“We must re-establish the primacy of politics over the market.” That sentence, spoken a little while ago by Germany’s Angela Merkel, sums up the startlingly unoriginal character of the approach adopted by most EU politicians as they seek to save the common currency from what even Paul Krugman seems to concede is its current trajectory towards immolation.
As every good European career politician (is there any other type?) knows, the euro project was never primarily about good economics, let alone a devious “neoliberal” conspiracy to let loose the dreaded market to wreck havoc upon unsuspecting Europeans. The euro was always essentially about the use of an economic tool to realize a political grand design: European unification. Major backers of the common currency back in the 1990s, such as Jacques Delors and Helmut Kohl, never hid the fact that this was their ultimate ambition. Nor did they trouble to hide their disdain of those who thought the whole enterprise would end in tears.
From the common currency project’s beginning, economic considerations were continually subordinated to the goal of using the euro to cement political bonds. That’s why most countries were allowed to enter the euro despite not having met some basic entry criteria. It also explains why no one really seemed to care too much when Greece admitted in 2004 that it had fudged, distorted, and lied its way into the euro club. Now, however, Europe is discovering what happens when political games diminish a currency’s ability to reflect economic facts on the ground.
In truth, Chancellor Merkel has it exactly backwards. The EU doesn’t need any more “politics” — at least in the sense most EU politicians and civil servants understand that word. Instead Europe needs more honesty and less fiscal fibbing; fewer backroom deals and more transparency; and more economic freedom and far less political centralization.
Such a dramatic change of outlook, however, seems most unlikely. Instead, much of Europe’s political class seems willing to go to almost any lengths to save the euro — including, it seems, beyond the bounds permitted by EU treaty law and national constitutions.
France and others, for instance, are actively pressing for the European Central Bank to do what European treaties legally forbid the ECB to do: “monetize” (that ever-useful euphemism for printing money) the debt in the form of unlimited purchases of government-bonds from debt-stricken eurozone nations. Yet others insist now is the time to create a European Finance Ministry that will somehow “manage” entire countries’ fiscal policies from Brussels.
Collectivizing debt, centralizing fiscal policy, consolidating power. In the end, it always seems to come back to the same thing for most European politicians: a remarkable self-confidence in their own indispensability. That’s usually a sign that one’s time is up.
This column first appeared on National Review Online.