PART A – In the balance
They sound technical and minor when projected against the great scheme of Europe’s extraordinarily rich history. Will there be conditionality attached to the ECB’s bond purchases? Will the bonds that it purchases be treated on a pari passu basis in relation to bonds held by private institutions? Will the ECB supervise all banks or just the ‘systemic’ ones? These are questions that ought to be of no genuine interest to anyone other than those with a morbid interest in public finance. And yet, these questions (and the manner in which they are answered) will probably prove as important for the future of Europe as the Treaties of Westphalia, of Versailles, of Rome even. For these are the issues that will determine whether Europe holds together or succumbs to the vicious centrifugal forces that were unleashed by the events of 2008.
It is now official: The existing institutions of the Eurozone have caused the common currency area to spin out of control once the financial sector imploded in 2008. They just could not sustain the thrust of that earthquake, the result being that the whole edifice started unravelling. Either the architecture would have to be revamped throughout the Eurozone or it would, inevitably, buckle under its grossly erroneous design.
Europe chose to remain in denial for three long years. To do only the minimum necessary in order to avert the Eurozone’s imminent collapse. These ‘moves’ did ensure that the Eurozone survived till now but, alas, they deepened the structural faults under the surface and hugely increased the economic and social cost of resolving the Crisis. The very principle at the heart of the ‘rescue’ efforts revolved around the combination of huge loans for stricken banks and member-states and generalised austerity which reduced the incomes on which the solvency of these same banks and member-states relied. The result was to gain time at the expense of the Eurozone’s longer term prospects.
Three currents: Euro-clasts, Euro-loyalists, Euro-critics
From the outset, three were the dominant views on what to do with this Crisis: First, there were those who welcomed the Eurozone’s dismantling. I shall call them, borrowing from our Byzantine tradition, Euro-clasts. They comprised neoliberal eurosceptics who always looked upon Brussels and the European integration project with the antipathy that they felt a super-state deserved, left wingers who saw in the Eurozone an attempt to pull the rug from under whatever powerbase labour had built up over the decades for supporting working people’s lives and conditions, and, finally, outright nationalists for whom borders provided a false sense of identity/security.
Amongst those is us who, for different reasons perhaps, did not want to see the European Union fall into pieces (thus recognising that the Eurozone, however terribly designed it might have been, ought to be maintained) two were the dominant currents: the Euro-loyalists who subscribed, however reluctantly, to the European elites’ handling of the Crisis and those who, like myself, thought that the cure was worse than the disease (whom I shall refer to as Euro-critics).
The Euro-loyalists’ argument has been, from the beginning, that the steps taken (e.g. the first Greek bailout, the creation of the EFSF, the first bond purchasing program of the ECB, the creation of the ESM, the Fiscal Pact, now Mr Draghi OMT etc.) were natural steps toward the creation of the missing architecture. They concede that terrible mistakes were made along the path but insist that the path, however meandering, will lead Europe to deliverance.
In contrast, Euro-critics (like myself) have been arguing that the chosen path leads with a high probability to a bottomless pit from which nothing good can come out; that the very foundations of the new institutions, e.g. the EFSF-ESM, are toxic and, therefore, will fail the more ‘weight’ is placed upon them by authorities increasingly desperate, as the Crisis worsens.
The last few weeks have seen to an acceleration along the path that the Euro-loyalists think will take Europe out of the Crisis’ black forest. Mr Draghi’s OMT pronouncement, moves by Brussels to integrate the banking system, plus the favourable verdict by the German Constitutional Court, have all contributed a nice breeze straight into the Euro-loyalists’ sails. The question is: Is this genuine hope? Or just more hot air? To answer dispassionately, we need to take a nuanced, close, careful look at the facts.
[To be continued tomorrow]