Eu Nations Sold Into Indenture
A Eurostate or bust – the big Brussels gamble | The Times (£)
The bailouts don’t work but they do allow the EU to build up centralised power at the expense of nation states
Another year, another train crash between politics and economics in Europe. One year ago, at 1am on Monday, May 10, 2010, the leaders of the EU took what seemed their boldest step yet towards the creation of a full-scale European political federation, bolder even than the launch of the single currency in 1999. This was the creation of a €750 billion fund, guaranteed collectively by all European taxpayers, to protect EU nations from the choice facing Greece that night: to abandon the euro or to declare itself bankrupt by defaulting on its government debts.
A year later, it is clear that the Greek bailout failed. Europe has, therefore, decided to repeat it.
There are, however, four important new elements to this rerun of the European financial crisis. The first is that instead of Greece alone, three, perhaps four, countries now face bankruptcy or expulsion from the eurozone: Greece, Ireland, Portugal and possibly Spain. ..
Second, the total cost to taxpayers in Germany and other creditor countries of supporting Greece, Ireland and Portugal will be much higher than seemed likely last year..
Third, the political resistance to another round of bailouts will be even more intense than it was last year,...
Finally the good news, although not necessarily for Europe’s leaders and central bankers: the global economy is much stronger than it was a year ago and could probably withstand a write-down in government debts...
So why do Europe’s politicians and central bankers refuse even to think about debt restructuring ...
Europe’s central bankers have a vested interest in spreading terror about the very idea of restructuring. The ECB itself is now by far the biggest holder of Greek, Irish and Portuguese bonds and would suffer enormous losses if their value were reduced. ...
The political motivation for tightening the debt yoke on Greece, Ireland and Portugal is even clearer. By turning these countries into permanent debtors to the ECB and the various EU bailout funds, Brussels and Frankfurt are enormously increasing the power of centralised European institutions at the expense of nation states. While the unprecedented control of national tax, spending and social policies now exercised by the ECB and the Commission is presently confined to Greece and Ireland, the bailout exercise has set precedents and created institutional capabilities that can gradually be extended to the entire EU.
The inevitable progression from monetary union to fiscal federalism and ultimately to full-scale political union was predicted by both Eurosceptics and Eurofederalists in 1989 when the single currency was first suggested by Jacques Delors and again in 1999 when the euro was created. The journey from the single currency to full-scale political federalism is taking a somewhat different route from the one expected — but it is proceeding exactly on schedule.