|It is said that, in the current crisis of the Euro, power has shifted to the bankers. The appearance is of a technocratic monetary policy dictating political developments, which is hardly surprising in a technical monetary crisis. But it is only an appearance, as what is being resolved through what modern jargon might call technical-monetary "adjustments" is the unresolved political contradiction at the heart of the Euro project since its launch.
In mid-October the leading foreign policy functionary of the Austrian State, Stefan Lehne, is addressing Brendan Halligan's Institute of International and European Affairs (IIEA). He will, apparently, tell the gathering of Irish officials and foreign policy academics the basic facts of life of the current crisis and the three possible "scenarios" of how it will develop: "prolongation of the crisis; the end of the crisis with a durable accommodation between the UK and the EU; and a massive deepening of integration in the Eurozone", with the outcome being determined by the actions of the 'Big Three' Member States: France, Germany and the UK.
And there is the rub. For a "massive deepening of integration in the Eurozone" means its political integration and, as Lehne has pointed out in papers he has written for the Brussels "Carnegie Europe" Institute, this "might weaken and even destroy the EU's overall coherence" and marginalize the UK. Earlier in the Summer the IIEA discussed the role Ireland might play in keeping the UK involved in the resolution of the Euro crisis or, as The Irish Times put it, acting as a "bridge" between the UK and Europe. The current Dublin regime seems enthralled by the notion of the "political leverage" it might gain by making itself a pawn of Britain in this regard, with issues such as opposition to a Financial Transaction Tax, defence of low Corporation Tax rates and defence of financial derivatives trading all seen as "common interests" with the UK. This, in our view, would place Ireland at the reactionary end of the Eurozone, minimizing its integration by retaining UK influence.
As regards the political resolution of the Euro crisis, in the judgement of one who should know, the future of the Euro is now secure. That is the reluctant conclusion of the man who bet against the Exchange Rate Mechanism in 1992 and won. George Soros' long article in the September edition of the New York Review of Books is a denunciation of Germany, but a spectacularly successful finance capitalist cannot allow his prejudices to obscure the reality of things. Following the Draghi announcement of "unlimited bond buying" by the European Central Bank, he prefaced his article just before it went to print with a statement reversing the judgement of the article itself, concluding:
"The Euro crisis has entered a new phase. The continued survival of the Euro is assured…"
Since his billions are dependent on it, he has taken the trouble to understand the European project, and it shows:
"The process of integration was spearheaded by a small group of farsighted statesmen who practiced what Karl Popper called piecemeal social engineering. They recognised that perfection is unattainable; so they set limited objectives and firm timelines and then mobilised the political will for a small step forward knowing full well that when they achieved it, its inadequacy would become apparent and require a further step. The process fed on its own success, very much like a financial bubble. That is how the Coal and Steel Community was gradually transformed in the European Union, step by step."
In other words, it is a political process, and Soros' description also applies precisely to how the project for the Euro currency was conceived. Following the collapse of the Soviet Union Francois Mitterrand feared that the impetus for European Union would be lost as Germany prepared for unification. Already the deepening of European integration had gone into reverse, a victim of British influence. According to his biographer, Jacques Attali (C'était Francois Mitterand, p. 306), Mitterand supported German unification on the following four conditions, none of which German Chancellor Helmut Kohl would have baulked at:
1) recognition of the Polish border;
2) a united Germany foregoing nuclear weapons;
3) the launch of a single currency;
4) the launch of European political union.
European integration had been derailed by British influence and the Federalists were on the back foot. But the Euro would create a "fact on the ground" which would eventually impel a new momentum towards political integration. This was the case put to Mitterand by Jacques Delors, the great architect of "Social Europe". The momentum of the currency was understood at the time by its chief engineers. Lehne quotes from Commission President Romano Prodi in the Financial Times in December 2001 as follows: "I am sure the Euro will oblige us to introduce a new set of economic policy instruments. It is impossible to propose that now. But some day there will be a crisis and new instruments will be created."
It could be said that Mitterrand failed in the sense that "perfection" was not achieved. The arrangements were—as Prodi stated—inadequate and, as Mitterand well knew, the contradictions would have to be resolved by a future generation of politicians when, to paraphrase Soros, "its inadequacies became apparent".
But he would not have been disheartened. Au contraire! He always said that it was sometimes necessary to provoke a crisis in order to arrive at a political solution.
In the current crisis political leadership has passed from France to Germany. Angela Merkel is now demonstrating the statesmanship of Mitterrand … "step by step". The moves towards fiscal integration have been determined and consistent since the "Merkozy" initiative launching the Fiscal Compact and the exit of Britain from the process at the end of 2011. From the very start—as reported exclusively (in Ireland) by this journal—Merkel has brought the Eurozone with her in a strategy to construct an integrated monetary and banking regime, that will also ultimately deliver debt resolution (see 'Yes vote vindicated!', in Irish Political Review, July 2012).
President of the ECB Mario Draghi has been allowed "do whatever it takes to preserve the euro as a stable currency". This leap forward has been described by the Anglo-American press as a "defeat" for Germany and a "turnaround" by Merkel. It is no such thing. There will, Draghi declared, be unlimited purchases of the Government Bonds of debtor countries—up to three years in maturity and provided they reach an agreement with the European Financial Stability Facility and put themselves under the supervision of the Troika—the executive committee of the European Union, the European Central Bank, and the International Monetary Fund. The ECB bonds will not rank in preference to other bonds.
In explaining the initiative, and the opposition of the Bundesbank (which Merkel had overruled), German Finance Minister, Wolfgang Schäuble, said—
"German fears of 'unlimited' ECB bond-buying were understandable but based on a misunderstanding. 'The fact that the ECB doesn't name a [ceiling] is because, if they did, it would be an invitation for speculators'." (Irish Times, 15th September).
The Financial Times, the organ of finance capitalism that has consistently promoted "solutions" that would have fatally weakened the euro and disabled its largest member economy, has been reduced to incoherence. Its editorial of 15th September is a pathetic attempt to stoke up imaginary Greek grievances against Germany.
Merkel's intervention was decisive. She overruled Bundesbank President, Jens Weidmann (who shares the conservative monetarist views of the German business class), and made sure that the German Government representative on the ECB board, Jörg Asmussen (a Social Democrat), supported Draghi.
The question arises as to why all of this was not done earlier. The reason is that the conditionality attached to unlimited bond buying could not have been imposed earlier. It was only as the crisis was prolonged that political acceptance emerged in Europe, and in the Member States directly affected, to take on the refusal of affluent Greeks to pay taxes and the inordinate privileges enjoyed by higher public servants and professional elites in Ireland. Bond buying without conditionality—as previously advocated by the Financial Times—would of course have destroyed the Euro.
The Financial Times and the political forces across Europe that share its view of the world initially advocated as a solution to the crisis the printing of cheap money and the flooding of debtor states with it. This was later replaced by a clamour for stricken banks (in Spain) to be refloated by the ECB without conditionality on the States in which they operated and which were therefore responsible for regulating them. Finally the neo-liberal solution shifted again, to a demand on Germany either to bankroll the debtor states or leave the Euro altogether—the initial position of Soros, parroted locally by Mary Ellen Synon in The Sunday Times. Any of these developments would, of course, have collapsed the currency. But a new benevolence towards Germany then swept across the neo-liberal press of Europe, which produced a clamour to the effect that it was in Germany's best interests to leave the Euro as otherwise it would "ruin itself" in financing the saving of the currency out of a sense of duty arising from wartime guilt (thus Richard Sulik, leader of the Slovak neo-liberal 'Freedom and Solidarity' Party, writing in Die Zeit, 19th August).
Of course debt resolution will be on the agenda when a banking and monetary union are in place. As far back as January 2012—as reported in this journal—this was admitted even by German Finance Minister Wolfgang Schäuble.
The solution announced by Draghi remains inadequate. Banking and its logic are temporarily and necessarily shaping the development of things, though within an overall political framework of a consolidation of the currency zone. And the Fiscal Treaty is silent on the question of private debt. But a solid basis for a resolution of the crisis has been put in place which allows the Eurozone—in the words of George Soros—to progress "step by step" towards resolution.
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