Business World

Thursday 19 April 2018

Debt crisis has shown us Europe's faultlines -- based in cloud cuckoo land

John Lichfield

Some of us remember when Europe was boring. We once sat through all-night ministerial meetings on Monetary Compensatory Amounts or haddock quotas in Sea Area 6(a).

In those days, we used to say Europe could never work because it was too technical for the politicians and too political for the technicians. Yet, in its stumbling, frustrating, inefficient way, that rather limited Europe did work.

I was never a full-on European federalist. I came to believe a quasi-federal union was the best way for European nations to solve problems they would have to solve anyway.

Now Europe is no longer boring. It used to be like an instruction manual for a fridge-freezer in 20 languages. It is now like a Dostoyevsky novel -- compelling but bewildering. And scary.

Even the main characters no longer understand the plot. There was an endearing, but terrifying, moment at one of the recent summits when Angela Merkel told journalists: "No one has ever tried anything like this before. Even the greatest experts don't know if it will work. But it's the best thing we can come up with."

Uh oh, I thought. We are all doomed. Europe has become too technical for the technicians and too political for the politicians.

Watching the eurozone countries trying to resolve their debt crisis has been like watching 17 people in oven gloves manipulating a Rubik's cube. Last week the Greek prime minister, George Papandreou, decided it would be a good idea to ask another 11,000,000 people to join in.

The Eurosceptic punditry said a Greek referendum was a marvellous idea. The people of Greece had a democratic right, they said, to defy the bullying elite and reject crippling EU-inspired austerity measures -- even if they were receiving hundreds of billions of euro in aid and debt-forgiveness.

Presumably they are cheering on Greek default because they hope it will start a chain reaction that will destroy the euro and even the EU.

Tipping the world into a deep recession is a small price to pay.

Hypocrisy is not just a Greek word. Nor is chaos. Please let us remember that, up to 2007, debt was the foundation of Western prosperity. The sub-prime crisis was caused by mega-bets on private debt approved by the "markets".

But it is foolish to blame banks and markets alone.

The crisis (another Greek word) has starkly exposed stupid old faults and dangerous new faultlines. For 30 years, at least, Greece has lived in a cloud cuckoo land in which it pretended to be a modern, democratic state but almost everyone avoided paying taxes.

Of course, the euro project itself was founded on the cloud cuckoo basis that countries could share a currency without harmonising economic policies. The rules were ignored by everyone, including Germany.

(Cloud cuckoo land, by the way, is a Greek notion, invented by Aristophanes in his play 'Birds'.) But who would have imagined that Europe would be reduced to holding out a debt begging bowl to China, India and Brazil?

But a dangerous faultline has also been exposed within Europe itself. The 17 eurozone countries are talking of creating one economic government with a single tax policy.

Is there a genuine popular appetite for a more federal system? No. The crisis has exposed a new nationalism. For example, the vicious exchanges of insults in the popular press. Bild Zeitung vs "lazy" Greece; Greek newspapers vs "Nazi" Merkel. Almost everyone against Italy, and Italy's Berlusconi-run media against almost everyone.

The limits of the halfway-house-muddle-through Europe I once championed have been exposed.

Europe is paying the price for years of ambiguous, late-night deals and mediocre politicians getting top jobs in Brussels.

So, should we scrap the whole European idea? Yes, if you want to plunge Europe into a long economic winter. Yes, if you want populist nationalism to take charge of the asylum.

Okay, then let's bring back boredom. Policies that don't quite succeed and don't quite fail, but at least keep the euro and the single market alive.

This is probably what the Germans, French and others have in mind, despite the big talk of a "federal core" for 17 nations.

An even more elaborate halfway house is all that their electorates will stand for. If the Euro-17 idea succeeds, we will be elbowed towards the margins. If it fails, prospects for a prosperous and peaceful Europe are grim.

From now on, cloud cuckoo land is for the birds. (© Independent News Service)

Irish Independent

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