Impossible parallelism. For the first time ever, this column is in doubt: could the euro (temporarily or definitively) disappear? Not because of the difficulties and divergences that its management is up against, but because of the increasingly obvious gap between this management and the political evolution of the EU. Difficulty in leading the euro is inevitable and evidence proves that it can be overcome, but on one condition - that it is accompanied by a parallel strengthening of political unity in the eurozone. Yet, in reality this strengthening is far too slow. The two aspects - daily management of the euro and political evolution - are far from parallel.
On a general level, I am trying hard to be positive with regard to European construction which, let's fact it, represents the most significant global innovation in a long time. My support for European construction remains intact, including the principle of the single currency - but management of the euro and the crucial political conditions are not progressing at the same pace.
Treaty on budgetary discipline is blocked. Haunted by the need for this parallelism, and in the hope of it coming to light, I did not write a word on these issues last week, hoping for a breakthrough. But the situation has actually become worse. The way the single currency works requires prior limitation of national autonomy - in other words the parallel evolution of political Europe. Angel Merkel has just explicitly reaffirmed this on the television - no financial support without political control.
Even the starting point (budgetary discipline which ought to have come into force this month) is currently blocked - I am referring to the treaty that has become known as the Fiscal Compact. It was already blocked in Germany (see below) and has now become blocked in France, now that the President of the Republic has asked the Constitutional Council if this treaty requires revision of the Constitution (with the lengthy procedures that his analysis now involves). Even in Italy, the ratification process has not yet finished!
The parallelism between management of the currency, on one hand, and political innovations, on the other, is recognised as practically impossible due to the enormous difference between the amounts of time needed for each - while management of the euro demands immediate action, the political transformations (which should occur simultaneously) involve complex analyses and in-depth studies. Protection of the euro against speculation of the markets, especially those in London and New York, requires quick and efficient instruments. In theory they exist, but in practice their use is linked to political progress.
The German case. Let's take the case of Germany because it's the most spectacular and important due to the country's economic weight. The Federal Constitutional Court needs time to deliver its verdict on the loss of national political autonomy, which is implicit in the automatic mechanisms of the euro. In the opinion of the president of this court, Andreas Vosskuhle, “there is not much more room for the transfer of competences to the European Union. To go further, Germany would have to be given another Constitution.” Note that he did not say that he is against this possibility: “It might even be politically legitimate and desirable.” And he even pointed out that the German parliament had approved the texts under discussion by a two-thirds majority. But the court over which he presides first has to examine the legitimacy of the texts submitted for scrutiny, including the budgetary Treaty, known in English as the Fiscal Compact. And the Constitutional Court will take its time over this as it does not give its verdict until 12 September. In the meantime, the budgetary discipline which was signed up to by 25 member states does not legally commit Germany, and Mrs Merkel will not be able to use this weapon. At the same time, the ESM is still not operational - it too is awaiting the verdict of the German Constitutional Court on 12 September.
Italy and Spain must wait. Everything I have written about up to this point is only one element of what is slowing the process down. The German minister of finance, Wolfgang Schauble, has suggested holding a referendum in his country about the transfer of competences to the EU - the Commission should become a true government and its president would be elected by the European Parliament which would obtain a power of legislative initiative (see EUROPE 10642). In Mr Barroso's opinion, each step towards greater solidarity would be accompanied by a step towards more responsibility. Mario Monti has said: “The more we get to the bottom of things to resolve the serious and immediate problems, the more we note that it is difficult to do this without other steps towards political integration.” But he was obliged to note that the anti-speculation instrument that he had seized upon with such difficulty at the last European summit has not obtained the desired effect of discouraging excessive spreads. The absence of, or extreme slowness in, political progress has influenced the speculative markets, which do not take any notice of the distant forecasts and drafts, but seek immediate speculation. I recall as well that Italy rejects the triple surveillance imposed on Greece as it intends to respect budgetary discipline - what Italy is after is the stabilisation of interest on its debt. But the political delay compromises this objective, even if the agreement on the instrument for defence theoretically already exists.
The Spanish case is even more symptomatic. The German adventures that I recounted earlier are slowing down the ESM's entry into force, and the integrated system of banking supervision involving the ECB still does not exist. The result of this is that the Spanish government, contrary to its hopes, is responsible for the reimbursement of bank loans, and this in turn swells it budget deficit. Alongside this, the conditions for the loans to Spanish banks have become harder - a preparatory document sets out 32 very strict conditions (and the details, which are astonishing, are featured in EUROPE 10653). If all goes according to plan the Eurogroup will give its verdict on these conditions on Friday. And we know that Finland is demanding additional guarantees if it is to take part in the operation.
Shared responsibilities. Everything I have said thus far proves, in my opinion, that the exercise of attributing responsibility for the current blockages to such and such a country or group of countries in the eurozone, in particular to Germany, is unfair and pointless. The national budgetary slippages are the primary reason for the difficulties, after all. The discipline has been freely accepted and the instruments to help the countries in trouble are really very considerable. What the eurozone has done to save Greece has been more than considerable and all the countries which have the single currency have taken part in the cost of the bailout attempts, including those which then found that they themselves were in difficulty and yet continue to pay. The MEPs who believe that they are generous and magnanimous in requiring the bailout effort for the euro in Greece to be pursued are exercising easy demagoguery, without taking into consideration the very heavy cost of this useless effort. Greece must be helped by EU instruments and not by continuing to line the pockets of the speculators from the financial markets.
My conclusion is simple. The definitive consolidation of the euro as a single currency will only be possible if the eurozone evolves in parallel towards a status of a federal nature. I am not referring to long term political ambitions, nor to an entirely or largely new treaty, but to developments which take place as quickly as possible, and which are crucial for the instruments and mechanisms of the single currency to be updated and put into action. Now, every time that fine-tuning the protection and support systems is discussed, the condition demanded - especially by Germany - is for the behaviour of the member state receiving support to be controlled. Note that Germany is not asking to exercise the control itself, but that this be done at the Community level by the institutions, which necessarily involves every country yielding part of its national sovereignty.
The federalist movements go much further by advocating a Convention, a new Treaty and a federal Europe. This is a project which evidently deserves to be taken into consideration and this column will come back to this, but my subject today is more modest - to confront the immediate risk that management of the euro may become impossible because of the lack of parallel progress at the political level.
In my opinion it is a short term, virtually immediate risk - the break-up of the eurozone before our very eyes. The EU could continue, but limited in its ambitions and possibilities. It's the end of a dream.
(FR/transl.fl)