Greece’s exit from the Euro now appears inevitable.
Democracy has broken out and the austerity regime imposed as a shock doctrine
by Germany with the support of Sarkozy’s France is unraveling. Eleven
governments have fallen in Europe and more are likely to follow. It looks
reasonably certain that the fiskalunion compact will be rejected by Ireland and
several other countries (France, Holland, Spain, Italy) are showing significant
signs of back-tracking on what was one a “done deal”.
When Greece returns to its own currency and begins to manage
its own economy, it will be a shocking mess. Devaluation will occur overnight
and the value of deposits will fall by 70-80%, the government will initially
have trouble financing debt so will simply write off all of its loans as a
total default, incurring the wrath of all. Then Greece will begin to sort
itself out. Like Iceland and Argentina, they will come to manage their economy
with intelligence and foresight. If they don’t, Greece will simply collapse as
a nation. Staying in the Euro will incapacitate Greece for over a decade and
inhibit their ability to reform and grow. Greece will likely become a hot-bed
of revolt and rebellion against the EU in general and Germany in particular.
Conflict could turn nasty, ending the near total peace of Europe since the
second world war. Either way, the near term future for Greece is not pretty.
A Greek exit from the Euro will have ripple effects, most
probably with Spain and Portugal next. Breaking up the Eurozone will help and
will create some of the conditions needed for economic recovery. Trying to
marry austerity as the core agenda with limited growth – the French plan – is unlikely
to make much difference. It looks like
we are seeing the end of the beginning for this crisis and the beginning of the
end game for the current phase of the European project.
Next there will be a need to rethink what the project is
about. Boris Johnson, heir apparent to the leadership of the British
Conservative Party, favours a straight “in or out” referendum on Europe and
this is being echoed by others elsewhere in the EU27. But “in or out” of what?
No one wants to see the end of easy travel across borders or the ready access
to EU markets. What the “yes or no” is about is the hegemony of Brussels as a
bureaucracy and the desire to stop or curtail the political integration
project. Both of these issues – the encroachment of Brussels in every aspect of
national life and the move to more and more political integration, which is what
the fiskalunion fully represents –
attack the idea of sovereignty. This is the core issue.
We could express this core issue in terms of two questions: “What is the role of a nation state in a
European Union?” Linked to this is the other critical question “what is the
role of democracy in the nation state and in the European Union?”
It is clear that democracy is not favoured by the bureaucracy.
When treaties have been rejected they have either been implemented anyway or
rejecting nations have been made to keep voting until the treaty is accepted.
When Greece suggested that it would ask the people what they thought of the
austerity proposals in 2011 the EU machine went into overdrive to ensure that
democracy wasn’t allowed to happen. So the answer to the second question is
clear. The EU appears to oppose democracy.
In terms of the first question, we are about to find out.
The new President of France meets with the German Chancellor to find out what
France is allowed to say, think and do. The President arrives with a growth
agenda and a recognition that this needs to be linked to strong fiscal
discipline. He will use Paul Krugman’s observation that it was export led
growth that has created the conditions which Germany enjoys, not austerity. He
simply wishes to pursue the same strategy. Let’s see what the Chancellor says.
Both are pragmatists and both are seasoned political operators, so we need to
read between the lines as well as look at the lines themselves.
What is at stake is the whole conception of the European
Project. I strongly recommend the recently published book The Decline and Fall of Europe by Francesco M. Bongiovanni (2012,
Palgrave Macmillan), which looks in depth at the challenges the EU27 now face
and provides a thorough analysis. Its worth the read (and the price of $30).
1 comment:
I applaud the demise of the EU, for cultural reasons. Globalization destroys all cultures. It centralizes power far from the people and crushes local economies, local customs, and local products. Without these, cultural diversity cannot exist.
Is showing your passport as the train crosses a border, or exchanging francs for lire, such burdens that we are willing to transform ourselves into the dull grey "multicultural" dearth of culture under which the US suffers?
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