UPDATE: this morning George Will summed up the problem as “Too big to fail and too big to bail.”
“It’s no good calling for leadership if none of the EU leaders has the authority to act.” So argues Charles Moore in “Europe’s Problem is that No One Knows Who’s in Charge” from The Telegraph today. Some of us have been attacked as Eurosceptics since the beginning for making the very same argument: you can’t have a currency without a government and you can’t have a (legitimate) government without the consent of the people.
Hard to see a way out: either the citizens in the PIIGS are going to have to work more for less, or the citizens in Germany & Benelux will have to pay for them to continue their easy livin’. Unlikely. Hope it stays non-violent… Too late. Mark Steyn phrases it beautifully:
Greece is reported to be within weeks if not days of default. There are two likely outcomes to this scenario: 1) Greece will default. 2) Germany and the Eurocrats will decide that default would be too embarrassing for the EU’s pretentions and will throw whatever sum of money is necessary into the great sucking maw of toxic ouzo to stave it off a while longer.
But Option Two doesn’t alter the underlying reality — that, if words have any meaning, Greece is insolvent, and given its rapidly aging population (100 grandparents have 42 grandchildren) is unlikely to be non-insolvent under any conceivable scenario, no matter how tightly German taxpayers are squeezed to pay for it. By the same measure, so are many other Western nations.
On the other hand, attempting to postpone the Club Med welfare junkies’ rendezvous with self-extinction will destabilize internal German politics (which always adds to the gaiety of nations) and strain to breaking point what’s left of the European banking system.
European leaders will try to fudge a deal that kicks the can down the road in the hopes that the market rebounds and the people move on to other things. But as Mr. Moore points out: markets move faster than treaties.
So this week, when everyone, including our Prime Minister and the head of the IMF, calls for political leadership, it cannot be provided. This is not because the leaders are not much cop (though they aren’t), but because they lack the necessary authority. The eurozone is suffering from a sovereign debt crisis, because no one is sure who is sovereign. Within an area united under the same currency some government debt – in the most extreme form, that of Greece – is toxic. Other government debt – above all, that of Germany – is fine. Greece finds herself neither sovereign, nor free, nor, to use the Patten phrase, achieving “some other benefit”. She is up the creek without a paddle, and so, quite possibly, are Portugal, Spain, Ireland, Italy, and more.
The Euro-visionaries such as Jacques Delors did not mind avoiding the question of sovereignty. Indeed, they almost rejoiced in it. They had wanted political union and failed to get it. So they hoped that, by pushing through economic and monetary union, they would make political union inevitable. If only they could get enough people into the room, they reasoned, they would find that they would not want to leave.
What they refused to contemplate was what is now happening. In 1997, William Hague predicted that being in the euro would be like “being trapped in a burning building with no exits”. He was attacked for his “half-way-out extremism” (Hugo Young), but today the acrid smoke from that fire is billowing across the markets. You can hear the screams of those trapped inside.
The crisis today is indeed worse than what followed the collapse of Lehman Brothers in 2008. People make bright suggestions for how the problems of the eurozone could be sorted out. These all depend on the idea that reform can be agreed and enforced. Given that treaty change can take years, and markets can collapse in hours, this seems improbable.
Diplomacy cannot create a nation, or even a looser political community, such as a United States of Europe. For that, you need the agreement of citizens. Such agreement has never seemed more remote in the history of the European Union than it does today.
It is not beyond Germany’s financial power to rescue the ailing eurozone countries. But the increase in political power for Germany which such a rescue implies is surely way beyond what most of the people of Europe would accept. The Germans do not want it either: in agreeing to create the ECB, they willed the means, but not the end. Now that the end is nigh, they are terrified.
What Europe faces, then, is a disaster that was predictable – and predicted – and is now unavoidable. In the process, millions will lose their jobs, an entire generation will miss the opportunities which their parents enjoyed, and blood will probably be shed. The rulers of Europe have never been so wrong since the late 1930s.