N. 65 August 2015 | The Greek crisis shows that ‘maintenance of the existing’ is no longer enough

The consensus that was reached after the Greek crisis showed that the strenous search for agreements between governments feeds mutual distrust, and it de facto provides a breeding ground for anti-system and eurosceptic movements. Italy could play a key role in the framework of the ongoing discussions if it sided with a Minister of the Treasury, and a budget for the eurozone.

If one needs a clear demonstration of the fact that Europe cannot simply grind to a halt and settle for “maintaining the existing situation”, to use the expression of Italian prime minister Renzi, then one surely need look no further than the recent Greek crisis. The frantic weeks that led up to the latest agreement provide the best possible illustration of how the current eurozone system feeds a spiral of mutual distrust that, whenever necessary, is overcome only with enormous difficulty, and only to result in inadequate compromises that, being the outcomes of trials of strength more than truly shared solutions, leave lingering and dangerous resentment in their wake. It is the same system, i.e. the so-called intergovernmental method (the search for agreements between governments, which claims to make up for Europe’s lack, at supranational level, of federal powers and instruments), that underlies of the functioning of the euro and is creating fertile ground for the growth of anti-euro and anti-systemic movements whose demagoguery facilitates – as long as politics is conducted exclusively at national level – their tactic of exploiting feelings of protest and resistance to change.

These considerations are certainly not meant to minimise the positive outcomes of  the agreement reached between Greece and the Eurogroup. Indeed, this agreement prevented Greece from leaving the single currency (an event that would have had far-reaching and potentially devastating consequences) and allowed it to avoid defaulting on its debt (had this proved impossible, the Greek citizens would have paid a terribly high price); furthermore, Tsipras’s about-turn seems at last to have given him a real chance of getting Greece started again, through policies truly capable of changing the degenerate Greek system. Most important of all, the agreement has affirmed the principle that the maintenance of absolute national sovereignty is incompatible with membership of a single currency, as clearly explained recently by Sabino Cassese (Corriere della Sera, 15 July). As Cassese pointed out, a government that has freely decided – a choice that then becomes binding – to become part of a community that shares the same currency and thus also shares a set of values and principles, as well as common political and economic policies, is no longer accountable only to the electorate at home, but also to the new community it has joined (and to the peoples that make up that community). All those raising their voices in protest over the perceived insult to Greek democracy fail to consider the fact that that Europe and, in particular, the single currency are fundamental dimensions of the political life of those countries that have opted to be part of them, dimensions that it is not possible simply to ignore, pretending that they do not constitute an irreversible step towards shared sovereignty; the point is, if anything, that this sharing of sovereignty must now be rendered explicit and clear to all, and must be supported by the creation of a democratic European supranational system. It is precisely this latter aspect that the tensions of recent months have clearly exposed. And, unsurprisingly, the reaching of a solution to the Greek problem seems to have opened up the possibility of speeding up the process of completing the monetary union, an issue that has been left in abeyance for over two years.

It is therefore no coincidence that, as soon as the Greek emergency was over, there emerged and began to circulate proposals – those of the French government and those attributed to the German finance minister Schäuble – that seem to reflect this new climate. In both cases, the stated objective, albeit still to be clearly defined, is precisely that of creating, in the short term, a true European monetary government. On the German side, the design that seems to be taking shape, increasingly solidly, is that of seeking to continue down the fiscal union route through the appointment of a eurozone Treasury minister, accountable to the European Parliament, meeting in a restricted composition (still to be determined), and invested with the power to intervene in cases of violation by member states of the budgetary constraints that are necessary in any monetary union, and also with the power to manage an autonomous eurozone budget financed with a share of the member states’ VAT or corporate income tax revenue. As remarked by the president of the German think tank DIW, this would in fact create an “ability to tax and borrow [that] could be limited to two purposes: to provide unemployment insurance and to support investment.” (Marcel Fratzscher, Financial Times 27-07-2015). A report by the five-member German Council of Economic Experts provides further confirmation that the issue of the transfer of sovereignty in fiscal matters remains central to German concerns (“Making the euro area collectively responsible for potential costs without member states giving up any national sovereignty over fiscal and economic policies would – sooner or later – make the currency union more unstable”  – 28-07-2015); at the same time, this report makes no secret of the obstacles that must be overcome by those in Germany who want to see immediate advances towards economic and political union, or of the fact that the German government, in order to overcome internal resistance, needs its eurozone partners to demonstrate a clear intention to move in this direction.

France, for its part, though its president Hollande and prime minister Valls, has stated its wish to move towards a eurozone government and budget, yet without specifying how the problem of transferring  powers of control over national budgets might be addressed, and remaining rather ambiguous on the issue of European parliamentary powers of scrutiny in relation to fiscal and economic matters. In the French view, these parliamentary powers of scrutiny should remain, for now, in the hands of a second-level representative body made up of MPs from the national parliaments of the eurozone member states  (i.e. a form of representation subject to national popular sovereignty, in line with the situation prior to the first direct elections of the European Parliament in 1979). In this regard, Italy, through its finance minister Padoan, has already expressed justifiable and necessary reservations.

But even though the divergences between these two proposals, stemming from these two countries’ antithetical approaches to the European process, are both numerous and deep, the main point is that the conditions now seem to be right for restarting discussions on reform of euro area governance. Crucially, the success of such an undertaking will depend on the role played by the other key governments and by the European institutions themselves. The principles that Germany defends and on which, in its view, the future advancements of the eurozone depend are sacrosanct. For this reason, were Italy to choose to support the proposal to create a eurozone Treasury minister with limited but real powers of intervention on national fiscal policies, accountable both to the European Parliament (in restricted composition, still to be decided) and to the majority of the members of the Eurogroup; and were it, on this basis, to support the need for an additional  budget for the eurozone financed by dedicated own resources (also offering proposals regarding the nature of the taxes necessary for this purpose) and for specific solidarity mechanisms, it could, through this move, play a decisive role in the current debate, and even dictate, to its eurozone partners, the agenda of the necessary reforms and the acceleration of the process that the gravity of the situation demands.

The Five Presidents’ Report, published at the end of June, indicated that the necessary work on European institutional reforms could be delayed until 2017, but recent events have certainly overtaken and belied this position. However, this report did show that, within the European institutions, there is still a clear desire to achieve the creation of a federal system of governance  of the euro area. It therefore falls to the governments, in the wake of this latest struggle to ensure the  survival and strengthening of the monetary union, to take the last decisive step of transferring sovereignty in this field, i.e. the step of creating the embryo of a European supranational government.


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