Mervyn King, former governor of the Bank of England, was interviewed today on Radio 4’s the World at One. It was the most soothing thing I’ve heard in this whole referendum dust up.
King said fears on Brexit have been ‘overdone.’ The Remain camp treated voters ‘like idiots.’
As for the effects of Brexit, he said: ‘The countries that may well suffer more are not the UK but the rest of the European Union. Because what this will do is to re-enforce the impetus behind political parties in Europe who would like to get out of the euro area.’
‘What this will do I think more than anything else is to create serious doubt about whether the euro area is a likely successful long term project. That’s the thing that is going to damage economies on the Continent.’
In its present form the euro ‘clearly is unsustainable.’
The interview has left me thinking King might be the man to chair the Brexit negotiations. That is, if we are to have Brexit negotiations. The powers are forming to reverse the Leave vote, but that is for another post.
Here is a link to the programme. King starts at 12.06.
He started by saying the statement by the Chancellor this morning, like the measured statement of the Prime Minister last Friday, were in contrast ‘with the slightly hysterical tone of some of the arguments that were put forward during the campaign.’
‘I think [voters] resisted this very strongly.’
People ‘didn’t want to be treated like fools. They could have listened to a rational argument. And there’s no doubt that leaving creates uncertainties. That was a powerful argument, but it didn’t help to exaggerate that argument by turning what were inevitably very speculative arguments into facts, £4,300 is the amount by which every household will be worse off…’
Are we heading for a recession? ‘We may, we may not.’
The markets today—truth in Project Fear? ‘No I think Project Fear went over the top. Sterling today, even after the fall, is roughly at the same level as it was in the middle of 2013 at a level the Bank of England and the Treasury then thought was necessary for the UK economy to rebalance … Sterling could not be at the levels it reached on Thursday night at midnight when people were speculating on the result, and hope to rebalance the UK economy. Some fall in sterling was inevitable.’
‘I don't think people should be particularly worried, markets move up, markets move down.’
‘We don't yet know where they will find their level and the whole aspect of volatility is that there is a trial and error process going on before markets discover what the right level of stock markets and exchange rates actually are.’
‘What we need is a bit of calm now, there's no reason for any of us to panic.’
King said ‘in 25 years' time we'll look back and say a little bit, that at least in economic terms, maybe that was a bit of a fuss about nothing.'
‘The long term effects may be much smaller than either side claimed.’
King stayed right out of the arguments while the referendum campaign was underway. That, and his sensible tone now, could make him the right man to be chairman of the Brexit negotiations.