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The eurozone’s fundamental problem

For those with an interest in the interminable eurozone saga, this syndicated interview with the French president Francois Hollande is well worth reading. It sets out clearly the main current differences in approach between M. Hollande and Mrs Merkel as they set off for the latest European summit, which starts today.  As always the meeting will attempt to paper over the cracks between these two very different ideas of how greater political and fiscal union in Europe should be achieved. There is still a long way to go before a really durable solution that can guarantee the euro’s survival is reached (if indeed that proves to be possible).

Although the story is that the Spanish government is moving nearer to asking for a formal bailout, the decision on whether to give Greece more time has again been deferred until the start of next month.  Europe is not going to let the Greeks go until or unless the bailout defences for Spain and others are firmly and finally in place. As the various interest groups within the eurozone stake out their positions, it is evident how much further work is needed to achieve an effective buy-in to the latest banking union and fiscal control proposals that are on the table.

What hasn’t changed is the enduring indifference of the political elite in Europe  to the wishes of their various electorates, something that has been a feature of the great European monetary union dream from the beginning. You can get a flavour of it in this quote from the Hollande interview:

He said domestic electoral considerations should not get in the way of solving the euro-crisis. Merkel “is very sensitive to questions of internal politics and to the demands of her parliament. I understand that, and can respect that. But we all have our own public opinion. Our common responsibility is to put Europe’s interests first.

And also in this:

Asked whether in order for a more integrated political union it might be necessary to draw up a new European treaty and put it to referendums, Hollande shot back with a reference to the no vote on the European constitution in France in 2005. “If I remember rightly, we tried that formula in 2005 and it didn’t produce the results we were hoping for. Because before launching into institutional mechanics, Europeans must know what they want to do together. The content is more important than the framework,” he said.

This neatly echoes a quote from the former French President General de Gaulle, which I came across the other day while preparing a talk on the future of the Eurozone:

Given the choice between betraying my country and betraying the electorate, I will always betray the electorate.

The indifference of Europe’s elite to voter consent (the “institutional mechanics”!) is of course both the eurozone’s greatest strength and its greatest weakness, one that may yet be decisive in bringing the whole edifice crashing down in the next year or two. The issue is not whether the leaders of Europe have the political will to press on to deeper fiscal and political union, which is not in question, despite the tactical differences between the French and Germans, but whether they can carry their populations with them as the economic and social fabric of the poorer member states starts to crumble and the costs of fulfilling the euro dream are laid bare ever more graphically.

Written by Jonathan Davis

October 18, 2012 at 11:26 AM