The European debt crisis is a reformation moment – the EU has overreached its power and now faces a crisis of legitimacy
Illustration by Satoshi Kambayashi
Perhaps I was wrong, after all. I thought Europe's governments would spend any amount of money and impose any amount of austerity to rescue any number of banks from their recklessness and folly. All banks were too big to fail. No debt was too big to bail. Europe was in the grip of a classic banker's ramp.
Yet Greece's bluffing of the high priests of the eurozone may, after all, be called. The unthinkable may be unavoidable. The priests are suddenly talking of "when, not if," Greece defaults. Greeks themselves seem to regard devaluation as a less painful discipline than state-imposed austerity, and are probably right. Their partial default and de facto departure from the euro would be a truly seismic moment, requiring the instant restructuring of debts and possibly currencies across the periphery of the eurozone, covering Greece, Ireland, Portugal, Spain and Italy. It would be drastic, but since it has been predicted ever since Maastricht in 1992, it can hardly be regarded as unimaginable.
At this point "pro-Europeans" have to stop talking rubbish and start on realpolitik. Alaric is not at the gates of Rome. Washington has not crossed the Delaware. Napoleon has not returned from Elba. All that may happen is that Europe's democracies, disregarded, distorted and corrupted for a quarter century by the oligarchs of Brussels, will crawl out from the shadow of the very Acropolis where democracy was born. For all sceptics of grand federations, gilded alliances, and upmarket mafias hatched down the ages in Europe's cloud-capped spas, this could be an exhilarating moment.
There is nothing wrong in a currency zone of compatible political entities. There is a dollar union between the American states, and there have been attempts at using currencies to cohere earlier empires, with crowns, roubles and pounds sterling. But a union must reflect an underlying economic reality, with political institutions that can relate voting to taxing and spending, and borrowing to repaying.
Where, as in Europe, this has become far from the case, the disciplines of a complex modern economy become unenforcible. Those in charge merely demand "ever closer union", which means ever more power over subordinate democracy.
A good history of the euro was supplied by the Nobel economist, Paul Krugman, in the New York Times in January. He contrasted the US dollar area, with its federal government, common language and political culture, with the eurozone, which has none of these things. Krugman concluded that "this, from the beginning, made the prospects of the single currency dubious". Worse, it had floated up to "grip the imagination of European elites". The single currency became a passport to a bureaucratic utopia, a means to ever more glorious union. Practicalities were for nerds.
I regard myself as a "good" European, but as far as the EU was concerned, that idealism was dented as each advance of Brussels power took ever greater liberties with Europe's taxpayers and legislators: regulating, subsidising and corrupting all it touched. A recent report showed the EU casually overpaying almost a billion euros to Greek farmers. It continues to throw more dead fish back in the sea than it takes out. It defaces Europe's countryside by subsidising half-built houses. It is still building itself a stupendous £280m palace in Brussels. The place is obscene.
Because being "pro-Europe" is a faith cult rather than a policy, its adherents dare not raise a peep of protest at its outrages. Not for the first time in Europe's history, a centralised superstate stalks the continent with a retinue of uncritical appeasers unable to see the wood for the tax-free salaries. Sceptics are treated like Rhett Butler in Gone with the Wind – traitors to the great confederacy who should be shot for speaking home truths.
That Germany should be the one country that can sensibly stage the euro bailout is doubly ironic. It is the one country that did not indulge in the housing bubble, most of its workers living happily in rented accommodation. Meanwhile, its constitution was crafted by the postwar allies to make its leadership of Europe near impossible. The German government is meant to be weak, at the mercy of its provinces and their electorates. If, as seems likely, Angela Merkel's voters grow fed up with bailing out Greece, or with bailing out banks, that will be an end to it.
The euro lobby is now pleading, begging, goading Germany to brandish its old muscles and flash its old sword. It calls on Germans to tell Greece to knuckle under, slash spending and sack its workers. If this fails then Greece's benighted politicians should be stripped of power and made subject to fiscal union, with public spending controlled and political oversight to enforce it. Greece and the other weakened states of Europe should be put in hock to the gods of the euro.
The postwar settlement was meant to liberate the smaller countries of Europe from this sort of overbearing treatment. It was meant to free their diverse histories, cultures and identities from centuries of great power victimisation. The symbol of such independence is the right to fix one's taxes, determine one's social security and value one's currency. There was no need for the euro. Even in the boom years, the best estimate is it may have boosted trade by 10-15%, but its bailout will more than wipe that out.
The euro rescue packages now being mooted are eerily reminiscent of the reparations imposed so disastrously on Germany after the first world war. It may all be "just", but the forced impoverishment of Greeks, Portuguese and Italians to honour the paper value of German and French debts must be as close to revolutionary incitement as modern policy can get. Does nobody in Brussels read history?
The former Tory chancellor, Lord Lawson, called the euro "among the most irresponsible political initiatives of the postwar era". Gordon Brown's most creditable epitaph is that he stopped the economically illiterate Tony Blair from joining it. Britain is free of its constraints, though not of its backwash. This is a true reformation moment in Europe's history, when a centralised and authoritarian Holy Roman Empire, grown fat and arrogant on the tithes of subject peoples, suddenly overreaches its power and faces a crisis of legitimacy.
David Cameron here has a historic opportunity to draft a new European dispensation. This would involve a managed devaluation of the debts of the peripheral states, backed by rescue packages for individual banks that then find themselves in trouble. Their depositor arms should be bailed out, but not their casino operations. Alongside would be a managed restructuring of a eurozone of convergent northern economies, in which it is conceivable the UK might even take part.
That may lead on to Cameron's ambition for a genuinely reformed Lisbon treaty, one that, unlike its predecessor, could pass the test of a referendum. Europe is clearly at a turning point, turning against the single-statism of the European movement, with its straitjacketed currency, its flows of economic migrants and counterflows of subsidies, its everlasting crises and its humiliation of democratic governments. It is turning back to national identity, and there is nothing the EU can do to stop it.
Yet Greece's bluffing of the high priests of the eurozone may, after all, be called. The unthinkable may be unavoidable. The priests are suddenly talking of "when, not if," Greece defaults. Greeks themselves seem to regard devaluation as a less painful discipline than state-imposed austerity, and are probably right. Their partial default and de facto departure from the euro would be a truly seismic moment, requiring the instant restructuring of debts and possibly currencies across the periphery of the eurozone, covering Greece, Ireland, Portugal, Spain and Italy. It would be drastic, but since it has been predicted ever since Maastricht in 1992, it can hardly be regarded as unimaginable.
At this point "pro-Europeans" have to stop talking rubbish and start on realpolitik. Alaric is not at the gates of Rome. Washington has not crossed the Delaware. Napoleon has not returned from Elba. All that may happen is that Europe's democracies, disregarded, distorted and corrupted for a quarter century by the oligarchs of Brussels, will crawl out from the shadow of the very Acropolis where democracy was born. For all sceptics of grand federations, gilded alliances, and upmarket mafias hatched down the ages in Europe's cloud-capped spas, this could be an exhilarating moment.
There is nothing wrong in a currency zone of compatible political entities. There is a dollar union between the American states, and there have been attempts at using currencies to cohere earlier empires, with crowns, roubles and pounds sterling. But a union must reflect an underlying economic reality, with political institutions that can relate voting to taxing and spending, and borrowing to repaying.
Where, as in Europe, this has become far from the case, the disciplines of a complex modern economy become unenforcible. Those in charge merely demand "ever closer union", which means ever more power over subordinate democracy.
A good history of the euro was supplied by the Nobel economist, Paul Krugman, in the New York Times in January. He contrasted the US dollar area, with its federal government, common language and political culture, with the eurozone, which has none of these things. Krugman concluded that "this, from the beginning, made the prospects of the single currency dubious". Worse, it had floated up to "grip the imagination of European elites". The single currency became a passport to a bureaucratic utopia, a means to ever more glorious union. Practicalities were for nerds.
I regard myself as a "good" European, but as far as the EU was concerned, that idealism was dented as each advance of Brussels power took ever greater liberties with Europe's taxpayers and legislators: regulating, subsidising and corrupting all it touched. A recent report showed the EU casually overpaying almost a billion euros to Greek farmers. It continues to throw more dead fish back in the sea than it takes out. It defaces Europe's countryside by subsidising half-built houses. It is still building itself a stupendous £280m palace in Brussels. The place is obscene.
Because being "pro-Europe" is a faith cult rather than a policy, its adherents dare not raise a peep of protest at its outrages. Not for the first time in Europe's history, a centralised superstate stalks the continent with a retinue of uncritical appeasers unable to see the wood for the tax-free salaries. Sceptics are treated like Rhett Butler in Gone with the Wind – traitors to the great confederacy who should be shot for speaking home truths.
That Germany should be the one country that can sensibly stage the euro bailout is doubly ironic. It is the one country that did not indulge in the housing bubble, most of its workers living happily in rented accommodation. Meanwhile, its constitution was crafted by the postwar allies to make its leadership of Europe near impossible. The German government is meant to be weak, at the mercy of its provinces and their electorates. If, as seems likely, Angela Merkel's voters grow fed up with bailing out Greece, or with bailing out banks, that will be an end to it.
The euro lobby is now pleading, begging, goading Germany to brandish its old muscles and flash its old sword. It calls on Germans to tell Greece to knuckle under, slash spending and sack its workers. If this fails then Greece's benighted politicians should be stripped of power and made subject to fiscal union, with public spending controlled and political oversight to enforce it. Greece and the other weakened states of Europe should be put in hock to the gods of the euro.
The postwar settlement was meant to liberate the smaller countries of Europe from this sort of overbearing treatment. It was meant to free their diverse histories, cultures and identities from centuries of great power victimisation. The symbol of such independence is the right to fix one's taxes, determine one's social security and value one's currency. There was no need for the euro. Even in the boom years, the best estimate is it may have boosted trade by 10-15%, but its bailout will more than wipe that out.
The euro rescue packages now being mooted are eerily reminiscent of the reparations imposed so disastrously on Germany after the first world war. It may all be "just", but the forced impoverishment of Greeks, Portuguese and Italians to honour the paper value of German and French debts must be as close to revolutionary incitement as modern policy can get. Does nobody in Brussels read history?
The former Tory chancellor, Lord Lawson, called the euro "among the most irresponsible political initiatives of the postwar era". Gordon Brown's most creditable epitaph is that he stopped the economically illiterate Tony Blair from joining it. Britain is free of its constraints, though not of its backwash. This is a true reformation moment in Europe's history, when a centralised and authoritarian Holy Roman Empire, grown fat and arrogant on the tithes of subject peoples, suddenly overreaches its power and faces a crisis of legitimacy.
David Cameron here has a historic opportunity to draft a new European dispensation. This would involve a managed devaluation of the debts of the peripheral states, backed by rescue packages for individual banks that then find themselves in trouble. Their depositor arms should be bailed out, but not their casino operations. Alongside would be a managed restructuring of a eurozone of convergent northern economies, in which it is conceivable the UK might even take part.
That may lead on to Cameron's ambition for a genuinely reformed Lisbon treaty, one that, unlike its predecessor, could pass the test of a referendum. Europe is clearly at a turning point, turning against the single-statism of the European movement, with its straitjacketed currency, its flows of economic migrants and counterflows of subsidies, its everlasting crises and its humiliation of democratic governments. It is turning back to national identity, and there is nothing the EU can do to stop it.
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