The economic crisis is now at a critical point, and Europe's leaders must chose between a federated eurozone power or yielding to the power of the markets and economic and political disruption.
With Italy losing its ability to refinance its debt, it is curtains for Europe as we know it. For decades, the Continent’s nations have walked a constitutional tightrope, refusing to make the ultimate choice between their core sovereignty and the merging of powers necessary to construct a viable European polity.
Europe, so we were told, was a political construction of its own kind, “sui generis” as the Brussels jargon has it – two words of Latin to back the claim that, somehow, Europe would be uniquely empowered to escape the federalist logic that has governed the history of all other successful decentralised political entities built around different levels of public authority.
The financial hurricane unleashed by the dangerous combination of poor regulation, too much debt and weak leadership terminates this useful but false conceit and brings Europe’s constitutional balancing act to an end.
The one choice our nations and their leaders now have left, and not for very long, is to decide on which side of history they would prefer to fall, and on what kind of political terrain they would like to land. They can take charge and assume control, initiating a bold jump forward into a federated eurozone power, involving as its main feature some shared assumption of the eurozone’s fiscal past and therefore a shared management of its fiscal future.
Or they can yield to the power of the markets, accepting an economically violent disruption of monetary union – and thereby reopening the door to the dynamics of nationalism that drove Europe’s history until 1945.
Understandably, the political difficulty of going for the first option is now triggering calls on EU leaders to give up on the euro and reconcile themselves with option number two. Yet attempts to paint a comparatively benign picture of the consequences of such political passivity are hardly convincing.
If the eurozone were to disintegrate as the result of a wholly avoidable process driven by financial speculation and the richer countries’ refusal to act, a vicious national blame-game would dominate Europe’s politics for a decade or more.
Formally, the EU would survive; secession, a legally viable option now that the Lisbon Treaty is in force, would probably remain an unattractive option for most if not all EU member states on a Continent exposed to massive economic disruption and extreme political uncertainty.
But it is hard to imagine how, with a self-inflicted political disaster unprecedented in 60 years of western European history and a search for culprits fuelling all kinds of resentment, Europe’s remaining policy endeavours would continue to chug along nicely.
Forget Europe as a globally relevant power; European credibility on the world stage would be destroyed for a very long time indeed. Whether the single market could survive in its present form should equally be doubted. It is all too often forgotten today that monetary devaluations as an instrument to restore competitiveness gave rise to substantial economic tensions and political anger in countries not resorting to such measures – and that this anger was one the main drivers of monetary union on the European Continent.
By itself, a small producer such as Greece leaving the euro zone may be economically and politically manageable. But the free trading of goods within the single market might well not survive the angry political atmosphere that would follow a larger eurozone breakup.
Given the dangers of bowing to the logic of disintegration, it is encouraging that the most relevant leaders in the EU today – Germany’s Angela Merkel and Nicolas Sarkozy of France – seem at last to understand that the extraordinary problems afflicting the eurozone will soon call for extraordinary measures to overcome them.
The German chancellor is finally giving speeches preparing her public opinion for politically far more ambitious crisis-fighting steps than those we have seen so far; and the French president will be mindful of the fact that the most assured way of losing the presidential elections in the spring of next year is to allow France and the eurozone to be overwhelmed by events in the coming weeks and months.
The recent improvement of his poll numbers suggests that the French electorate wants to see a president who confronts the crisis head on and explains what he is doing.
The political analysis that suggests public opinion in most euro zone countries would be hostile to a further merger of euro zone sovereignty misses out on one essential fact: most citizens are now genuinely scared and therefore prepared to sign their leaders a generous cheque for further European political integration – if that is what it takes to stop the financial markets from running amok.
Ireland’s citizens have made a name for themselves in Europe for their particular reluctance to hand more powers to Brussels. But the disintegration of the euro zone is inevitable unless more powers are given to its joint political authorities – and Ireland should have a strong interest in such powers being exercised through means other than a Franco-German directoire.
It is now apparent that the notorious Irish insistence on each member state retaining its own right to a European commissioner has backfired very badly: the ensuing expansion of the number of commissioners has been a main factor behind the political decline of the institution, now marginalised by a European Council largely run by Germany and France.
Here is a lesson to be learned: Irish obstreperousness gave Ireland a splendid feeling of leverage for a few months – and has lethally weakened its best ally in Brussels.
It is clearly unhealthy for the eurozone to find itself under the sway of two leaders representing only two of its nations and less than half of its citizens. It is therefore excellent news that the overwhelming majority of elected German politicians understands this and is pushing for a proper treaty-based process to give the eurozone the efficient, fair and balanced leadership it so desperately needs.
The irksome Franco-German condominium over eurozone affairs has emerged only because Europe’s joint institutions were too weak to manage the crisis. For Ireland, as for Italy or Spain, accepting the transfer of new sovereign powers to the eurozone is the best way to secure its place in Europe’s political future.
This article first appeared in the Irish Times
The European Council on Foreign Relations does not take collective positions. This commentary, like all publications of the European Council on Foreign Relations, represents only the views of its authors.