Euro crisis: When “earth’s proud empires pass away”…

Andrew Roberts in the FT with a little touch of cold realism on the Euro crisis. He also picks out the underlying political and economic problem here, and advises the EU to prepare for a big bang he argues springs from a federalist overreach of the original Treaty of Rome that never fitted such an enlarged area:

…here we are in the endgame, and it is certainly not all right. Greece has now lost almost a quarter of its gross domestic product in five years; foreign companies sweep their cash out of the country before close of business every night; Greek banks have lost almost half their deposits as people camp outside cashpoints; political extremism is on the rise on both right and left, and there are even reports of Dickensian diseases appearing in parts of Athens that did not have slums before but do now.

The testament of history is so often witness to the hubris-nemesis phenomenon that it is worth repeating, since there is a way out of this for Angela Merkel, François Hollande and a few others, though not many. If Napoleon had stayed one day in Moscow, rather than a month, and returned to Vilnius before the frost descended, there might be a Bonaparte on the throne of France today. If the Ottomans had stayed neutral or joined the Allies in 1914, the Caliph might still be reigning in Istanbul. Nothing is inevitable if empires do not overstretch.

Germany and France should, therefore, in as orderly and honourable a way as they can, return to the safety and the rationality of the original Treaty of Rome, reinstitute the “six”, and keep the euro only for those countries that deserve membership on the logical grounds of genuine economic synergy. These are utterly removed from the commission’s hubristic fetish of global hegemony.

Of course, history is more reliably written after rather than before the fact… But it’s a much clearer criticism of the anti democracy of the whole EU project than anything emerging from the No side in the Irish Referendum…

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  • … and ‘Pride goeth before destruction, and an haughty spirit before a fall’ ..

    Six Signatory States 1951: “‘By the signature of this Treaty, the participating Parties give proof of their determination to create the first supranational institution and that thus they are laying the true foundation of an organised Europe. This Europe remains open to all countries that are free to choose. We profoundly hope that other countries will join us in our common endeavour.’

    This is a fairly clearly indication that the project was political even though the political cover was an economic one. Surely it was a bit presumptuous of the super six – in effect, France and Germany – to speak for Europe. The trouble with institutions, once formed, is that they develop their own dynamic if not, as in this case, their own competence. Was there ever any likelihood that the EU wouldn’t go the way of the USSR and earlier empires?

  • I love reading articles that involve historicity. It sort of reminds me of articles written by Turgon.

    One of the problems with the analogy of Empire overreach is that too few people see the EU as an empire, although if you called it the “Holy Roman Empire, mark II” you would be quite close to the mark. Now, when did that Empire overreach?

    I think that happened many centuries before it officially ended, i.e. once it became clear that the Empire would be dominated by the Germans (there is a bit more than a parallel there).

    As to Ireland, when were substantive economic issues ever debated during an Irish referendum campaign on Europe? The substantive economic issues were always a matter of cross-party consensus and the debates repeatedly reduced to social issues.

    I completely agree that Maastricht 1992 was the overreaching measure of the EU project. Unfortunately, there has never been any right-of-centre criticism of the EU project in Ireland. Had there been, you would have seen genuine vigorous debate, as there was in Britain when Mrs. Thatcher was Prime Minister.

  • Before we get all Germanophobic, it’s worth recalling that the original intentions — see the previous post where we addressed the ECSC — were all French. The moving spirits were Robert Schuman (French foreign minister), Jean Monnet of the head of French General Planning Commission, Paul Reuter (legalist at the French foreign office) and Bernard Clappier (Schuman’s “fixer”).

    If Roberts is hanging his customary right-wing thesis on the nature of “federalism”, then he has a single moment of truth: Reuter supplied a draft which included the term “supranational”, which Monnet amended to “federation”. As it happens, I’d reckon the whole €-concept is supranational and bureaucratic rather than federal and democratic. Were it the latter, we’d have some grip on the ECB.

    Anyway, what about Grisela Stuart’s paradoxical but intriguing proposal: that one way out is for Germany to leave the €-zone? Odd that she made the suggestion two years ago, but the commentariat (e.g. PoliticsHome) are just catching up.

    And the Osman dynasty persists: the 44th Sultan would be Bayezid III, a.k.a. Osman Bayezid Osmanoğlu, great-grandson of Sultan Abdülmecid I (reigned 1939-61), formerly of the US Army and a … ahem! … librarian. His predecessor,Ertuğrul Osman Osmanoğlu, died a Turkish citizen (having been reinstated after 80 years) at 97 in Istanbul in 2009. His Imperial Highness lived for the better part of seven decades in a rented ($350 a month!) third-floor flat over a Lexington Avenue, NYC, restaurant.

    Sic semper tyrannis!

  • DC

    I think the problem is more so to do with financial globalisation interfering with European (euro) economic governance.

    National banks blowing out international levels of credit – which was pumped into property etc but now needs repaid out of european economies that simply just aren’t profitable or dynamic enough to pull it off and pay this all back. That’s why it is toxic debt. Globalisation gone wrong.

  • DC

    But i suppose empires in decline is what had a lot of people reaching out and demanding a lot of cheap and easy credit – to sustain a level and standard of living that passed away years ago.

    Surely more need to tax the rich more now than ever in order to keep society together.

  • abucs

    Of course the danger in over-reaching on the taxation is :

    1) if people are not onboard as community it feels like unjustified robbery which will further corrode community

    2) it further cuts economic wealth creation which compounds the debt problems and the wealth available to re-distribute.

  • Those two posts by DC are helpful.

    Even in the limits of these comment-boxes, it focuses us on some essential problems out there:

    — the Big Corps have more clout than national governments. Even when they don’t they buy the national governments. [The end of nations as we knew ’em?]

    — Individual states and statelets are only too happy to underbid. Thus those offices in (e.g.) the Caymans, Gibraltar or Liechtenstein, or even “decent” EU-phile Luxembourg, with hundreds of brass plaques outside and a single office bod inside, which exist only to process off-shore funds. Half a per cent of squillions comes cost free, except to the places which generate the original profits and now lose the corporation taxes (see any Private Eye of recent vintage). By the by, that’s the answer to your NI corporation tax problem: don’t bother — the big boys have already found a dozen places even cheaper, and it’s a race to the bottom.

    — So, we’ve got to keep the wealth we do generate, and increase it. Hmmm … sounds like an argument for nationalisation. Even a few trade barriers (Mandy’s “bra wars” were viewed as a useful support, as I recall). Now don’t come all Chicago School and tell us that nationalisation is inefficient, at least not before you’ve explained why privatisation of UK enterprises (water, gas, electricity, transport) has been such a crushing disaster for the consumer. Or that “free trade” is always a good thing (consider why UK energy prices are artificially high; why it’s better business to flog pharmaceuticals around the world than supply them to the NHS).

    — In the ’30s we got ourselves into a similar mess. Then it took the threat, and the actuality of a major European war. And these idiots want to deconstruct the €-zone and/or foment widespread social chaos! Cheez!

  • Alias

    Once upon a time in Euroland, only the eurosceptic elves were telling the people that the euro was a political project masquerading as an economic project; and that while politicians lived in Dreamland, the markets lived in an unfamiliar and unforgiving place called Realityland.

    But now, alas, even the europhiles are acknowledging that the eurosceptic elves were telling the truth all along and that the euro is likely to go down in ignominious history as quite possibly the most destructive – and certainly the most recklessly demented – idea of the latter half of the 20th century.

    As always, the distant and unwelcome voices from Realityland call out yonder that there can be no monetary union without economic union; no economic union without political union, and no political union without a shared nationalism.

    If there ever could be political union it would require the Germans to regard those other nations they dismiss as feckless as they regard their own nation; and all to live as a brotherhood of man (cue rainbow and flower petals dropping from fluffy clouds).

    But in distant Realityland, we see that the Germans despise the Greeks and the Greeks despise the Germans – and there goes our lovely wee dream of a shared nationhood and political union.

    And remember dreamers, no economic union without political union…

    Yes, that is how dumb an idea the euro is.

  • Alias @ 10:12 pm:

    History is a wonderful instructor, so apply similar logic to Article XVI of the Act of Union, 1707.

    Do you reach similar conclusions?

    [2 doyts = 1 bodle; 2 bodles = 1 plack; 3 placks = 1 bawbee. Not many people know that.]

  • tuatha

    I have yet to hear an intelligible or credible explanation of why
    (a) the EEC/EU was so recklessly, heedlessly, disingenuously extended to 25+ members,
    (b) the original criteria for euro membership, specifically <3% current account deficits wasn't enforced – only Germany came within spitting distance of that, the French never less than twice that and the Latins just laughed.
    It was obvious, ten years ago, to anyone still capable of doing basic arithmetic almost free money would be wasted and that it would never be repaid.
    The pretence that we can vote YES to the Fiscal treaty and indenture future generations to pay for the decadelong party thrown by relatively few speaks to massive hubris.
    Which will inevitably be followed by Nemesis.

  • tuatha @ 12:03 pm:

    Well (a) there is the easy one. Because the Brits, partly out of self-interest, partly because the US wanted the ex-Warsaw Pact countries inside the tent [complete this clause as feel fit], rounded up another thirteen of the fifteen who were convinced of the wisdom to hamstring re-united Germany. The Germans, of course, saw the accessions as new markets, having bought (e.g.) Škoda in advance.

    As it says here, “Flag as offensive”.

  • There is also a principled reason for a: because the Iron Curtain was an externally-imposed frontier across Europe and it was just as much a moral imperative to remove it as it was to remove the Berlin Wall.

    I completely agree with b) though.

  • … I mean I completely agree with you re: b.

  • Surely the failure re (b) wasn’t public, but private debt-escalation.

    Sticking to the aul’ sod — and saving myself trouble by quoting Larry Elliott (at The Guardian, today):

    Take Ireland, one of the three countries subject to harsh bailout terms. Does it have a competitiveness problem? As Dhaval Joshi of BCA Research notes, Ireland accounts for 0.3% of global GDP yet accounts for 3% of world trade in services and 6% of trade in pharmaceuticals. Ireland ranks third in the world for foreign direct investment, on which the return is 17%, compared with 6% in Germany. “As a trading economy in key sectors, Ireland is punching 10 or 20 times above its weight. This is hardly a sign of an economy that needs to become more competitive,” Joshi says.

    Nor would the proposed fiscal pact, on which Ireland votes in a referendum later this month, have prevented the crisis that has reduced GDP by 15% and prompted a fresh exodus of the young and talented. Ireland, like Spain, had healthy public finances in the years before the crisis broke. The problem in both countries was not too much public debt but too much private debt. The reason there was too much private debt was that borrowing was too cheap in economies that were growing fast and at risk of overheating. And the reason borrowing was too cheap was that Ireland and Spain had given up the right to set their own interest rates and were subject to the one-size-fits-all dictates of monetary union.

    Of course, the Ahern mafia could have done something about all that, by devices such as compulsory savings/imposing charges/raising taxes, diverting funds into a sovereign wealth fund (as the Norwegians have done with oil revenues) and so restraining excess disposable income (and the inflation that stems therefrom).