Saturday, November 19, 2011

End of the euro, Saturday edition

Contrary to popular belief, the "ever closer union" toward which Europe fitfully inches is a political - not an economic - project, though achieved largely through economic means. The first goal was to create a unified Europe and bring an end to European wars. The means were economic: a Common Market, or free trade zone (to be expanded later to include the free movements of capital and then labor). [my emphasis] - Stephen Cohen, Euro Shield Wall Street Journal 04/29/2003
The immediate failure of European leaders on the bank crisis which they are (mis)managing as a sovereign debt crisis has tended to obscure their broader political failure on creating a democratic and unified Europe. Germany and France are the most obvious drivers of the current disastrous Herbert Hoover economic policies that are likely to destroy the euro and possibly the EU itself. But Britain is the third of the largest powers in the EU, and its own hesitant stance toward European unity under both Labour and Conservative governments is very much a major part of the political failure of EU leadership.

John Feffer of the Institute of Policy Studies (IPS) gives a summary of the history of the European Union in Is Europe Over? FPIP 11/15/2011. He also does a brief interview on the topic in 'Is Europe Over?': A Look At The Region's Fate NPR 11/19/2011. Feffer's article summarizes the EU this way:


Europe as a unified, democratic, relatively peaceful, and economically prosperous order has so far only enjoyed a brief lifespan. This conception of Europe dates to the early days of the Cold War and the perceived need to create a bulwark against the Soviet Union to the east. Centuries of Franco-German enmity vanished after World War II, as these two key European countries united against a common enemy at the urging of a common friend (the United States). The resulting economic alliance would expand and deepen over the decades into the current European Union of 27 countries. The EU now boasts a parliament, a council of ministers, a common currency (for 17 of the 27), the largest economy in the world, and even, somewhat ominously, a military force that has intervened overseas a dozen times or so.

Thanks to a difficult-to-contain economic meltdown, however, this ambitious regional project suddenly seems on the verge of unraveling. And the very qualities that began to gather around the concept of "European" in the 8th century – religious persecution, cultural particularism, and hereditary aristocracy – appear to be returning in the form of Islamophobia, extreme nationalism, and the oligarchy of bankers. It's not a pretty sight. [my emphasis]
Paul Krugman has been pessimistic for months about the euro's ability to survive under the current austerity policies that for whatever perverse reason dominate the economic thinking of the one-percenters in Europe and the US, as well as the governmental elites in both places. He continues his Cassandra routine, unheeded by the Very Serious People despite his excellent record on these things recently, in Eurogeddon 11/15/2011: "ECB [European Central Bank] bailout or bust. And it's looking like bust." And in Incredible Europeans 11/19/2011:

There are strong self-fulfilling aspects to this crisis of confidence - which is why Europe desperately needs the ECB to act as lender of last resort, and short-circuit the vicious circles.

But no, the ECB will defend its credibility. And it will end up as the highly credible defender of the value of a currency that no longer exists.
Guardian columnist Simon Jenkins writes that A new Europe must be built on the ruins of the old 11/10/2011. He clearly thinks that the EU is finished, all but the funeral: "A 50-year fiction is over. As often before in history, a new Europe must be built on the ruins of the old, and we had better get used to it." He was writing just over a week ago:

This is the way the world ends, not with a bang but a cliche. Crisis spirals out of control and Armageddon moves to the brink of abyss. "Europe" is too big to fail yet too big to succeed. Each newscast is a crash course in economics, each headline an incitement to suicide. But since we are not at war and few understand what is going on, the rest cannot believe it. As if watching the fall of Icarus, they sense the gods are angry but return quietly to the plough.

This week the European backwash of the crash of 2008 moved way beyond high finance. Economics may have pushed politics to the wall, but in Greece, Italy and, more important, Germany, politics is hitting back, hard. Yelling, spitting and choking with frustration, it has had enough of economics, and has beaten it to the ground. Yesterday it claimed its first scalp, demanding a new ruler of Greece.
Historian Timothy Garten Ash (Germany's rendezvous with history will also put Cameron on the rack Guardian 11/09/2011) looks at the significance of the crisis for Germany:

As it marks the 22nd anniversary of the fall of the Berlin Wall, Germany faces its biggest external challenge since its miraculously peaceful liberation and unification. How it handles the eurozone crisis will shape future generations' verdict on the way in which Europe's central power has used what the historian Fritz Stern called "Germany's second chance". Germany spectacularly blew its first chance, as a dynamic, innovative, rising economic and cultural power at the beginning of the 20th century. Will it make a better fist of it this time, at the beginning of the 21st?
Under Anglela "Odoacer" Merkel, in the conditions produced by the current depression, the EU has become a vehicle for German hegemony in Europe:

For anyone who remembers the old Franco-German relationship, when Helmut Kohl used to say that "one must always bow three times before the tricolour", the language in which people here [in Berlin] now talk about their once senior partner is startling. "France must decide whether it wants to be on the periphery or in the core," confides one [presumably German] politician. There's no doubt who wears the trousers now, and it's not that tiresome little man in Paris. ...

Twenty years ago, Germans endlessly repeated Thomas Mann's post-1945 wish to see "not a German Europe but a European Germany". Today, an interesting variation is doing the rounds in Berlin: "a European Germany in a German Europe".
Why that quotation from the politician deserved anonymity is not clear.

Garton Ash does not seem to grasp the depth of the current crisis. He seems to think that Greece can just drop out of the eurozone and the EU and the euro will just tool right along, with other countries suicidally lining up to join the eurozone. And this statement of his is just nuts:

As we hurtle towards this crunch, both Britain and Germany should stop and think. Britain needs to take more seriously the underlying German argument, which is that the kind of budget, debt and wage discipline it has practised with such impressive results over the last decade, and now seeks for the whole eurozone, is precisely what Europe needs.
This still reflects the current conventional wisdom, aka, what the one-percenters find comforting. But it is plainly contradicted by the disastrous experience of austerity economics in Ireland, Greece, Portugal and Spain: and for that matter the obviously bad results in the US and Britain. This may put Garton Ash in agreement with the Very Serious People. But there's nothing serious about it except for the depth of its error.

Garton Ash gushes about "this stern north European protestant discipline" of austerity economics. I don't even want to think about what may be going on in his fantasy life. Are you kidding me? Sadly, he doesn't seem to be kidding.

Garton Ash is a knowledgeable historian about Eastern Europe especially. And he's written some of the most insightful analyses of post-Berlin Wall Europe. But this is just goofy. He's in denial of the seriousness of the eurzone/EU crisis.

Jenkins overstates when he writes that "the EU was always a confection of elitist diplomacy, supported by Europe's peoples only for as long as they thought it would bring them money." For a country to join the EU, membership had to be approved by a national referendum. And generally the supported for EU membership in the 27 nations now a member was wide and deep. And the political nature of the EU as a vehicle for preserving peace and democracy was clear. It's the narrowness, lack of vision and one-percenter corruption of small and irresponsible European leaders like Odoacer Merkel and Nicolas Sarkozy that pushed things to a point where public support of the "European project" is in such doubt now.

But Jenkins may well be correct, though I don't share his seeming enthusiasm for the prediction, when he writes, "European political union, the universalist dream of visionaries, has met its Waterloo."
I had though NATO would die before the EU. But that's not how things are developing.

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