Can the euro survive? Today, less than a decade since the introduction of the single currency, this is the question that hangs darkly over Europe’s future. The Greek crisis, then the Irish one, and now the threat of a crisis in Portugal have irrevocably shaken confidence in the monetary union that, in spite of its size, the Europeans have created in the absence of a state framework, and above all in its chances of survival. It is a monetary union in which the economic and commercial imbalances between the member states are tending to become more rather than less marked, and in which dreaded asymmetric shocks are becoming endemic.
Doubts over the stability of the euro are, in turn, generating negative predictions regarding the future of the process of European unification and, as a consequence, the future stability of the world order, given that Europe is still a nerve centre of global trade and of the global economy. Perhaps this explains, in part, why both the USA and China have intervened repeatedly in recent months, the former urging the Europeans to resolve these crises quickly and offering help through the IMF, and the latter offering to support Greece and Portugal directly through financial aid and investments.
To alleviate these doubts it is not enough just to parade the successes that have been notched up in terms of integration and coordination of European policies. It is necessary to clear the field of all the ambiguities surrounding the choices that must be made in order to eliminate, once and for all, the contradictions that lie at the root of the problem.
Indeed, even though the facts speak plainly, Europe’s political responses continue to be insufficient and wholly inadequate. France and Germany’s proposal to reform the Stability Pact is a case in point: it unrealistically suggests that new constraints and sanctions can be imposed on the Eurozone countries, while deliberately ignoring the fact many of these countries – France and Germany first and foremost – have repeatedly failed to respect both signed agreements and the undertaking to promote European economic growth as well as European stability. The same applies to the fund which the national governments have set up to help the countries in difficulty, which is inadequate in many respects: in legal terms, in terms of its size, and also because of the lack of clarity over how it will operate and for how long it will remain in place. Inherently flawed, too, is the policy that burdens a single institution (the ECB) with sole responsibility for dragging the collapsing national banking systems back from the brink, through loans and cash injections whose consequences, in terms of the risk of creating new speculative bubbles (furthermore without unravelling the tangled web of fiscal, economic and production regulations that currently suffocates the Eurozone), no one is able, or willing, to predict.
In short, the political world in Europe has still not grasped that the crisis we are currently going through does not only expose the limits of the European institutions and of the monetary union, the fragility of the rules the Europeans have set themselves, and the structural weaknesses – actually already well known – of several European countries. The crisis has once more brought the Europeans face to face with the problem of the need to decide where, in Europe, sovereignty should lie. The fact is that the present situation is profoundly ambiguous and, as many commentators have already clearly stated and as the markets have already appreciated, this is also reflected in the debt: “The European sovereign debt is not really sovereign” said the Financial Times on 30 November. Indeed, since “the markets have realised that some key elements of‘sovereignty’ are missing” they are now tempted to speculate on the probable bankruptcy of certain countries. Indeed, a debt is sovereign only insofar as a state’s government is able, through the coordinated and combined use of different instruments – monetary, fiscal and budgetary –, to stop, or (depending on the situation) to discourage the markets from speculating. In Europe, however, none of this is possible because the states, having accepted a single currency, lack the power to use monetary tools, despite having retained their sovereignty in other fields: spending, taxation, foreign policy and defence. This state of affairs, which ought to have been a transitory stage on the road towards the political union of the countries that had adopted the euro, is instead tending to become a permanent aspect of the behaviour and intentions of the European governments. But surely no state can imagine that it is possible to go on incurring debts in a foreign currency indefinitely – which, in the absence of a state, is exactly what the euro is – in the hope that they may never have to repay them or never have to face the judgement of the markets to which they will necessarily have to turn in order to sustain them. As history indeed shows us, previous monetary unions not accompanied by political union have all failed.
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In short, what is taking place in Europe today stems from the fact that the Europeans have yet to decide whether and in what framework to re-link the project of monetary union to that of political union. This link was still implicit at the time of the ratification of the Maastricht Treaty, and it is a connection that is definitely made in the other great centres of world power. Indeed, China and the United States base their decisions in the economic, monetary and fiscal spheres on political-strategic objectives that they have decided they must pursue within the framework of the new global power relations.
Europe, on the other hand, through its ineptitude, risks paying the heaviest price for a crisis that began in the USA, but is now overwhelming Europe’s banking and economic systems. It is, indeed, on Europe’s vulnerable state bonds market that international investors have now begun to turn their speculative attention, just as they speculated on the different national currency markets at the time of the EMS. At the same time, however, elsewhere in the world other states in similar economic and financial difficulties, such as California for example, are spared these speculators’ unwelcome attention, precisely because they are an integral part of a very different, continental-size power framework.
And Europe’s ineptitude is, again, the reason why, powerless to intervene, it can only watch as the current process of redistribution of global wealth unfolds.
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Mankind is on the brink of an enormous, historical change in the relations between the West and the rest of the world, and the Europeans are approaching this epochal transition in a position of weakness and mired in structural crises. For the Europeans, therefore, now is the time to decide how they intend, politically, to broach this historical phase, starting with the debt crisis that has emerged in the Eurozone. In no. 33 of The Federalist Papers, Alexander Hamilton, precisely in reference to the question of how to govern the power of taxation, asked: “What is a power, but the ability or faculty of doing a thing? What is the ability to do a thing, but the power of employing the MEANS necessary to its execution?”
In short, unless the problems of power and sovereignty can be resolved by creating the first core of a European federal state, the Europeans will continue to lack both the ability and the faculty to take adequate action. For this step to be possible, however, there will have to emerge, very soon, within the key countries in the process of European unification, France and Germany first and foremost, the conditions that will make it possible to go beyond adjustments to the Stability Pact, or efforts to gain time by creating new systems for saving struggling countries, based on intergovernmental cooperation, without tackling the root causes of the crisis; and possible, also, to stop tackling individually the issues of disarmament, security and energy policy. There needs to emerge an awareness of the need to re-start the initiative really to found the European federation, beginning with a core group of countries.
It is around these questions that the debate on Europe’s future needs to revolve: all those, in the different countries, who are keen to see the Europeans once more taking control of their own destiny must thus press for their parliaments, political movements, unions and associations within civil society to mobilise and force their governments to take the historical decision demanded of our times: the foundation of a European federation.