ‘spoof’? It is neither. We live in a time of fracturing conventionality. Orthodox thinking is increasingly challenged. Extraordinary circumstances require extraordinary measures. The crowns of global leadership are lying in the gutter. Let Britain pick one up, put it on and start leading.