Crisis offers opportunity to disrupt status quo

ABOUT 2,500 years ago, the Greek philosopher Heraclitus concluded that war was the father of all things.

He might have added that crisis was their mother.

Fortunately, war between world powers is no longer a realistic option. But major international crises, such as the global financial crisis, remain with us — which might not be an entirely bad thing. Just as in war, crises disrupt the status quo, which means that they create an opportunity for change.

To overcome a crisis requires doing things that previously were barely conceivable, let alone feasible. That is what has happened to the EU over the last three years. If the euro is to survive, eurozone members must act, while other EU members with various levels of commitment to integration remain on the fringe.

Indeed, almost all taboos that existed after the eruption of the crisis have been abolished. Most were established at German instigation, but now they have been removed with the German government’s active support.

It is an impressive list: National responsibility for bank rescues; the sanctity of the EU treaty’s proscription of bailouts for governments; rejection of European economic governance; the ban on direct government financing by the ECB; refusal to support mutual liability for debt; the transformation of the ECB from a copy of the old Bundesbank into a European Federal Reserve Bank.

What remains is the rejection of eurobonds, but that, too, will ultimately disappear. The only question is whether that taboo will fall before or after next year’s German general election. Germany is playing a strange role in the crisis. It has become the EU’s leading power, but it is neither willing nor able to lead. Precisely for this reason, many of the changes in Europe have occurred despite German opposition.

In the end, the German government has had to resort to the art of the political U-turn, with the result that Germany has grown institutionally weaker — a dynamic exemplified by its reduced influence in the ECB’s governing council. The old Bundesbank was laid to rest on Sept 6, when the ECB adopted its “outright monetary transactions” programme — unlimited purchases of distressed eurozone countries’ government bonds — over the objections of a lone dissenter: Bundesbank president Jens Weidmann. And the undertaker was not ECB president Mario Draghi — it was German chancellor Angela Merkel. The Bundesbank did not fall victim to a sinister southern European conspiracy; rather, it rendered itself irrelevant. Currently, the eurozone is on the threshold of a banking union, with a fiscal union to follow.

But, even with only a banking union, the pressure toward political union will grow. With 27 members, EU treaty amendments will be impossible, not only because the UK continues to resist further European integration, but also because popular referenda would be required in many states. These plebiscites would become a reckoning for national governments on their crisis policies, which no sound-minded government will want.

This means that intergovernmental agreements will be needed for some time to come, and that the eurozone will develop in the direction of inter-governmental federalism.

In the end, former French president Nicolas Sarkozy has prevailed, because the eurozone today is led by a de facto economic government made up of member countries’ heads of state and governments. European federalists should welcome this, because the more these heads of state and governments turn into a government of the eurozone as a whole, the faster their dual role as the EU’s executive and legislative branch will become obsolete.

The European Parliament will not be able to fill the emerging vacuum, as it lacks fiscal sovereignty. Only national parliaments can fill the vacuum, and they need a common platform through which they can control economic governance.

This crisis has defined the agenda for years to come: Banking union, fiscal union, and political union. What is missing is an economic growth strategy for the crisis countries; but, given mounting unrest in southern Europe, such a strategy is inevitable.

* Joschka Fischer, Germany’s foreign minister and vice-chancellor from 1998 to 2005, was a leader in the German Green Party for almost 20 years. Copyright: Project Syndicate/Institute for Human Sciences

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