Year LV, 2013, Single Issue, Page 3

 

 

No time left to lose

 

 

“What is wrong with Europe is as clear as daylight: if one wants a common currency, there has to be banking union, which means equipping ourselves with European mechanisms for banking supervision, bank deposit guarantees and crisis management. And that requires, in turn, a minimum common tax, and common fiscal policies which do not undercut each other. This too, in turn, requires closer coordination of economic policies and a more vigilant oversight of imbalances which might be building up, for both lender and debtor nations. For reasons which are obvious, all of these tasks can only be carried out by institutions which have won democratic legitimacy before Europe's citizens, not just at the moment of their election, but in each and every decision taken, and under close control.”

So writes Jose Ignacio Torreblanca, one of many commentators on the eurozone crisis to have highlighted the inescapable need for Europe to complete its monetary union with political union ( April 5, 2013). What Torreblanca expresses is a simple truth which the leaders of the national governments and European institutions, the national and European parliamentarians, the political parties and the lobby groups, as well as public opinion, now have no choice but to heed.

Until they do, most of the European countries, especially those that are currently struggling the most, are destined to go on seeing their unemployment levels rising and their capacity to produce goods and services falling; this will exacerbate the existing social tensions and encourage widespread populism; the risk of a worsening of the sovereign debt crisis will continue to be a threat hanging over the future of the eurozone. It also represents a threat to the stability of countries outside the eurozone, like the UK, which, for this very reason, want to be closely involved in the reorganisation of the European framework. The British Prime Minister, David Cameron, has repeatedly reminded the eurozone countries that Treaty changes are needed in order to reinforce the euro. It is in this context that the UK is insisting on the need to rethink relations between the different categories of EU countries, which may be defined, according to their situation with regard to economic and monetary union, as the “ins”, the “pre-ins” and the “outs”. Cameron’s “plan” is to renegotiate the Treaties in order to get certain competences transferred back to national level and obtain reductions in the financial contributions of the member states, yet without this undermining the advantages of single market membership. He also plans to put the results of these negotiations to referendum.

At the start of 2013, the President of the European Council, Herman van Rompuy, tried to avert the risk of a British national referendum on Europe, arguing that this would make sense only in the wake of Treaty change; what, otherwise, would a British referendum actually be on? But the truth is that there already have been modifications. And in the meantime Germany, too, through finance minister Schäuble, has requested that certain aspects of the banking union supervision and control mechanisms be included in a possible future revision of the Treaties.

How, for their part, do the eurozone governments, MPs and MEPs intend to respond to the challenge thrown up by these developments? Will they have the ability, and the will, to carry through to completion the political plan that was (and still is) the basis for the creation of the single currency? Until just a few weeks ago, the German chancellor Merkel was the only eurozone government leader prepared to openly raise the issue of the need to resolve the problem of political union in order to complete the process of monetary unification, albeit without providing precise indications on how to go about achieving this,and without finding anyone willing to put her words to the test. Recently, however, there have emerged leaders who do seem ready to take up this challenge. The first was the Italian prime minister, Enrico Letta, who is currently grappling with a national crisis whose ultimate outcome is, without doubt, inextricably linked to the outcome of the European one. Indeed, Letta, addressing the Italian parliament and also in talks with Angela Merkel, French president François Hollande, and the leaders of the European institutions, underlined the need to see the economic and monetary union evolving in a federal direction. Subsequently, French president Hollande, speaking at a press conference on 16 May at the Elysée Palace, stated, for the first time, that L'idée européenne exige le mouvement. Si l'Europe n'avance pas, elle tombe ou plutôt elle s'efface; elle s'efface de la carte du monde, elle s'efface même de l'imaginaire des peuples. Il est donc plus que temps de porter cette nouvelle ambition. L'Allemagne, plusieurs fois, a dit qu'elle était prête à une Union politique, à une nouvelle étape d'intégration. La France est également disposée à donner un contenu à cette Union politique. Deux ans pour y parvenir. Deux ans, quels que soient les gouvernements qui seront en place. Ce n'est plus une affaire de sensibilité politique, c'est une affaire d'urgence européenne.”

In short, the governments of the two key countries of the European Union, together with that of Italy, which has always played a decisive role in paving the way for the crucial steps in the integration process, seem at last to be converging on a key point, underlined as long ago as December 1991 by former German chancellor Helmut Kohl, who, addressing the Bundestag in the wake of the Maastricht summit, underlined that political union is the indispensable bedfellow of economic and monetary union. As he pointed out, recent history has shown just how misleading it is to imagine that economic and monetary union can survive indefinitely without political union. The politicians of all the European countries, in the wake of the launch of the single currency, made the serious mistake of not allowing this fact to be realised; as a result, we are today confronted with a situation so grave that it threatens to bring down an entire continental-scale system of values, institutions, and social and production models. France, Italy and Germany truly have no time left to lose. The time has come to agree on concrete steps towards political unification of the eurozone, to give this agreement the tangible form of a pre-constitutional pact open to any eurozone country wishing to participate, and to do so now, before the project definitively loses credibility. This is a point that the French president Hollande, to his credit, has clearly specified, remarking: “ce n'est plus une affaire de sensibilité politique, c'est une affaire d'urgence européenne.” All this amounts to an enormous responsibility and it is one that the governments, parliaments and politicians in these three countries must, together, prove capable of shouldering, with the support — it is to be hoped — of the Community institutions.

***

The crisis has exposed institutional, economic and financial problems that have long been brewing in Europe. The inadequacy of the European framework has been apparent ever since the first, hesitant responses to the Greek crisis in 2010, which were due to the fact that the French and German governments, urged by the USA to act quickly in order to prevent disaster on the financial markets, lacked the instruments needed to intervene: the Lisbon Treaty does not envisage the possibility of having to save the euro, while the eurozone, with the exception of the ECB, has neither instruments allowing rapid intervention, nor mechanisms for correcting the economic and financial imbalances that can arise between the various countries. A second sign of Europe’s inadequacy came just a year later, in 2011, when the economic and financial instability of Spain and Italy emerged as a further threat to the euro. This was the point at which the governments and national parliaments found themselves with no choice but to start bending the existing Treaties to their own requirements, and even stepping outside the Treaty framework. All of a sudden, the widely-held belief (developed in the wake of the lengthy and laborious process of adopting the Lisbon Treaty) that no further institutional reform would be necessary for a great many years was swept aside. The next two years saw several major developments: article 136 TFEU was modified in order to establish the legitimacy of the European Stability Mechanism (this modification was ratified unanimously by all 27 EU member states including the UK and the Czech Republic); 25 states entered into the fiscal compact (an international treaty in which the UK and Czech Republic declined to participate); and the European Stability Mechanism entered into force for the 17 eurozone member states. Throughout all this, the UK, having excluded itself from the eurozone consolidation process (which it could not in any case impede, given that saving the euro was also in its own interests), took advantage of its freedom to introduce another question into the arena of political debate: that of refounding the European Union.

Regardless of the will of the governments and of the national and European institutions, all this has had the effect of reintroducing the concept of differentiation into the European unification process; in other words, the political logic implicit in the creation of a currency shared by only a vanguard group of states, which, as the experience of the past 20 years has shown, cannot work within an EU-wide institutional framework.

At the end of 2012, this logic had assumed such force that even the keepers of the current European order (i.e. the presidents of the European Commission, the European Council, the Eurogroup and the ECB) were prompted to propose a roadmap for creating four unions (banking, fiscal, economic and political), plus a separate, additional budget for the eurozone. Basically, this roadmap, which sets out the stages to be accomplished in order to transform the economic and monetary union into a federal union, albeit by a deadline (2018) that is still too long, provides a framework within which to act in order to speed up the process of creating a federal Europe.

However, when the grip of financial speculation loosened, this roadmap was soon reduced to the implementation, in the short term, only of the banking union. The blame for this does not lie only with the governments. Indeed, this watering down of the plan can also be attributed to the reticence and reluctance, on the part of national MPs, MEPs, and the various political families, to abandon the current European and national frameworks, as well as to a general lack of confidence in the ability of politics, both at national and European level, to solve problems.

Our countries are caught in a vicious cycle which sees them compelled to apply austerity measures in the economic and social fields, and crushed by the absence of growth prospects and by the deepening political crisis. To break this cycle it is necessary to highlight, rather than underplay (or even deny), the close relationship that exists between the need to realise the European political union project and the need to create, without delay, the instrument that is crucial to the promotion of a European monetary-economic policy, namely a separate budget for the eurozone funded with its own resources (starting with a tax on financial transactions and a carbon tax) — a budget that must be democratically controlled and governed, within a bicameral federal framework, by the representatives of the citizens of the countries that have adopted, or intend to adopt, the single currency. This is the terrain on which, within a very short space of time, the future of the euro and of Europe will be decided.

***

The momentous challenge now facing the Europeans is quite clear to the rest of the world, and is summed up well in several passages of a memorandum sent to President Obama by a group of experts from The Brookings Institution. The section dealing with the euro, significantly entitled Eurozoned Out, appears in the part devoted to the Black Swans, i.e. “events so dramatically negative that [the President] will need to take steps in advance to avoid them” (Big Bets – Black Swans, Recommendations for President Obama’s Second Term, Brookings, January 2013): “The question of whether EU leaders want the Euro to remain intact has been settled. But, they now face two crucial challenges. First is the danger that political and economic accidents related to the current crisis will threaten the survival of the Euro. It will take some time to build a new Eurozone. During this period, much of the European Union will be in recession or experience stagnation. Member states will disagree strongly about the future course of action. Elections are likely to be fought on these issues and they could bring to power radical parties with rejectionist policies. The result may be a political crisis that leads to an inadvertent fracturing of the Eurozone followed by contagion and a disorderly collapse.”

The risks described above are very real ones. The uncertain situation in Italy together with the widening of the economic gap between France and Germany are threatening to bring down the economic and monetary union, derail the European political project, and plunge the weakest countries into chaos. Quite simply, a confederal framework is incompatible with the survival of an economic and monetary union. The eurozone, at supranational level, completely lacks mechanisms of redistribution and balancing and the fiscal and social instruments that are needed in order to compensate for the asymmetries that, instead of diminishing, have increased since the introduction of the euro — asymmetries that are turning into dangerous divergences. In the past few years, the added value produced by the German manufacturing industry, considered as a proportion of the German GDP, has doubled compared with that recorded in France; furthermore, Germany has recorded a trade balance surplus greater than that of all the other eurozone countries put together (in 2012 it was slightly higher than China’s, while France actually recorded a negative balance of trade). At the same time, Italy, a key European country in terms of the size of its population and its economic influence, has, on account of its vast public debt and volatile political situation, become a loose cannon for the rest of Europe.

It falls to politics to point the expectations of the different sections of public opinion in a positive direction, embarking on a new phase in the process of building Europe, geared at resolving the eurozone crisis by creating a new institutional framework and promoting the transfer, to European level, of national sovereignty in the fiscal, banking, economic and political spheres. For this to happen there has to emerge without delay, in France and Germany, the concrete will to reduce the imbalances that have been created between these two countries as a result of national industrial, economic and fiscal policies that are increasingly incompatible with the objective of achieving their integration; this must be accompanied by the will to relaunch, together, the roadmap of the four unions needed to create the federal union. For its part, Italy, to facilitate the development of the process and play a positive role in reviving the political dimension of European integration, must provide concrete proof of its desire and capacity to remain in Europe, implementing, urgently, the reforms that everyone now knows to be indispensable in order to prevent its whole system — institutional, economic, financial and judicial — from collapsing under the weight of its social and political disorder and of the cost of its national debt. It is only in the setting of a renewed convergence of purpose and policies between the main players in the process of European unification that it will be possible to implement what is the last remaining option for creating the federal union: that of creating a new, pre-constitutional pact between the eurozone countries in which they will undertake to move from a provisional, intergovernmental government to a democratic, federal government responsible for currency, taxation and the economy in the eurozone; and at the same time, convening, in the near future, a European constituent assembly with a mandate to draw up the constitution of the federal union and lay down rules to regulate the transition from the old to the new European institutions and the relations between the eurozone and the rest of the EU.

Because doing nothing, or allowing these issues to be postponed, amounts to leaving the way clear for those wanting to see Europe’s disintegration,

This is why anyone who genuinely cares about the future of their own country and of Europe must undertake to make politicians, the institutions and public opinion appreciate the urgency and historic importance of creating a European federation now, within the framework and using the instruments demanded by the present historical and political moment. There is no time left to lose.

The Federalist

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