BERLIN – Some 2,500 years ago, the ancient Greek philosopher Heraclitus concluded that war is the father of all things. He might have added that crisis is their mother.
Fortunately, war between world powers is no longer a realistic option, owing to the threat of mutual nuclear destruction. But major international crises, such as the current global financial crisis, remain with us – which might not be an entirely bad thing.
Just as in war, crises fundamentally disrupt the status quo, which means that they create an opportunity – without war’s destructive force – for change that in normal times is hardly possible. To overcome a crisis requires doing things that previously were barely conceivable, let alone feasible.
That is what has happened to the European Union over the last three years, because the global financial crisis has not only shaken Europe to its foundations; it has assumed life-threatening proportions.
Compared to the beginning of 2009, we are now dealing with a significantly different EU – one that has become divided between a vanguard of member states that form the eurozone and a rearguard, consisting of member states that remain outside it. The reason is not evil intent, but rather the pressure of the crisis. If the euro is to survive, eurozone members must act, while other EU members with various levels of commitment to European integration remain on the fringe.
Indeed, almost all taboos that existed after the eruption of the crisis have now been abolished. Most were established at German instigation, but now they have been removed with the German government’s active support.
It is an impressive list: national responsibility for bank rescues; the sanctity of the EU treaty’s proscription of bailouts for governments; rejection of European economic governance; the ban on direct government financing by the European Central Bank; refusal to support mutual liability for debt; and, finally, the transformation of the ECB from a copy of the old Bundesbank into a European Federal Reserve Bank based on the Anglo-Saxon model.
What remains is the rejection of Eurobonds, but that, too, will ultimately disappear. The only question is whether that taboo will fall before or after next year’s German general election. The answer depends on the future course of the crisis.
Germany, Europe’s largest economy, is playing a strange, sometimes bizarre, role in the crisis. At no point since the founding of the Federal Republic in 1949 has the country been so strong. It has become the EU’s leading power; but it is neither willing nor able to lead.
Precisely for this reason, many of the changes in Europe have occurred despite German opposition. In the end, the German government has had to resort to the art of the political U-turn, with the result that Germany, though economically strong, has grown institutionally weaker – a dynamic exemplified by its reduced influence in the ECB’s Governing Council.
The old Bundesbank was laid to rest on September 6, when the ECB adopted its “outright monetary transactions” program – unlimited purchases of distressed eurozone countries’ government bonds – over the objections of a lone dissenter: Bundesbank President Jens Weidmann. And the undertaker was not ECB President Mario Draghi; it was German Chancellor Angela Merkel.
The Bundesbank did not fall victim to a sinister southern European conspiracy; rather, it rendered itself irrelevant. Had it gotten its way, the eurozone would no longer exist. Placing ideology above pragmatism is a formula for failure in any crisis.
Currently, the eurozone is on the threshold of a banking union, with a fiscal union to follow. But, even with only a banking union, the pressure toward political union will grow.
With 27 members (28 with the approaching addition of Croatia), EU treaty amendments will be impossible, not only because the United Kingdom continues to resist further European integration, but also because popular referenda would be required in many member states. These plebiscites would become a reckoning for national governments on their crisis policies, which no sound-minded government will want.
This means that intergovernmental agreements will be needed for some time to come, and that the eurozone will develop in the direction of inter-governmental federalism. This promises to be exciting, as it will offer completely unexpected possibilities for political integration.
In the end, former French President Nicolas Sarkozy has prevailed, because the eurozone today is led by a de facto economic government that comprises member countries’ heads of state and government (and their finance ministers). European federalists should welcome this, because the more these heads of state and government turn into a government of the eurozone as a whole, the faster their current dual role as the EU’s executive and legislative branch will become obsolete.
The European Parliament will not be able to fill the emerging vacuum, as it lacks fiscal sovereignty, which still lies with national parliaments and will remain there indefinitely. Only national parliaments can fill the vacuum, and they need a common platform within the eurozone – a kind of “Euro Chamber” – through which they can control European economic governance.
Federalists in the European Parliament, and in Brussels generally, should not feel threatened. On the contrary, they should recognize and use this unique opportunity. National MPs and MEPs should come together quickly and clarify their relationship. In the medium term, a European Parliament with two chambers could emerge.
This crisis offers a tremendous opportunity for Europe. It has defined the agenda for years to come: banking union, fiscal union, and political union. What remains missing is an economic-growth strategy for the crisis countries; but, given mounting unrest in southern Europe, such a strategy is inevitable. Europeans have reason to be optimistic if they recognize the opportunity that their crisis has created – and act boldly and decisively to seize it.