Just try imagining there was no EU . . .


THERE’S NOTHING unusual in the fact that nobody knows what the future holds for the euro, the European Union and the global capitalist system.

 That’s what happens in a systemic crisis: the assumptions on which projections are based cease to be valid. What may be somewhat unusual, though, is the degree to which what we might call “false futures” hold sway. The vast bulk of popular and political opinion now coheres around solutions based on two things that are definitely not going to happen.

One false future is that the monetary union of the euro is turned into a fiscal union. The 17 members of the euro zone will collectively acknowledge the inherent weakness of the single currency structure. They will agree to give formal and institutional shape to the coup that has already happened in Europe, with an unelected directory in Frankfurt assuming control of national budgets. The Frankfurt Group (Angela Merkel, Nicolas Sarkozy, Mario Draghi, José Manuel Barroso, Jean-Claude Juncker, Herman van Rompuy, Christine Lagarde and Olli Rehn) which has assumed command with no democratic or legal mandate will be given retrospective legitimacy by changes to the EU treaties.

Whether or not this is a good idea is irrelevant for one good reason: it is not going to happen. The weaker members of the euro zone (like us) will never vote to create a centralised technocracy whose only aim is to impose more and more austerity on citizens while forcing those same citizens to bail out banks. And the stronger members of the euro zone are not going to do the one thing that would make the weaker members change their minds: bribe them by writing off their debts. So the future imagined by the conservative right is an impossible one.

But the other thing that isn’t going to happen is the future vaguely imagined by much of the left: that the German taxpayer decides to pay for everyone’s mistakes by simply underwriting a system of eurobonds to which all the debts are converted. German public opinion is surely less hostile to the idea of sharing the pain than is generally assumed, otherwise the Social Democrats and Greens, who suggest doing precisely that, wouldn’t be riding so high in the polls. Some honest discussion of the role of German banks in the reckless lending that helped to create the crisis would help. But there’s a big difference between sharing the burden and assuming it in its entirety. It is both unjust and impractical to expect ordinary Germans to pay for all the collective follies.

We have, then, two completely unrealistic “futures” for the euro and the EU, one in which we all vote to make our loss of national economic sovereignty permanent and the other in which the average German wakes up one morning and says, “Don’t worry, lads, just send the bill to us.” Is it any wonder that there is such a state of paralysis?

What’s needed, obviously, is a response that doesn’t expect us to surrender to permanent technocracy in Frankfurt and doesn’t expect the Germans to bail out everybody else. The odd thing is that a detailed and realistic plan which depends on neither of these impossible things has been on the table for some time. It has very wide political support across Europe – everywhere, it seems, except at the top tables.

The plan was drawn up by Stuart Holland, former economic adviser to British governments, and Yannis Varoufakis, professor of economics at the University of Athens. It is based on assumptions that are much more realistic than the current orthodoxies. Holland and Varoufakis argue that there are three interlocking crises – banking, sovereign debt and (one that is usually ignored) under-investment – that have to be dealt with simultaneously. They suggest (and everything that has happened this year bears them out) that loading more debt on peripheral nations does nothing to address the banking and investment crises and doesn’t really tackle sovereign debt either.

What they propose, therefore, is a three-pronged approach to the crisis, using three existing EU institutions. The aim is to “Europeanise” the problem without treaty changes or asking the Germans (and the Dutch, Finns and Austrians) to bail out everyone else.

First, the European Central Bank would issue “e-bonds” to back the portion of sovereign debts (60 per cent) that is permitted under the Maastricht criteria. Effectively, that debt would then be owed to the ECB, but at the low interest rate the ECB could get. The member states continue to service this debt – there is no demand that Germany or anyone else does so.

Second, the European Financial Stability Fund is used as the mechanism for cleaning up the European banking system.

Third, the European Investment Bank is empowered to embark on a major infrastructural investment programme across the euro zone, with the aim of supporting the economic growth necessary to solve the crisis.

This is a big, bold, ambitious plan and it requires the capacity to imagine an active, coherent and courageous EU. But if that seems fanciful, try imagining the only realistic alternative: no EU at all.

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