Beyond the Greek crisis


ANOTHER WEEK, another EU summit, another battle over Greek default. And again the EU leaders, in crisis management mode, will struggle to agree, and probably will agree if latest reports from finance ministers are born out, a second bandage for the ailing Greek economy. But what about the long view?

We are two years into the crisis, as Pat Cox said on Friday, and there is no sense that the EU is ahead of the curve, only of an endless rearguard action against the markets, cobbled together adhocery.

What is missing in what has drifted by default into an existential crisis for the euro zone is a long term unity of purpose to give the euro the solidity and authority which this one-winged bird of monetary union was not given at Maastricht – a political union. As Joshka Fischer, Germanys former foreign minister, argues in an important article reprinted in the Dublin Review of Books : “The current European crisis is only superficially a financial crisis; at its core, it is a political crisis triggered by the political weakness of the EU and the Euro Group.”

“The eurozone, as designed, has failed,” the Financial Times Martin Wolf echoes. “It was based on a set of principles that have proved unworkable at the first contact with a financial and fiscal crisis. It has only two options: to go forwards towards a closer union or backwards towards at least partial dissolution.”

And so, “it is not just individual countries which have to draw the lessons from the economic and monetary interdependence . The EU as such has to do the same,” President of the European Council Herman van Rompuy rightly argued in Dublin Castle on Friday. He insists, however, that the Union’s new tools of increased economic co-ordination, banking supervision and the long-term stability mechanism will do the job. But does this “fiscal union-lite”, essentially an enhanced “Stability and Growth Pact”, convince and really meet the needs of the euro?

Politically it will be hugely difficult. After the trauma of Lisbon the further integration of the EU was something no-one wanted on the agenda for a decade. Demands for increased pooling of sovereignty raise many hackles. In Germany, a “transfer union” in which there is a sharing of budgetary resources, either through direct transfers or the issue of “euro-bonds” underwritten by the euro area’s taxpayers, is anathema.

Fischer makes the important point, however, that, in truth, we are part of the way there. “The European rescue package not only turned the Maastricht currency union into a ‘transfer union’ or a ‘union of solidarity’ but marked the first step taken toward establishing a European economic government, should these decisions be implemented effectively.” The terms imposed on Ireland, Greece and Portugal were in effect a form of collective European economic governance, albeit one-sided and hardly democratic – a real fiscal union would also see not just the bailed out but the bailers, like Germany, submit themselves to a collective discipline.

Whether and how we want to get there are difficult, charged questions. But we should start the debate.