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Anti-Troika protesters in Greece, 2011 |
Just a few years ago liberal and left-of-centre opinion was unanimous in its adoration for the 'European project'. The titles of trash political literature from that time are testament to a near cosmic hubris, with such adoring tracts as 'Why Europe Will Run the Twentieth Century' springing up left, right and centre. Following 1992's Maastricht Treaty, an age of post-heroic certainties dawned.
Friedrich Nietzsche - a self-styled "good European" of less tedious stock - once damned precisely this kind of triumphalism: "'We have discovered happiness,' say the Last Men, and they blink." Since the sovereign debt crisis (how prosaically was the forward march derailed!) a turn to excoriation in those self same circles cannot conceal the stream of melancholy that underlies it. The insistence is still, however, that a deeper commitment to the old model of unification along either neo-functionalist or intergovernmental lines will save us all. The creepily sterile lust for deeper "consolidation" (implying there are any real gains to consolidate) hinges on the idea that eurozone policy has been too "ad-hoc" and has lacked vision. What should a substantial vision propose, according to post-enlightenment European gladiators like Jurgen Habermas? Integration, of course, to combat finance! "The justification for taking a major step forward on European integration does not derive solely from the current eurozone crisis, but also from the need to curb the evil practices of the shadowy parallel universe that the investment banks and hedge funds have built up alongside the real economy of goods and services," he and his co-writers suggest. Thus, there is the good old productive economy and the separate - in fact, "evil" - realm of finance.
Friedrich Nietzsche - a self-styled "good European" of less tedious stock - once damned precisely this kind of triumphalism: "'We have discovered happiness,' say the Last Men, and they blink." Since the sovereign debt crisis (how prosaically was the forward march derailed!) a turn to excoriation in those self same circles cannot conceal the stream of melancholy that underlies it. The insistence is still, however, that a deeper commitment to the old model of unification along either neo-functionalist or intergovernmental lines will save us all. The creepily sterile lust for deeper "consolidation" (implying there are any real gains to consolidate) hinges on the idea that eurozone policy has been too "ad-hoc" and has lacked vision. What should a substantial vision propose, according to post-enlightenment European gladiators like Jurgen Habermas? Integration, of course, to combat finance! "The justification for taking a major step forward on European integration does not derive solely from the current eurozone crisis, but also from the need to curb the evil practices of the shadowy parallel universe that the investment banks and hedge funds have built up alongside the real economy of goods and services," he and his co-writers suggest. Thus, there is the good old productive economy and the separate - in fact, "evil" - realm of finance.
This
Europe of liberal, post-political fantasy never really existed - and
the sooner we dispense with that fantasy, the easier for an
internationalism of substance to replace it.
The
modern European Union - and the eurozone which is its offspring - owe
their institutional form in more ways than one to the USA. Of course,
there was the Marshall Plan. But there was also the financial and
monetary shape of the global economy. When repeated bouts of
financial instability and inflation prompted investors to flee the
dollar, it was to Germany they flocked. Eichengreen again: "Whenever
doubts about the dollar and funds flowed out of the United States,
they ... flowed mainly into Germany."1
Germany's periodic bouts of currency strengthening against the French
franc - which, it must be said, the Bundesbank's Ordoliberals did
little to challenge too deeply - made the security blanket of a
shared currency more appealing. The euro evolved out of financial and
monetary instability following the end of Bretton Woods. The
commitment of the European Central Bank to combating inflation (and
nothing else) of course reflects a Greman Ordoliberal prejudice, but
also the economic
reality
of Europe's sole heavyweight economy. Though the euro, when launched
in 1999, was an incipient challenger to the dollar, it was in other
ways a prisoner of the world system founded on dollar power. The
rigidities of the eurozone institutions were as much a result of
Europe's contradictory developed-subordinate status in the postwar
economy as they were the German ideology.
Underlying
the fixation on inflation combat were other policies: essentially the
dominant European classes were committed totally to a form of fiscal
and monetary restraint in order to maintain export competitiveness.
Many have claimed Germany takes this position because of the
hyper-competitive Chinese productive economy. I suspect it has more
to do with the shaky US source of demand for German goods. The
eurozone was, in the end, a monetary and fiscal straitjacket for
peripheral European economies (the
United States is Germany's second biggest export destination after
France). The euro allowed Germany to benefit from declining
transaction costs while trade union deals allowed the Germans to
control wage growth and undercut ECB inflation targets. For
export-oriented economies like Germany, wage restraint meant gaining
competitive advantages over those who allowed wages to rise. By
tackling inflation, the euro was kept strong and this meant exports
could be sustained despite growth. However, major differences opened
up between export and import dominated countries inside the eurozone.
Add to this the growth of credit - with flush German and French banks
loaning to the European periphery, especially Greece - and you have a
deeply precarious and lopsided "unification."
Following
the 2007-8 financial crisis (itself the progeny of the US real estate
sector), Europe's rule-based rigidity really came into its own.
Peripheral economies, which had allowed wage increases and the credit
expansion to fuel consumption, could not benefit from depreciation.
German and French banks, heavily exposed to the US subprime crisis,
stopped lending. Governments bailed out the banks. The liquidity
freeze led to growing unemployment and steep increases in sovereign
debt. Bond yields in the periphery rose, with the result that
peripheral economies - like Greece - were locked out of bond markets.
The rest is the widely catalogued history of harsh European austerity
and deflationary measures inflicted on the unwitting southern
Europeans. As Mark Blyth puts it in his book
Austerity: The History of a Dangerous Idea:
"If states cannot inflate their way out of trouble (no printing
press) or devalue to do the same (no sovereign currency), they can
only default (which will blow up the banking system, so it's not an
option), which leaves only internal deflation through prices and
wages - austerity. This is the real reason we all have to be austere.
Once again, it's all about saving the banks."2
The
natural argument of many on the left and on the liberal wing of the
mainstream has been reform of the eurozone from within. Yet the
institutional and legal framework of the eurozone has cemented a very
stable power bloc in Europe. German big and medium capital benefits
from the lowering of transaction costs across the economy while banks
profit from the deflationary consequences of the euro on borrowers.
It may be a harsh form of neo-mercantilism, but it does the job of
feeding global consumption on the back of German exports. There will
need, then, to be a significant deterioration of the domestic German
position along with the continued success of peripheral, left-wing
politics if the grip of deflationary Europe is to be undone. What
Costas Lapavitsas and the German Keynesian economist Heiner Flassbeck
call "confrontational exit"3
from the eurozone by Greece may possibly precipitate just such a
crisis.
3Lapavitsas
& Flassbeck, Against the Troika, Kindle
loc 1466: "A Left
government should be prepared for confrontational exit... The first
step of this process would probably be a declaration of default on
the debt... cessation of payments of interest and capital and a
unilateral call for negotiations on what will be paid and how...
[requiring] popular mobilisation, a Debt Audit and strong legal
support."
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