The Euro’s Chains and Pains

euro chainsIt has been quite a ride of late for Greece and its baffled citizens. There was cash shortage, with pictures of pensioners sobbing beside  barren ATMs, followed by the plebiscite on the latest European Union lifeline, which was rejected. Then came the showdown and, to the amazement of Greeks who thought they rejected one possible deal, the acceptance of a package even more onerous than that originally offered.

All this has been most peculiar, but even more strange is the chorus that insists the present agitation against Greece is an enormous threat to the EU. Why? Could not Greece be offered the option of an ordered exit from the euro? Why can’t Greece join in an orderly manner those EU member states that do not belong to the euro? And why, in the first place, did the treaty that created the euro not contain an exit clause?

These questions generate further questions. Why has there been an ever-growing hostility between northern and southern countries that belong to the eurozone? Did not the euro project envisage, as announced at the time, the reinforcement of convergence and unity — the so-called “ever-closer union” — among its members? Why has the euro achieved the opposite of what had been announced?

I am afraid I have to recall that there were people who warned against the unintented consequences of a single currency in the absence of a single country. It was then observed that a proper single currency would involve automatic transfers between its members. That this would in its turn entail a single fiscal policy and, ultimately, a single government — not to mention what for some is just a boring detail, a single parliament.

But can we really have a single budget, a single government and a single parliament without a single country? There is certainly a school of thought that believes we can (its adherents do not know what they believe, they just believe that they know). They indeed believe that nation-states have been merely the result of political decisions. They also believe that most social institutions and social artifacts are basically the result of political decisions.

It just so happens that they are not. It may well be that political decisions are an important ingredient of social institutions. But they are not the only one, and often not the decisive one. Social institutions are not made by anyone in particular. They emerge from a long and complex process of decentralised interaction which cannot be centrally commanded — even if that command is issued in the name of “reason”, or even, to quote the current boilerplate, “rational liberation from the yoke of prejudices and traditions”.

This, I think, does not necessarily entail that the creation of the euro has necessarily been a mistake. But it was certainly an enormous error to create the euro without an exit clause. And it is an enormous mistake to identify the euro with the European Union. The single currency should be perceived only as a possible option for those countries that want to subscribe to it. For this same reason, these very same countries should be entitled to leave the euro whenever elected parliamentary majorities may prefer to do so. That option should have been on offer from the very beginning.

I am afraid that the dogmatic interpretation of the euro as an irreversible project of social engineering, as Karl Popper would have put it, has created a sort of straitjacket. Unfortunately, straitjackets have been only too common in the Continental political tradition. Alexis de Tocqueville described this as the “perpetual and sterile conflict between the Ancient Regime and Revolution”. Sociologist and philosopher Ralf Dahrendorf described the same phenomenon as Europe’s recurrent e tendency to generate “unfortunate dichotomies”.

Prudence tells us that we should keep ourselves as far as possible from this illusion of inevitable dicothomic choices. There is always a via media. And perhaps now is finally the time to reshape the EU as a much looser and flexible institution.


One thought on “The Euro’s Chains and Pains

  • gardner.peter.d says:

    ‘And perhaps now is finally the time to reshape the EU as a much looser and flexible institution.’

    It certainly is. However, although David Cameron once upon a time did say so he is not asking in his so called re-negotiation of Britain’s membership of the EU for any such thing.

    The core issue is whether supra-national government is superior to parliamentary democracy. The founding fathers of the EU and their predecessors such as Jean Monet believed it is and that expressions of national will need to be heavily constrained lest differences of opinion lead once more to large scale military warfare. Furthermore, since a supra national state would require the transfer of sovereignty to a foreign collective it would not command popular support and would therefore have to proceed incrementally and largely by stealth. The process is not yet complete. The euro is only half constructed. When introducing it the Eu knew it would cause, sooner or later, an existential crisis. The intention of the EU remains to overcome whatever crisis may arise and complete it as the last stage of forming a federated Europe.

    The plan is outlined in the Five Presidents’ report on completing economic and monetary union by 2025, with treaty changes to be defined in a white paper in the spring of 2017.

    The effect of this, if implemented would be to create a two tier membership: the politically federated core and a second tier of members. One can reasonably surmise based on past behaviour of the EU and its steadfast adherence to the political objectives of the European Project, that countries in the second tier will have to comply with EU policies and legislation – the latter already has primacy over national parliaments’ legislation – and will bear full liability for the financial consequences of both EU policies in both the politically united and second tier member states.

    It is remarkable that even in Britain, one of the most euro-sceptic states, the political elite are never challenged to explain why they believe – as the leadership of every political party in Britain except Ukip does believe – that supra-national government by an unaccountable foreign collective is better than sovereign parliamentary democracy.

    In my humble opinion, the EU will fail but it will take a long time and cause enormous suffering, even unto violence, and impose enormous costs on its member states, already evident from it being the slowest growing economic region in the world. But you ain’t seen nothing yet.

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