Saturday, September 17, 2011
Sovereign Debt Crisis will Change Nature of EU
Europe is clearly at a turning point, turning against the single statism of the European movement, with its straitjacketed currency, its flows of economic migrants and counterflows of subsidies, its everlasting crises and its humiliation of democratic governments. It is turning back to national identity, and there is nothing the EU can do to about it.
Certainly the EU is in a crisis from which it is likely to emerge substantially altered. The three scenarios I foresee are as follows:
i) A return to independent sovereign states with their own currencies.
ii) A survival of the customs union aspect but an end to the political union objective.
iii) an increasing intensity towards economic unity within the eurozone, led by Germany, leaving a residual group of nations remaining out of the euro and completely outside any political union aspirations.
It could be that i) and ii) come about at a later stage but the one which seems most likely in the near future is iii).
As a non reconstructed liberal internationalist, I have always supported the EU- to solve the world's problems we need more unity not less- and thought it would be good to be in the euro. But when I thought it through I could never see how, when some regions in the UK would prefer a different interest rate to other regions how a single rate for the whole of Europe- which basically suited its biggest member, Germany- could ever survive any really serious crisis. Now we have that crisis and the lines of fracture are so very clear to see.
Any single currency like the euro implies a supra-national degree of discipline and direction. Greece, Italy, Spain and Ireland proved not so biddable or adaptable and have precipitated a point of departure. Those who are happy to accept German direction and economic dominance, will, I guess, stay in a probably smaller euro-zone, and accept an even tighter regime of control from Brussells. The rest of the EU membership, including us, will have to make our future in the 'slower' tier of the EU, able to adjust our currency but outside the possible powerhouse of economic expansion.
Some right-wing Tories are urging Cameron to exploit the crisis as Bagehot discusses in his Economist column this week. His conclusions seem sensible, even if this gang of Tories is not:
Still, Eurosceptics are right about one big thing. Europe’s tectonic plates are moving, and Britain’s vital interests are in play. The government should plan defensively in case a moment for horse-trading arises. But it should seek a narrow, valuable and—if timed right—achievable concession. Try a protocol giving a veto over EU financial regulation to Britain (where the lion’s share of European financial business is transacted, after all). Forget blanket opt-outs that will not be granted. Europe is on fire. The moment is not golden; this is no time for glee.