WORLD VIEW:As Europe has grown closer, it has been inadequately served by politics and the media, writes PAUL GILLESPIE
NECESSARY BUT not sufficient. That seems a fair judgment on the package agreed by euro zone leaders to refinance Greece and shore up the single currency from market speculation and attacks. They went some way to reasserting political primacy over financial markets – a wholly welcome development.
It is an important event in a longer process. Private sector involvement in debt writedowns opens up – crucially – a collective rather than a unilateral path towards sovereign default within the euro zone. Greater flexibility for the existing financial stability funds and mechanisms, allowing them extend loans to non- programme states, intervene in secondary markets and provide collateral loans, is a qualitative change – one French president Nicolas Sarkozy says is tantamount to the creation of a European monetary fund.
Although hedged with conditions and yet to be filled out in detail, these measures probably herald the eventual creation of a eurobond system, whereby euro zone member states would pool the organisation of borrowing and debt in a limited fiscal union. That is technically feasible but politically hugely challenging for leaders and electorates unwilling to deepen economic governance in this incomplete monetary union. Nonetheless it is the big idea emerging from this crisis which pits sceptical and rapacious market players against hesitant and reactive political leaderships. They faced a choice between the worst scenario – break-up of the euro – and the less worse one of extending its architecture.
Once Italy and Spain were drawn into this deadly serious game the stakes changed, necessitating a shift away from the strategy of making Greek, Irish and Portuguese taxpayers pay for market failure towards one of collectivising such risks.
The total EU government debt (including bank bailouts) amounts to about 90 per cent of its annual economic output, roughly the same as the United States or Germany. But other aggregate balances – of tax and spending, trade or investment – are much healthier than those of the US. The prospect of a euro break-up is a matter not just for the European region but for the global economy, as has been seen in disparate comments by US, British and Chinese leaders whose interests are directly affected.
Looked at differently there is a striking coincidence between the European and US debt crises, facing simultaneous efforts to resolve them politically. Together they amount to what the historian and commentator Timothy Garton Ash this week described as a “structural crisis of liberal democratic capitalism – or, if you prefer to emphasise the politics, liberal capitalist democracy – as it has developed in the heartlands of the West over the last decades”. This arises from the accumulation of debt through the financialisation and globalisation of capitalism since the 1980s. By privatising profits and socialising risks the system greatly increased inequality and depended more and more on a relentless consumerism to underwrite growth as manufacturing was outsourced to China. It is now unsustainable ecologically as well as economically.
That is the deeper, competitive, context of the euro zone crisis. It must be resolved politically, including by much more public debate on what kind of Europe political leaders, parties and citizens want to see emerge and which policies would best get them there.
The crisis has deepened the long-standing process of Europeanisation, whereby EU issues become part of domestic politics. Irish people now know much more about German, French, Greek and Italian politics because we are more exposed to their decision-making – and the reverse also applies.
We have become used to hearing their voices on the media as part of our domestic debate, even if it is normally the views of political leaders rather than citizens. This deepens interdependence, but the process is still inadequately served by media and democratic practice.
An example can illustrate this point. Last Saturday the Greek prime minister George Papandreou orchestrated a telephone conference on the euro zone crisis of members of the Party of European Socialists in his role as president of the Socialist International. They called for decisive political efforts to tame the markets and adopted a statement supporting a sustainable solution for Greece, creation of a stability agency to reprofile the debt of EU member states and potentially issue eurobonds, protective measures, including a tax on financial speculation, and a European investment strategy to promote fair growth and job creation.
Participants included opposition leaders such as Martine Aubry (France), European Parliament PES group leader Martin Schulz (Germany), Dutch Labour Party leader Job Cohen, Finnish foreign minister Erkki Tuomioja, Spanish minister for Europe Diego López Garrido and Tánaiste and Labour Party leader Eamon Gilmore. The following day Gilmore was asked about eurobonds and said he supported them. But he did not refer to the PES conference, which received scant publicity around Europe.
Yet its ideas are highly germane and would surely help citizens get a more political handle on it if they were more widely known, given the current dominant conservative majorities. That can change. The EU system needs more such alternative politics just as much as technical economic expertise if it is to survive this crisis.