Euro crisis: “None of Europe’s leaders are yet spelling out the cultural revolution that is to come.”

I missed this at the time, but the BBC’s Europe editor Gavin Hewitt’s thoughts on “one of the fundamental dilemmas in political leadership” being faced by eurozone politicians caught in a manifestation of  “the political trilemma of the world economy” are worth reading.

Within the EU there is tension, and at its heart is the role of Germany. The Germans never wanted to join the euro if it meant it would have to bankroll the weaker countries. That is what has happened. For Germany the single currency has become not so much a monetary union but a transfer union. It raises the unresolved question of the great divide in economic cultures between the North and southern Europe. In the long term that cannot be resolved by Germany bailing out the rest.

In the past the engine for decision-making was the Franco-German alliance. It drove the EU forwards. That can no longer be taken for granted. President Sarkozy and Chancellor Merkel have clashed too often. There is a report in the Spanish paper El Pais, sourced to the Spanish prime minister, that President Sarkozy threatened to pull France out of the euro if Germany wouldn’t help Greece.

So to the future. The push is on to co-ordinate tax regimes more closely. Some want to go further with economic integration or economic government. Tensions will resurface. If the changes are far-reaching Germany will want treaty changes. That will open up arguments that have scarcely subsided since the Lisbon Treaty was ratified.

Lying behind this is an old argument. When do Europe’s people get a voice as to whether they want their national budgets scrutinised by the EU before their national parliaments? Potentially there could be the most significant expansion in economic governance since 1999.

That was on Friday, when he noted that

For the moment the turbulence has subsided, but it is only a pause.

Since then the latest move by the Germans has caused the turbulence to return.

Still everyone’s hero, Robert Peston explains

Investors see it as a fairly desperate attempt to ease strains in eurozone markets and fear that it shows that eurozone governments are running out of policy options to hold the eurozone together – so they have sold the euro, which has fallen to its lowest level against the dollar for four years.

And from his update

So what’s motivating the Germans?

Well the view from the London markets is that it’s all about persuading German voters and politicians that supposedly horrid speculators are being knee-capped, to allay their concerns that German participation in the great trillion dollar bailout of the eurozone isn’t throwing good money after bad.