Writing in the Financial Times today, Tony Barber discusses the latest Eurozone reprieve, and maps out the possible next stage:
[T]he crisis is compelling eurozone leaders to assemble the building blocks of a common fiscal policy and economic government. They will surely have to go further. By not increasing the EFSF’s lending capacity beyond €440bn, the leaders failed to eliminate the daguarantee of all the region’s outstanding debt. Common eurozone bonds, once unmentionable in polite policymaking circles, would be the logical next stepnger that Italian and Spanish bonds will come under intense market pressure, as they did just before the summit. Another wave of attacks on Italy and Spain might be the trigger for a joint eurozone guarantee of all the region’s outstanding debt. Common eurozone bonds, once unmentionable in polite policymaking circles, would be the logical next step..
Seen from the perspective of someone who believes that the Eurozone should be preserved ‘as is’ (not my view) that makes sense, but here’s the rub:
All the same, the path to a closer economic union contains a potential pitfall – public opinion. Politicians in Germany and rich countries such as Austria, Finland and the Netherlands have never asked voters if they want a union that channels part of their wealth to other countries. According to a poll for ZDF public television, only 47 per cent of Germans want Greece to stay in the eurozone; just as many want Greece to get out.
Sooner rather than later, politicians must address the problem of legitimacy. The paradox is that the debt crisis is driving Europe’s leaders towards closer integration while simultaneously sapping the public’s faith in that same goal.
That, of course, implies that “the public” had much faith in that goal in the first place. The evidence that the public actually did is, to say the least, mixed, which is why so much time and cunning has been spent in avoiding asking it for its opinion.
The problem Brussels now faces is that the fiascos of the last couple of years have—finally—begun to alert the EU’s electorates that “ever closer union” is something too costly for them to ignore.
The latest Greek rescue (and the broadening of the competences of the European Financial Stability Facility that is a key part of it) will need to be approved by the parliaments of the Eurozone. That will make for some very interesting conversations with voters, some of whom may remember remarks such as these from Angela Merkel (from late February 2010):
Greek bond prices rallied this week on a report that Europe’s top economy was considering coming to the aid of debt-burdened Greece, as Prime Minister George Papandreou prepares to hold talks with Merkel in Berlin on Friday. But the German chancellor denied any such plan was in the works, saying “there is absolutely no question of it”.
“We have a (European) treaty under which there is no possibility of paying to bail out states in difficulty,” Merkel told ARD public television.
That was before Greece I, before Ireland, before Portugal, and, now, Greece II.
Good luck with that whole legitimacy thing, Angela.