THE European Commission has had some real leaders, men with elements of greatness: Walter Hallstein, Roy Jenkins, Jacques Delors — father of the EU single market — come to mind.
It has had its share of forgettable presidents: the pompous Gaston Thorn, the bumbling Jacques Santer.
Some fall somewhere in the middle in terms of reputation: the Italian, Romano Prodi is a case in point. And perhaps, also the current incumbent, Jose Manual Barroso.
Right now, the position of the man from Portugal lies in the balance, along with the future of the eurozone.
Will the smooth talking former Portugese statesman be remembered as the man who looked on while the vision of a unified Europe crumbled to ashes on his watch?
Right now, Europe’s leaders are like men frantically working on fortifications, squabbling among themselves as they await the long boats of the Viking invaders from the financial markets, sailing along with the idea of rape and plunder in their heads.
The next few months are likely to tell us quite a bit, not least about the European Commission and its likely future prospects.
The young Jose Manuel started life as a Maoist student opposing a crumbling right-wing dictatorship before shifting to the right of centre and entering Government in the mid-1980s. By early 2003, as prime minister, he was hosting George Bush, and Tony Blair, as they put the final touches to the Iraqi invasion plan on the Azores.
Eighteen months later, Barroso was on his way to Brussels to preside over an EC that was gliding serenely along in an era of prosperity.
Within three years, the conditions that made this period of contentment possible had begun to disappear. 2007 was turning into 2008. Purring moggy transformed into hissing, savage, clawing Tiger.
It took Barroso and the Commission time to adapt to this very changed environment.
The EC has had to cope with global meltdown and, more recently, with the sovereign debt crisis and the enforced bailouts of Greece, Ireland and Portugal. Barroso and his comrade in arms, the Finn, Olli Rehn, have worked to ease the stringent financial conditions enforced at the behest of the ECB, and the leaders of France and Germany.
Rehn, in particular, was quick to wake up and smell the coffee, realising that simply applying the leeches was killing the patient.
Yet, not for the first time, the Commission has struggled to assert itself against the powerful governments at the heart of the Union.
EU leaders have been reluctant to admit that the banking system, even in the core countries, has been rendered fragile by its exposures to a troubled periphery, while heartland states like Italy struggle with unreformed indebted economies.
Increasingly, the so called bond market vigilantes have been circling the eurozone. The traders having been having a field day.
The omens for many months now have not been particularly good. The financial cancer on the periphery appears to have metastasised, spreading to affect the core countries of Spain, Italy and even France, where the prospect of a Greek default has sent bank shares plummeting by over 60% in a grim replay of events in Ireland some three years ago.
Much of the speculation has centred on Berlin and on the people who have been picking up the euro tab. Compassion fatigue has set in, big time.
The German parliament has just approved by a large majority the beefed up EFSF bailout fund agreed on July 21, but few believe that Chancellor.
Merkel has come close to persuading her increasingly exasperated population to accept that they may have to start writing much larger cheques if the post-war European settlement is to survive intact.
The future of Greece and its ongoing bailout hangs in the balance. A Greek default — hopefully a controlled one — appears all but inevitable.
What then for the banks with heavy exposures to this troubled country?
France and Germany are haggling over the scale of the writedowns which lender banks must absorb.
Few doubt that the hit will be shy of €100bn — it could be considerably more. The European Commission sought, until recently, to try and paper over the cracks between the financial surplus states such as Germany, Holland and Finland, and the Mediterranean group of states now coming under pressure.
But Barroso has begun to abandon all pretence at normality and this week, in his annual "State of the Union" address to MEPs in Strasbourg he came out, all guns ablaze.
He issued a stark warning: "we are confronted by the greatest challenge the EU has seen in its history".
He called for a strengthening in central European institutions. In his view, economic co-ordination should not be the work of separate governments, but rather that of European institutions led by the European Commission.
Barroso suggested that some changes to EU treaties may be needed, but that even without such change, the issuing of shared debt in the form of Euro bonds could go ahead.
The EC president is also proposing the introduction of a Financial Transaction Tax along the lines of the "Tobin tax", a tax proposed by the US Nobel prize winner, James Tobin, who in turn, drew on a proposal of the great economist, John Maynard Keynes.
The idea of a tax on financial transactions appeals to continental Europeans in general and it drew applause from the MEPs gathered to hear the speech.
However, Britain is bitterly opposed to any such tax, unless it were to be implemented on a global basis.
The British fear that activity in the City of London could be hit, with funds flowing to untaxed financial centres.
Treasury sources have indicated that Britain will veto the plan.
Barroso’s argument is that the tax could raise 55bn a year while curbing runaway speculation.
In truth, the proposal’s real aim is the sugaring of the Euro bond pill — a Tobin tax by itself will not save the European project from collapse.
What could achieve this aim is the assembly of massive financial firepower, with the aim of fending off the speculators, buying time for the various troubled sovereigns and financial institutions to get their respective houses in order.
Barroso is clear that the EU must go further to address the contradictions underlying the euro project.
In his view, monetary union must be completed by an economic union — he has indicated that the Commission will be presenting plans with this in mind over the coming months.
"It was an illusion to think that we could have a common currency and single market, with national approaches to economic and budgetary policy." But the obstacles that lie ahead in terms of implementing the proposed economic union remain enormous.
The crisis has exposed yawning gaps between north and south, east and west within Europe.
Can the increasingly disillusioned voters in the wealthy states and in Germany, in particular, be persuaded that sacrifice for the common good is preferable to a dissolution of the euro, and perhaps of the EU itself?
Can the spectre of moral hazard and an unending underwriting of the debts of the feckless be banished?
What implications will economic/fiscal union have for a country like Ireland and for its cherished low Corporation Tax rate?
Can the political establishment here possibly sell yet another EU treaty to a weary electorate in an atmosphere of disillusionment?
Barroso is at least, seeking to make the case for integration rather than allow it to be lost by default.
There is a compelling logic to his words: either we move forward, or we tumble off the European bike, with unknown consequences for us all.
In the tweeted words of one Commission official, "at last, some emotional arguments in defence of the EU!"
But the Barroso crisis plan depends heavily on the cooperation of the European Central Bank, a body riven with internal dissension and one that has shown a marked institutional reluctance to engage in anything that could conceivably threaten its strict monetary mandate.
The ECB must stand ready to pump massive liquidity into the market to support the EFSF in the event that the markets turn on Spain and Italy, two countries viewed as too big to fail, and too big to save.
The bank’s own lawyers have questioned the legal basis for such an intervention.
Meanwhile, the national parliaments are still voting to ratify the deal agreed in late July. Is the European pantomine horse equipped to play the role of Fifth Cavalry to the project?
Will Barroso turn out to be Europe’s Lucky General for the early 21st century?
a d v e r t i s e m e n t
This appeared in the printed version of the Irish Examiner Saturday, October 01, 2011
