Europe on my mind… November 15, 2011
Posted by WorldbyStorm in Economy, European Politics, Irish Politics.trackback
Very interesting editorials in yesterday’s Guardian and Irish Times about the Euro crisis, both of which echo points made here by many of us in comments over the past fortnight. And it supports the contentions made that the dynamics in play are markedly different to those seen previously.
As the Irish Times notes:
Over the past fortnight, as the economics of the euro zone crisis have moved into the most dangerous territory yet, there has been a historic shift in the politics of the single currency bloc, and the European Union more generally. In just two short weeks two prime ministers have been forced from office.
This has happened almost entirely as a result of pressure from the most powerful of their counterparts. The stick used to drive Greece’s George Papandreou and Italy’s Silvio Berlusconi from office was the threat, explicit for Greece, and implicit for Italy, to withhold financial support for their bonds unless they got their acts together.
And while it acknowledges that both Berlusconi and Papandreou in their own, rather different, ways had:
…not only failed their respective peoples, they failed to live up to their responsibilities to the 350 million citizens of the euro area. By so doing they contributed to pushing the single currency closer to fragmentation. The economic, political and social costs of the euro breaking apart are so great as to pose a threat to the way of life of all the continent’s citizens. It is the duty of each and every one of the zone’s leaders to do whatever it takes to avoid that outcome. Neither Papandreou nor Berlusconi met that responsibility. They got their just deserts.
But it notes that…
But if the much more aggressive response of core countries’ leaders to the political failings of their peripheral counterparts is not disproportionate to the scale of the threat, it raises many questions and concerns. The effective unseating by the core countries’ leaders of two of their counterparts is unprecedented. Having set the precedent, other member states – the small and enfeebled ones in particular – cannot but be concerned that they too will be subject to similar pressures. In the absence of any real institutional counterbalance to the newfound “leadership” role that France and Germany, in particular, have taken upon themselves, there has to be a risk of a repeat with less justification. Such are the risks of unaccountable power.
And that’s the core point that many of us have made. The institutional aspects of the EU have been ignored by France and Germany. What’s most remarkable is how slowly this has been recognised by the media and commentariat, or perhaps more accurately how loath they have been to publicly recognise it. Because this reality makes a mockery of the rhetoric of the Union. Indeed it makes a mockery of the various contortions we ourselves as citizens of this Republic [for those of us living in this part of the island] have been forced to go through at both Nice and Lisbon.
Those Treaties import, the supposed strengthening of the institutions of the European Union, is rendered irrelevant by the emerging Franco German ‘leadership.
What’s also particularly striking is how unfit for purpose the EU has proven itself to be, and in particular the eurozone. This is so clearly now an entity that was forged in hard but not difficult times and with no real experience of genuine political or economic crisis across its lifetime. One can only suppose that this lack of a tempering exacerbated the already extant contradictions between institutional and national aspects of the EU and further weakened it in respect of determining which of those two pillars would supplant the other when given the opportunity.
And whatever the faults of Berlusconi and Papandreou, and they are legion, the manner of their departure is not merely unprecedented but hugely concerning. And the Irish Times reference to ‘unaccountable power’ merely points up that one of the explicit purposes of the EU, to pull away from national domination is now hollowed out almost entirely.
There’s a certain pathos to the Irish Times at the conclusion of the editorial:
Ireland also must be concerned at any pressure to force a member state to leave the euro. The forced departure of even one member could cause huge damage and threaten to cause the entire project to unravel. If one country can be forced out, then why not others, citizens and financial markets would ask. Confidence in those countries could evaporate with lightning speed, and a run on the weaker countries, including those too big to bail out – Italy, Spain and even France itself – could tear the project apart. The lesson must surely be: hang together or hang separately.
But in an European Union where the largest powers now overtly dominate the project conceptually is already torn apart and as to the future? The question then becomes one of whether being in a ‘union’ that is not really a union is better than being outside it.
Indeed the Guardian goes, as one might expect, somewhat further:
The rise of the technocracy, to distort Michael Young’s famous phrase, is what we are witnessing. This ugly term conveys two separate things. The first is a contrast with a more familiar “ocracy” – that derived from “demos”, a Greek word which brings to mind the common people. Messrs Papademos and Monti have not had to worry about them since both are unelected. Not merely unelected in the Gordon Brown sense of taking up the premiership midterm, but truly unelected in the sense that Mr Brown would only have been if he had entered No 10 without having bothered to stand as an MP.
This is a genuinely disturbing event. And the Guardian continues:
…the former European commissioner Mr Monti was last week installed as a life senator just before being asked to form a government. Meanwhile in Athens a central banking bureaucrat, Mr Papademos, was called in to fill a vacancy created precisely because the previous premier had flirted with the dangerous idea of giving the people a say on austerity, through a referendum. Democrats have undoubtedly struggled in imposing wage cuts and other retrenchments on the people of southern Europe: another government could well fall victim to the slump in the Spanish election at the end of the week. But it is a logical leap from this observation to snapping up the first half of Churchill’s quip about democracy being the worst form of government – while disregarding his rider about all the other forms that have been tried.
Note that the institutions, or those drawn from the institutions are used to shore up the flagging polities. But also note that they are all but imposed. And it makes one blindingly obvious point that all too often is lost in the talk of technocrats…
If distance from popular opinion is the first thing conveyed by “technocrat”, the second is expertise. Brussels would like Europe’s leaders to tackle its sinking economy in the professional spirit of an engineer fixing an aeroplane. But pursuing this analogy highlights how forlorn such hopes are. Faced with a grounded plane, our engineer would start with calculations about the vehicle’s weight and the force required to overcome it; next he would consider the options for boosting the latter relative to the former. By contrast, those trying to fix Europe’s economy are working to the rigid rule that the weight of public debt must be reduced first by all available means – even if this greatly weakens the force of growth, which in the end is what must carry that weight. As a result, the economy is most unlikely to fly. Likewise our engineer would be greatly concerned by the balance of forces across the two wings, whereas Europe’s elite imagines it can force all the adjustment on to the indebted periphery, while leaving the likes of Germany alone.
Asymmetric adjustment will not lead to balance, not least because the Germans depend on the periphery’s spendthrift ways to sell their exports. But then economics is not engineering. It remains as much an art as a science, and its judgments have such vast implications for who gets what that they will always be contentious politically. Don’t bank on the technocrats being able to stay above the fray for long.
And then consider that they will have, personally, little or no democratic legitimation, and slim enough mandate. This can only spell trouble.
But then again it’s been trouble all the way, and what of the latest example? The Greek Conservatives, no doubt aware of the poisoned chalice they’ve been handed in the shape of the ‘national government’ are pushing the chalice away given that all it contains are the very austerity measures that brought down PASOK. As well they might. If it can break one government it can surely break two (something our own Coalition might like to ponder). How soon until some bright spark in the EU decides to suggest the retention of the technocrats and jettison the elected representatives. In the name of stability, of course.
Treaties, indeed. This was written in 1996….
“It is not possible to mix economic and political systems at will, without understanding the necessary relations which exist between them. An economy determines definite parameters within which political forms can exist. Unrestrained national sovereignty, and a free trade area, in a 20th century economy, are incompatible — for reasons outlined below.
….
Maastricht, in essence, attempts to solve the problem of creating a single currency by grafting a 19th century monetary system, with the same rigidity in exchange rates as a gold based one, onto a 20th century economy. By irrevocably fixing the ratios between national currencies (i.e. abolishing them), adjustments between different levels of productivity, and other factors affecting costs, can no longer take place via exchange rates — this, incidentally, would occur with any attempt to introduce a single currency, and not simply under the Maastricht Treaty. The only issue is ‘what type’ of adjustments will take place in the real economy.
….
The fundamental errors of the Treaty of Maastricht are that it attempts to reverse the economic history of the 20th century. Adjustments based on exchange rate changes will be eliminated. But no budget adequate to large scale transfers via the state will exist. An attempt is to be made to organise a single currency area, almost as large as the U.S. economy, without anything like the U.S.’s federal budget. The entire weight of adjustment, in consequence, will have to be taken by the price mechanism. But both economic theory, and history of the this century, shows that it won’t work. For the reasons outlined above, the prices will jam, huge imbalances and inequalities will multiply, and the process will fall into deep crisis. An attempt will, therefore, be made to make real prices in the affected regions downwardly flexible by breaking up trade unions, cutting welfare benefits, attacking democratic rights — i.e. the entire process which has already started across Europe. However, even these measures, while destroying the quality of life, will not work, and economic stag nation will grip Europe — the losses via the errors of the Treaty of Maastricht will be far greater than the disadvantages of flexible exchange rates.”
Who wrote that piece Donagh?
The most depressing thing about the current euro-debacle is the sight of the current leaders of France and Germany making the same (economic) mistakes that led to the crises of the 1930s and the rise of fascism (in the name of stability), which led to the war, that led to Merkel and Sarkozy’s predecessors building the EEC to prevent exactly that sort of thing ever happening again.
All we need now is for a short Austrian fella with a moustache and a fat bald Italian to pop up and offer to solve all our problems.
The analogies between Merkel and Brüning (the last German chancellor of the Weimar republic) are interesting. Brüning also sought to deal with recession (and pay of reparations) through cutting wages, public welfare and restricting credit. Predictably unemployment reached 5 (or was it six – can’t remember) and … well the rest is history without invoking St. Godwin.
The Weimar republic’s inflation crisis was in 1923, wheelbarrows full of money etc. Inflation was not a problem in 1933, when, you know, that little fella actually came to power. The cost of reparations had been lowered and payment put on the long finger so that wasn’t the key problem either (although it loomed large in people’s minds).
Weimar argubly survived worse crises from 1919-24 then what confronted it in 1933; the difference was the elites took a decision to go with the far-right.
million.
This is a well-written piece.
It’s quite clear that there were fundamental problems with the Growth and Stability Pact and Maastricht Treaty.
Firstly, it is practically impossible for any supra-national agent (or any other entity) to objectively enforce any form of fiscal discipline of any weight on any government or regional fiscal body. Instead, the framework is a wishy-washy set of “guidelines” which, highly partisan, domestically-motivated political interests are expected to follow in good faith. It took a global recession to uncover the hidden fractures of this faith-based cohesion but, let’s be clear: right from the start, there were serious design flaws in the constitutional framework.
A Debt-to-GDP ratio of more than 60% (the supposed limit of the Maastricht Treaty “convergence criteria”) does not suddenly appear overnight. It is important to understand that excessive debts and bloated deficits had been running in many European states for many years before the Sub Prime Crisis was just a twinkle in a Goldman Sachs Structured Products Salesman’s eye.
There are two ways to fix the problems of imbalance, in my opinion. One way is to try to engineer a price-flexibility mechanism (more punitive) another way is to encourage non-offending core countries to take ownership of peripheral problems via a supra-national democratic power transfers….
see here: http://theinternationalperspective.wordpress.com/2011/11/14/
http://theinternationalperspective.wordpress.com/2011/09/08/
One thing I definitely agree with.
The institutional aspects of the European “Union” seem to be evaporating quickly and yet collective ownership and solidarity was supposed to be the cornerstone of the Euro-dream.
The EU is a collective, the treaties were a collective design…its flaws have been collective mistakes.
The “EU is a collective, the treaties were a collective design…its flaws have been collective mistakes”
This of course is true, but it only applies to those that supported the treaties. It does not include those like myself that opposes the steady and sustained attack on national democracies that each of these treaties meant. The overthrow of various PM’s and their replacement by local Viceroys is just the latest and inevitable part in the process of the destruction of democracy in Europe. The EU was always a centralised militarised neo-liberal anti-democratic imperialist project.
[...] Europe on my mind? 07:39 Tue Nov 15, 2011 | WorldbyStorm [...]
“Asymmetric adjustment will not lead to balance, not least because the Germans depend on the periphery’s spendthrift ways to sell their exports”
At last someone in the MSM has said it! Because I haven’t seen or heard it much elsewhere! Merkel calls for drastic reduction in debt, does she realise this will impact on the German economy.
I seem to recall Marx argued taht capitalism developed a globsl economy but that it couldn’t break down the national barriers it had created, one of its contradictions. Then it looked like teh EU may disprove that – apparently not, at least not by peaceful means.
It’s mad, the idea that the entire EU can become like Germany has so many ramifications that as you say just simply haven’t been worked out that you’d wonder why this hasn’t been picked up. I think Larry Elliott said something in the last few days, but as you say, that’s more or less it…
http://platypus1917.org/2011/11/01/letter-from-greece/
“To cite some recent examples, various anarchists, under the rubric of the political tendencies of “communization,” found a verification of their theories in the English riots. This falls into a pattern: Nepalese guerillas “verify” the aspirations of Maoism; the struggle of “indignados” verifies libertarian impulses; and, finally, the Arab Spring and the Wisconsin protests verify for the entire global “Left” that we are on the right track. People feel obliged to prove repeatedly that the “struggle continues,” only to forget the fact of our impotency. To recall a verse by Stéphane Mallarmé: “Le Néant parti, reste le château de la pureté!” (“With nothingness gone, there remains the chateau of purity!”) Experience assures the “Left” that its nothingness is dispelled, so that its chateau of purity can stay intact.”
One of the German government’s official 5 economic advisors has cracked and admitted that the ECB might be required to print money. Too little, too late, I fear. Listening to the CDU party conference (a form of self-harm that I wouldn’t recommend to anyone) you wouldn’t think that Europe is burning. Money is still being sucked in from the periphery, resulting in a property bubble and speculative growth in major German cities and a quarterly rise of 0.5% in GDP.
The consequences of German (with a bit of Franco) policies will only hit Germany after collapse of some kind in the EU.
Some stats: (from Ahura Mazda at irisheconomy).
(Finland?! What’s happening in Finland? Nokia sold to Microsoft – end of Nokia.)
Miguel Carrion (writes in eurotrib as migeru) has a good analysis here on the public-bad-private-good ideology underpinning the actions of the ECB.
You have to give it to the german myopia about inflation. Dont allow inflation cause that might end democracy.
Yet in avoiding inflation, and its benefits, they seem intent on squashing democracy in other countries.
Crudely put (anot not a godwinism) Hitler at home bad but hitler abroad who cares
the word technocrat is a real spin doctor word. sounds more like some advanced type of nerd than a puppet dictator. how long can the irish times chew on this before they start justifying it as common scene.
As a German friend of mine said, when I complained about having to bow the knee to Merkel: ‘She bows the knee to the editor of Bild Zeitung: that’s what you should really be afraid of.’
It is not a question of the Merkel bowing before a newspaper editor, but the fact that the German political elite, (like our own fianna gaelab political class), chose to represent and do the bidding of finance capital and that is what the ECB is doing as well.
An article in ‘Counterpunch’ – the american online newsletter has pointed out -
“Mario Monti, who will replace Berlusconi, was formerly the European Chairman of the Trilateral Commission and a member of the Bilderberg Group. He is also listed on Goldman Sachs board of international advisers.
Lucas Papademos, who will replace Papandreou, was formerly the Vice President of the European Central Bank (ECB), and served as Senior Economist at the Federal Reserve Bank of Boston in 1980. He’s also been a member of the Trilateral Commission since 1998.
It’s also worth noting that the ECB’s new president, Mario Draghi, is a trustee at the Brookings Institution, a Fellow of the Institute of Politics at the John F. Kennedy School of Government at Harvard, a former member of the Board of Directors of the Bank for International Settlements, and a former Managing Director at Goldman Sachs…….”
[...] Once upon a time such a description of core beliefs would have been the very essence of what most of us believed modern Europe stood for. This is what we enthusiastic Europeans thought of as our ideals as well. Then came the Lisbon Treaty votes. The first. The second. And with them the lies, distortions, threats and intimidation. The hallmarks of dictatorships, of police states, of that other Europe, the one we did not really think about any more. Old Europe, pre-Union Europe, a Europe we left behind. How wrong we were. How stupidly, blindly optimistically wrong we were. [...]
The growing divergence between France and German bond rates means that a common approach by Merkel and Sarkozy is probably not possible.
1. European Monetary Revolution (French way)
2. European Political Revolution (German way)
3. Break-up of Euro
4. Some Combination of the above…
Take your pick, I suppose…
The PM of Italy has just appointed a government with no elected people at all, and the new PM of Greece has just appointed a government with people linked with the previous military regime. In Ireland virtually the entire political/media elite has nothing to say about these massive attacks on democracy. The supporters of the EU, this imperialist anti-democratic project, especially those in the Labour Party need to review, and review fast, their devotion to this emerging Empire
[...] ask the Germans. Oh, hold on. We have to [...]