Dear Santa, please get rid of the Euro
In the interests of democracy, fraternity and growth, Phil Mullan’s Christmas wish is for the speedy demise of the single European currency.
On 15 December in London, Phil Mullan took part in the annual Institute of Ideas lecture, an event titled ‘Christmas in Euroland’. An edited transcript of his introductory comments is published below.
Christmas is a time we wish for things. Sometimes, as many a ‘Dear Santa’ letter will testify, these wishes can seem, at least at first, a little outlandish, maybe even utopian. So in good seasonal tradition, here is mine: my wish is for a speedy decision to dissolve the Euro, and for this to happen as part of a political, democratically infused campaign for a stronger, united Europe.
First, a small piece of good news – and to be blunt there’s not a lot of it around when it comes to the Euro, not least as the risk is ratcheting up, on a daily basis it seems, of a re-freezing of the credit markets with bank collapses and an even deeper economic contraction in Europe than is already on the cards. The small positive development I’m referring to was the break-up between David Cameron and the other European leaders recently, because it made the realisation of my wish a tiny bit easier. Whatever his motives, and although probably by mishap rather than intention, Cameron’s veto made a little crack in the whole no-politics, anti-politics regime which so far has dominated the life of the Euro, and especially has characterised the technocratic machinations of trying to save the Euro over the past two years.
These days, bringing politics of any form to bear in the councils of Europe is a good thing in itself. And that’s what we saw at the recent summit: a split, accidental as it most likely was, between an expression of political interest – personified by Cameron’s veto – versus that endemic tradition of bureaucratic Brussels stitch-ups, isolated from people and closed away from accountability, and obsessed instead with technical process and procedures. This aloof approach was epitomised in the summit’s main but so-narrow outcome: an attempt to strengthen the fiscal rules surrounding the existing Stability and Growth Pact.
In any such counterposition between politics and technocratic process, we should always side with national politics, whatever the complexion of the politics, because it at least has the virtue of bringing discussion back closer to people. It makes political debate around alternative approaches a little more open. So, ‘more public politics, no more bureaucratic stitch-ups’ is the parallel wish I’ve added to my Dear Santa letter.
To get back to my initial wish: for an end to the Euro. Of course, to question the survival of the Euro has become a taboo subject, not only in Europe but across the Western world. President Barack Obama, for example, is constantly claiming to the American public that the biggest danger to the American economy is ‘headwinds’ from Europe and the risk of the Euro failing. At least until Cameron’s treaty veto, no Western leader, including, I would stress, Cameron himself, had appeared to countenance that anything should take precedence over ‘Saving the Euro’.
The mainstream position makes it clear that we’re in TINA-land again: ‘There Is No Alternative’ to saving the Euro, everyone says. I want to argue the opposite: that the Euro should not be saved, not because it has recently become no longer worth saving, but because in its specific institutional form this common currency should never have been established in the first place.
The problems of the Eurozone are rooted in the simple, essential flaw at the Euro’s heart: you can’t have a stable currency union across economically uneven countries without previously establishing a political union. In the absence of a legitimate, full-blown political union – and by that, I mean one that is a popularly supported, solidarity-infused, transfer union – then the only way to perpetuate such a currency area is through the imposition of more of the austerity measures we have seen in Greece, Ireland, Portugal, Spain and Italy; measures known as ‘internal devaluation’, which in brief means reducing prices mainly brought about through the imposed reduction of wages.
Without an open political union and the existence of free resource transfers from richer parts of the currency bloc – as happens, for example, across other currency areas like the United Kingdom or the USA – the future for the weaker parts of the Eurozone can only be one of deflation and prolonged slump. And that would only be the price of bringing just a temporary respite to the consequences of economic unevenness. It doesn’t address the productivity differences that underpin this unevenness in the first place. It means pain without any durable gain.
The Euro as constituted is therefore dysfunctional, and irreformably so. Letting it go now, through a collective decision to dissolve it, would be the better and more progressive path to take, despite the disruption that would be precipitated, especially in practical and legal areas. These issues would be difficult but surmountable, and much better than the alternatives.
Against all those hyped fears of global economic catastrophe if the Euro doesn’t survive, there are, I believe, three solid, inter-linked and almost certain benefits. Firstly it would be good for democracy; secondly it would be good for economic growth and prosperity; and thirdly it would help move us towards a stronger Europe. The recent summit’s breakdown gives a little bit more of an opening to have a public debate on these arguments.
1. Better for democracy
The Euro, and especially the proclaimed No.1 priority of saving the Euro, has become the justification for every further step taken in attacking popular democracy and moving further away from democratic political accountability. In traditional elitist fashion, the defence of the Euro is seen as too important, too serious and too complex to allow ordinary people to get involved and, heaven forbid, have a say in what to do. Herman van Rompuy, president of the European Council, put this anti-people, anti-democratic sentiment very succinctly last month, when former Italian prime minister Silvio Berlusconi was being ousted: Italy, he said, ‘needs reforms, not elections’. This means: we from the European bodies know best, we dictate what will happen; Italian people should have no say in the matter.
That trajectory in trying to save the Euro – anti-populist, antithetical both to participation and to political accountability – is not going to reverse. The ultimately unsolvable ‘Euro crisis’ will see to that, because as time passes the stakes are going to get higher and for as long as the Euro survives we will see escalating attacks on national sovereignty, which means attacks on popular sovereignty.
Last week’s summit itself represented another significant erosion of national sovereignty, with its reinforced threat of EU-level sanctions if anyone breaches the three per cent deficit limit, the right of the European Commission to look at national budgets before national parliaments do, and the Commission’s ability to parachute in teams of budget inspectors to national capitals and push countries to apply for bailouts even if they do not want to.
And if ‘muddling on’ in its present closed, insulated form were to move closer towards imposing a real fiscal union, that is a political union, then such a destination would involve a level of coercion and trampling on democratic rights across the whole Euro region of a scale not seen in modern peacetime – and this applies not just in the weaker countries but also in the stronger ones, because it would be their taxpayers who would be forced to pay in one way or another for offsetting the economic imbalances. So a concrete way to challenge the anti-democratic monster that Europe has become is to argue for the Euro to be dissolved, because its survival is the main justification today for reducing democratic rights.
2. Better for economic growth
The demise of the Euro would be good for economic growth for three reasons:
(i) More efforts to shore up the Euro mean more of the fiscal cuts, austerity and deflationary tendencies that we’ve already seen, and that’s the opposite of what is needed for taking steps to rebuild those broken and weak economies and replace the artificial debt-dependent activities of the past decade. Getting rid of the Euro removes one big argument used to justify austerity measures.
(ii) Orderly dissolution is less disruptive than disorderly. The Euro’s implosion is getting more likely as time passes. And a crisis-precipitated disorderly collapse, which is the alternative to, or rather the probable outcome of, the ‘muddle on’ approach, would be worse for the economy than a planned dissolution. It would be more chaotic and painful, as well as being politically more dangerous as the recriminations and reciprocal accusations of blame would be much more bitter than they already are today. That’s not a good climate for growth plans.
(iii) A more positive economic argument is that the existence of the Euro has been a barrier to addressing Europe’s deep economic problems. The Euro didn’t cause the atrophy of productive activity across western Europe over the past quarter-century – the high levels of joblessness, the sluggish growth rates – but it’s certainly got in the way of finding a solution. In the Euro’s early years, up to the onset of the Western Financial Crisis in 2007, the Eurozone was the mechanism for the different local elites to avoid facing up to the seriousness of their economic problems and to remain in denial of the need for a thorough, strategic restructuring of production.
This applied both to the weak economies, which lived artificially on the easy credit facilitated through the single currency, and to the relatively stronger ones, including Germany, which also benefited artificially, both from an undervalued currency and also from the captive, high-consuming European ‘home market’. More recently, of course, managing Euroland’s debt and financial problems has become a distraction from focusing on a growth agenda.
Removing the constraining blanket of the Euro would remove at least this impediment for all Euro countries from embarking on the long overdue restructuring of their economies. It would, for example, remove the constraint for Greece in getting on with what it needs to do economically: default on its debt and devalue its currency; not, hopefully, as ends in themselves, but as means to create a better foundation for their own necessary productive reset.
Remember that the West’s big economic problem, including Euroland’s, is not one of too much debt but one of inadequate growth. Debt is a symptom, not a root cause of their difficulties. Every Western economy needs to establish a dynamic of durable, not debt-driven growth. The best cure for Europe’s problems, including its debt problems, would be growth based on industrial expansion. This would put people to work, increase tax revenues, shrink the deficit, and make possible increases in public spending to support a new industrial policy that would help make growth durable.
This requires radical corrective economic surgery, a restructuring not just of debts and the financial system but, more fundamentally, of the productive industries. And the longer this is postponed, the more drastic, painful and disruptive it will need to be. Getting rid of the Euro will at least help to clear the way for this difficult period. I stress difficult, but difficult for a necessary and beneficial purpose.
3. For the goal of ‘One Europe’
The demise of the Euro is also a necessary step for bringing about a genuinely popular, democratically legitimate process of Europeans coming together. Why? Because the surest way to undermine the idea of closer European integration is to persist with more of the muddle-through, increasingly intrusive, forceful and anti-democratic attempts to keep this flawed and unworkable currency together. Cross-border resentment and accusations are already pronounced, whether it is the German elite and media castigating profligate, feckless and lazy southern Europeans or the reciprocal attacks on domineering, dictating Germans who, it is claimed, are returning to type.
Every further bureaucratic action imposed in the name of keeping the Euro going is only likely to intensify inter-nation tensions and ultimately rivalries, and thereby sullies and undermines the positive idea of European integration. So campaigning against the Euro can both be a focus for, and also a necessary precondition for, relaunching the progressive, beneficial goal of a single, but this time democratic and politically accountable Europe.
In Europe, whether we are inside Euroland or outside it, we are in a tough place today, with huge social, economic and political challenges. The Euro as an institution and the coercive technocratic measures being taken in the name of defending it are barriers for all of us in being better able to address these challenges.
Trying to preserve the Euro is bad for politics, it is bad for democracy, it is bad for living standards, it is bad for the prospects of durable economic recovery, and it is bad for the goal of European internationalism.
The only way things can change is for ordinary people to put our heads together and assert ourselves politically. And a suitable focus for this, perhaps made a little bit easier by the aftermath of the recent summit failure, is to campaign publicly for the dissolution of the Euro as presently constituted.
Phil Mullan is the author of The Imaginary Time Bomb: Why an Ageing Population Is Not a Social Problem, IB Tauris, 2000. (Buy this book from Amazon (UK) or Amazon (USA).). This article is a transcript of his introductory comments at the Institute of Ideas Christmas lecture.
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