The German Foreign Minister, Guido Westerwelle, has written a fascinating piece in today’s Financial Times explaining why “the Eurozone needs deeper integration through tighter economic governance and tougher rules for the stability pact.”
Underlying Westerwell’s argument is the assumption that the crisis in the Eurozone is not a crisis of the Eurozone, but rather the result of errant behavior by profligate Euro-Med states.
This then is a story of sin and virtue.
According to this dominant discourse all that is required are measures to ensure that the rules are more vigorously applied to stop countries from sinning.
The absence of growth, however, suggests that too much virtue risks becoming a collective vice. As the Bishop of Bath and Wells pointed in last week’s House of Lords debate the Eurozone will not emerge from the debt crisis without economic growth and growth looks ever distant with the severity of the austerity measures currently being introduced across Europe.
The idea that the Euro-crisis might in part be due to institutional weaknesses is dismissed by Westerwelle as errant nonsense. Westerwelle talks about governance – he purposefully avoids talking about institutions.
The limitation of this dominant position is explored by the London based think-tank Centre for European Reform:
The reason the Eurozone is governed by rules is that few of its member-states – least of all its wealthier North European ones – have any appetite for fiscal union. Crudely, rules (gouvernance) exist because common fiscal institutions (gouvernement) do not. But rules are no substitute for common institutions. And tighter rules do not amount to greater fiscal integration. The hallmark of fiscal integration is mutualisation – a greater pooling of budgetary resources, joint debt issuance, a common backstop to the banking system, and so on. Tighter rules are not so much a path to mutualisation, as an attempt to prevent it from happening.
Proponents of European integration have always held that when faced with a crisis Europe’s Member States inevitably take the political decision to move towards an ever closer Union. Many have therefore assumed that the resulting Euro-crisis will in time compel Europe’s politicians to take steps towards greater fiscal union.
So far the Monnet thesis seems wanting. To stabilize the Eurozone, Germany and other virtuous North European states would need to turn the currency into the very thing they said it would never be.
Even if they recognise that such a quantum leap forward is necessary they have no democratic mandate to do so and in the case of Germany the virtuous electorate of Baden Wurttemberg seem unlikely to consent to such a move. The unpalatable alternative is to persist with self-defeating policies that look likley to hasten defaults, contagion and eventual break-up.
Westerwelle’s article, interestingly titled Germany is not for turning on how to save the Euro suggests that Germany seems reluctant to take the Monnet test. This might explain why this has become as such an existential crisis for Germany. If the Euro-zone is to survive, Germany might just have to break a few rules and in so doing learn that sinning can sometimes be virtuous.
Certainly there’s more than a whiff of the sanctimonious in some German politicians’ analysis of the crisis, and in some cases worse (the head of the German TUC fiercely reprimanded politicians recently, saying that “we learnt sixty years ago that Germany shouldn’t dictate to other countries”).
But were German banks who lent vast sums to Greece and Italy really acting morally? It is at least arguable that German banks, having lent money so unwisely are now driving a no less short-sighted policy of austerity in southern Europe when what they should be doing is forgive the debts. Such forgiveness, especially if accompanied by just a little humility about who caused the crisis, would surely be closer to the divine than blaming the Greek people for what their leaders led them into?
Hi Foreignpolicy1,
I was wondering on a similar note,, No Profile Comment
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In America: governments, businesses, individuals are now buried under a mountain of debt. A mountain of debt that will never be repaid.
Who will borrow when they can’t make the payments on the debt that they have already? The math alone calls for a system reset, a debt jubilee.
Investors are already losing… in a rigged monetary casino that rewards usury, speculation, and currency manipulation while looting main street.
There is a moral principle that debts should be honored. That is, debts between businesses that buy and sell real products, not bundled ponzi schemes, debts between individuals, between friends and businesses that know each other to be rational and moral, debts based on investments where there is a rational expectation of return.
There is also a moral principle that unjust debts should be cancelled, and usury legislated against. Debts that are ‘odious’, debts based on fraud, debts to dictators, debts arranged by oligarchs without the consent of the general population (the 99 percent who have been left out of the equation), debts based upon compound interest upon compound interest, that should have been written off long ago, the debts need to be cancelled in a general jubilee. Think outside the box. It’s time for a jubilee.
Schäuble, who held talks with George Osborne, had an important message for Britain: forget any attempts to use the eurozone crisis to repatriate EU social and employment laws.