Euro crisis: “The “European project” won’t go quietly into the night…”

Whilst the Irish Government waits for “the right time” to play whatever cards they think they have, Greece is still in the vanguard of the PIGS.

As the BBC Europe editor, Gavin Hewitt, points out

To the issue that caused a tremor in the markets on Friday: that Greece may opt to leave the euro. It has been met with fierce denials. For the moment it seems a highly unlikely option. And yet in German circles it is being discussed.

In Berlin at government level the idea is dismissed. The Economy Minister, Rainer Bruederle, said yesterday: “our goal must be to strengthen Europe”. But elsewhere some, like Hans-Werner Sinn of the Ifo Institute, see a Greek exit as preferable to permanent fiscal transfusions from German coffers.

For the moment the most likely outcome is that Greece will be given some extra help, but the fundamental problem will not have been addressed. Can you have monetary union without fiscal union? And can you have fiscal union without political union – for which there is almost no appetite? [added emphasis]

On this Europe Day, the problems of the euro cast a shadow over the European project. Bail-outs are deepening divisions between the northern European countries and the south.

And not just bail-outs, as, via one of the Professor’s stand-ins, a more strident Irwin Stelzer argues

This seems to be just one part of the increasing pressure on the entire concept of a united Europe. When Germany refused to go along with Britain and France in attempting to stop the slaughter in Libya, it called into question the concept of a European Common Foreign and Security Policy, notwithstanding the enormous resources being poured into the newly established European External Action Service, a euphemism for a full-fledged foreign service. And when France resurrected border controls and check points to prevent a flood of Tunisian immigrants from Italy, and Italy retaliated by issuing travel documents to some of the 25,000 immigrants who were passing through Italy en route to the EU country thought to have the most generous benefits, it put a serious dent in the concept of the free movement of peoples throughout the EU. Finally, a chasm has opened between the prosperous north and the less-hard-working south; between the 17 EU members that comprise the eurozone on one side and the 10 other EU members who have their own currencies and want no part of the bailouts; within the gang of 17, between Germany and Finland; and between the exporting machine that is Germany and protectionist France. 

The vision of a united Europe still has a powerful hold on the elites of Europe, who see the transfer of power from nation-states to an unelected bureaucracy as insurance against future wars and, if truth be told, a relief from democratic pressures. In addition, the prospect of a euro that would replace the dollar as the world’s reserve currency, or at least weaken its role in world trade, has a powerful hold on the French, who make no secret of their antipathy to Anglo-Saxon capitalism. 

The “European project” won’t go quietly into the night. But it just might go noisily into the ashcan of history if the Germans decide they cannot convert the Greeks into hard-working, tax-paying euro-citizens worthy of continuing handouts. Or, at minimum, we might end up with a euro-nord and euro-sud, as Martin Feldstein once suggested.

Read the whole thing.

But whether or not the “European project” goes quietly, or even noisily, “the result [remains] a crisis in European democracy”.

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  • joeCanuck

    The whole world is in a state of chassis.
    It’s quite unbelieveable that the EU could collapse. But so many countries just ignored the rule about not exceeding the 3% limit. I think Greece was the first but was quickly followed by others who seemed to have thought that the good times would last forever. Our poor (literally) children and, in my case, grandchildren will be paying for a very long time.

  • DC

    Joe

    Ireland’s budgets were fine and in line with EU limits.

    It’s the way that credit was doled out by financial services and mistaken for actual economic growth.

    It wasn’t growth but toxic debt, the credit wasn’t structured right and it all collapsed inside the financial markets, basicially poorly structured debt. Financial services and banks should have been allowed to go insolvent and the uber wealthy should have taken a hit on their shares and assets.

    Except when it all fell through the taxpayers were called on to replenish the banks, taxpayers have recapitalised the banks. The economy should have been allowed to deflate, instead taxpayers are doing the supply-side topping up of the economy, rather let the economy deflate and do a restructuring of if you like a haircut to those creditors.

    Basically – too much global credit was released inside the UK and Irish national economies, it has now turned into toxic debt because the natural economy was never there to support such lending.

    The writing must be on the wall for the euro?

  • joeCanuck

    Fair enough DC about the budget; I mistakenly thought that Ireland was outside.
    Don’t you think that the Euro collapsing would put enormous strain on the whole project?

  • DC

    Also I saw Michelle Obama talking about American freedom after killing Osama Bin Laden, but I don’t see how Americans can be free with so much debt racked up – both national and personal.

    The primacy of economics once again. There’s not much freedom on the breadline, Michelle Obama. Osama is now just a killer killed.

  • Greenflag

    DC ,,

    ‘I don’t see how Americans can be free with so much debt racked up ‘

    As long as the dollar remains the world reserve currency they can at least ‘pretend’ to be free and what was that nice word that Alias used to harp on about ah yes ‘sovereign ‘.

    Greece should never have been allowed into the Eurozone . Any Euro politician be they German, French or British or Irish should have known that ‘Transparency International ranked Greece 80th in the table ranking from least corrupt to most corrupt . Did the Euro politicians somehow imagine that the Greek government and it’s financial controls were somehow immune ? But then Italy ranked 67th in the same table whereas Ireland ranked 14thone place ahead of the more ‘corrupt’ Germans at 15th . The USA now ranks 22nd having slipped from 18th a few years ago .

    The sad reality is that the Goldman Sachs /Bank of Americas /Citibanks are being allowed by the political authorities to get away with mass ‘theft’ despite their role in creating the mess .

    This financial crisis is not just a crisis for the EU . It’s an even bigger crisis for the USA and it’s role in the world economy . Even in NI almost half the population did’nt even bother to vote as most of them suspect that no matter who wins the local Assembly election the City of London and it’s now always win . They’ve just got to deal now with a more amenable Tory poodleand it’s ‘Big Society’ bullcrap , than the former ‘toothless’ terrier of ‘Third Way Labour’

    When the ‘elected ‘ democratic politicians continue to fail to address this issue effectively they should not be surprised when popular democracy rises up and does the job for them .