Saturday 22 July 2017

We need to come up with a plan B for the Euro crisis

The tyranny of mediocrity in Brussels will march on -- unless drastic action is taken immediately, writes Declan Ganley

LAST Tuesday morning, I woke up in the pre-dawn darkness of a downtown Manhattan hotel. Having flown in the night before and still unadjusted to the five-hour time change, I decided to take a walk along the Hudson shoreline to the Irish Famine memorial, a place that, for me, always stirs deep emotions.

I walked south along Battery Park, looking out over the Hudson and the illuminated Statue of Liberty. On the morning that was in it, with news of the latest Greek tragedy cramming the Twitterosphere, I was reminded once again of the costs of the errors that have led the European project to this seminal moment.

I thought of another man who had stood in that part of lower Manhattan on another summer morning in 1776. From that spot, Alexander Hamilton had, with a meagre cadre of men and with extraordinary courage in the face of overwhelming odds, stood his ground and returned the cannon fire of two of His Majesty's prize warships. It would not be the last time that Hamilton would show the courage to take on the impossible and triumph.

When the war ended, Hamilton became the first American Secretary of the Treasury, and found himself facing a threat even more destructive to his nascent nation -- the overwhelming debts of the 13 colonies that had merged to form a more perfect Union.

Hamilton did then what Europe must do now. Recognising that the debts of the individual states posed an almost insurmountable barrier to the economic survival of the Union, he federalised them, sharing the burden evenly and in the process purging failed lending and speculators (including close friends), and forever cementing the economic bonds of Union that were to make his country the leading world power of the next two centuries.

Faced with a similar crisis today, with debt burdens in various member states threatening to pull the European project apart at the economic seams, our leaders have no plan. And so the tyranny of mediocrity in Brussels and Europe's capitals marches on.

To borrow a line from Churchill: "They are decided only to be undecided, resolved to be irresolute, adamant for drift, solid for fluidity, all powerful to be impotent."

The response of those leaders has been to stumble from crisis to crisis, responding to events, but never shaping them. This latest Greek disaster is the perfect example of that -- a hole temporarily plugged, even as the foundations of the dam are giving way.

The member states' political establishments, our own included (by which I mean a complacent civil service as well as the main parties), have learned nothing from this crisis. They still labour under the delusion that simply being "good Europeans" and doing what they're told will get them out of this mess. Given this penchant for Brussels and Frankfurt to react to, rather than shape events, we must give them something to react to.

If only to force affirmative decision, Ireland needs a plan B. We should immediately begin printing an alternative currency -- in Ireland's case, the Irish punt. We should signal our European brethren that failure to federalise and purge the bank-related portion of our debts in short order will result in us leaving the euro, slashing our costs, liquidating failed banks, and dissolving the suffocating carbuncle that is Nama. This will restore competitiveness quickly. We need to show that we are prepared to go our own way if we must.

It may sound daunting, but the alternative for Ireland is for several generations to be bled over and over again to pay for a stalled political project that without urgent and radical reform is headed for grand failure. If Europe will not lead for us, we must follow the steps of our forefathers and lead ourselves.

Of course, that is not what I hope will happen. Yet, in this seminal moment for Europe, we face the choice that Hamilton did all those years ago -- to unite and succeed, or to allow the power of an economic crisis and nationalistic rivalry fuelled by half-truths, (such as "the lazy Greek" myth, or that Irish bailouts were due to low corporate taxes) tear us apart.

The crisis of the moment calls for vision and clarity. As a committed federalist, my vision is for a Europe that is united, democratic, accountable, transparent and strong. A United States of Europe whose leaders are directly elected and accountable, where the power of large member states is mitigated so as not to harm the smaller, where tax competition is as stiff and unfettered between Ireland and France as it is between Texas and California. Where member states are sovereign, but where an accountable, efficient and small central administration can keep us all moving in the same direction.

There is but one solution -- Europe must federalise the debts of its member states. It must create a fiscal firewall to this crisis, with the full power of all 27 economies standing behind it. In doing so, it must be prepared to allow its failing banks to liquidate and its failed lending to be purged.

Confidence in the European Union will not be restored until the perception that it is a reluctant union ends and Europe recognises that it must allow its broken financial institutions the freedom to fail.

The lesson of this crisis is that half-union, with its Potemkin accountability has failed, and failed utterly. We must either go our separate ways, or take the steps and make the reforms necessary to unite fully in the face of the challenge of the moment. To do that we must reform not only how the euro works, but also the way the entire European project is governed.

The courageous Hamilton and his mentor George Washington had an advantage in entering into America's debt federalisation. They already had enshrined the concept at federal level, of government by consent of the governed.

Their Declaration of Independence and newly minted Constitution thus provided the foundation for Hamilton's state debt federalisation.

Europe has no such sound constitutional foundation; the Lisbon Treaty's constitutional arrangement is unfit for purpose, a classic failed Euro fudge.

Therefore, we now need European leaders with the courage of Hamilton and Washington to step forward and lead a speedy democratic and institutional reform that is the prerequisite to a safe and much needed debt federalisation. This need not take months; with courage and leadership and the appropriate sense of urgency, it can be done.

Anything less can no longer be acceptable. If we are to be in, we must do so in full faith and commitment to a reformed, democratic Europe worthy of our country's prior historic sacrifices for liberty, or we should get out and go the way of Switzerland or others, while we still can. Europe's time for dithering is over, as is Ireland's.

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