Vanity and Venality

7/30/2019 Vanity and Venality

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Vanity and Venality

Susan Watkins

Un New Deal pour lEurope by Michel Agliettaand Thomas BrandOdile Jacob, 305 pp, 20.00, March, ISBN 978 2 7381 2902 4

Gekaufte Zeit: Die vertagte Krise des demokratischen Kapitalismus by Wolfgang Streeck

Suhrkamp, 271 pp, 20.00, March, ISBN 978 3 518 58592 4

BuyThe Crisis of the European Union: A Response by Jrgen Habermas, translated by

Ciaran CroninPolity, 120 pp, 16.99, April 2012, ISBN 978 0 7456 6242 8

For Europe!: Manifesto for a Postnational Revolution in Europe by Daniel Cohn-Bendit

and Guy Verhofstadt

CreateSpace, 152 pp, 9.90, September 2012, ISBN 978 1 4792 6188 8

BuyGerman Europe by Ulrich Beck, translated byRodney Livingstone

Polity, 98 pp, 16.99, March, ISBN 978 0 7456 6539 9

The Future of Europe: Towards a Two-Speed EU? by Jean-Claude Piris

Cambridge, 166 pp, 17.99, December 2011, ISBN 978 1 107 66256 8

BuyAu Revoir, Europe: What if Britain Left the EU? by David Charter

Biteback, 334 pp, 14.99, December 2012, ISBN 978 1 84954 121 3

All quiet on the euro front? Seen from Berlin, it looks as though the continent is now under

control at last, after the macro-financial warfare of the last three years. A new authority, theTroika, is policing the countries that got themselves into trouble; governments areconstitutionally bound to the principles of good housekeeping. Further measures will be neededfor the banks but all in good time. The euro has survived; order has been restored. The newstatus quo is already a significant achievement.

Seen from the besieged parliaments of Athens and Madrid, from the shuttered shops andboarded-up homes in Lisbon and Dublin, the single currency has turned into a monetary choke-lead, forcing a swathe of economies more than half the Eurozones population into perpetualrecession. The Greek economy has shrunk by a fifth, wages have fallen by 50 per cent and two-thirds of the young are out of work. In Spain, it is now commonplace for three generations to

survive on a single salary or a grandparents pension; unemployment is running at 26 per cent,wages go unpaid and the rate for casual labour is down to 2 an hour. Italy has been in recessionfor the past two years, after a decade of economic stagnation, and 42 per cent of the young arewithout a job. In Portugal, tens of thousands of small family businesses, the backbone of theeconomy, have shut down; more than half of those out of work are not entitled to unemploymentbenefits. As in Ireland, the twentysomethings are looking for work abroad, a return to thepatterns of emigration that helped lock their countries into conservatism and underdevelopmentfor so long. Why has the crisis taken such a severe form in Europe?
http://www.lrb.co.uk/search?author=Aglietta,+Michelhttp://www.lrb.co.uk/search?author=Aglietta,+Michelhttp://www.lrb.co.uk/search?author=Brand,+Thomashttp://www.lrb.co.uk/search?author=Streeck,+Wolfganghttp://www.lrbshop.co.uk/product.php?productid=57024&utm_source=LRB&utm_medium=BNbutton&utm_campaign=BuyNowhttp://www.lrb.co.uk/search?author=Habermas,+J%C3%BCrgenhttp://www.lrb.co.uk/search?author=Habermas,+J%C3%BCrgenhttp://www.lrb.co.uk/search?author=Cronin,+Ciaranhttp://www.lrb.co.uk/search?author=Cohn-Bendit,+Danielhttp://www.lrb.co.uk/search?author=Cohn-Bendit,+Danielhttp://www.lrb.co.uk/search?author=Verhofstadt,+Guyhttp://www.lrbshop.co.uk/product.php?productid=62167&utm_source=LRB&utm_medium=BNbutton&utm_campaign=BuyNowhttp://www.lrb.co.uk/search?author=Beck,+Ulrichhttp://www.lrb.co.uk/search?author=Livingstone,+Rodneyhttp://www.lrb.co.uk/search?author=Livingstone,+Rodneyhttp://www.lrb.co.uk/search?author=Piris,+Jean-Claudehttp://www.lrbshop.co.uk/product.php?productid=61755&utm_source=LRB&utm_medium=BNbutton&utm_campaign=BuyNowhttp://www.lrb.co.uk/search?author=Charter,+Davidhttp://www.lrb.co.uk/search?author=Brand,+Thomashttp://www.lrb.co.uk/search?author=Streeck,+Wolfganghttp://www.lrbshop.co.uk/product.php?productid=57024&utm_source=LRB&utm_medium=BNbutton&utm_campaign=BuyNowhttp://www.lrb.co.uk/search?author=Habermas,+J%C3%BCrgenhttp://www.lrb.co.uk/search?author=Cronin,+Ciaranhttp://www.lrb.co.uk/search?author=Cohn-Bendit,+Danielhttp://www.lrb.co.uk/search?author=Verhofstadt,+Guyhttp://www.lrbshop.co.uk/product.php?productid=62167&utm_source=LRB&utm_medium=BNbutton&utm_campaign=BuyNowhttp://www.lrb.co.uk/search?author=Beck,+Ulrichhttp://www.lrb.co.uk/search?author=Livingstone,+Rodneyhttp://www.lrb.co.uk/search?author=Piris,+Jean-Claudehttp://www.lrbshop.co.uk/product.php?productid=61755&utm_source=LRB&utm_medium=BNbutton&utm_campaign=BuyNowhttp://www.lrb.co.uk/search?author=Charter,+Davidhttp://www.lrb.co.uk/search?author=Aglietta,+Michel


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Part of the answer lies in the flawed construction of the European Union itself. ThoughAmericans have been hard hit by the great recession, the US political system has not beenshaken. In contrast to most European incumbents, Obama sailed through his re-election. Only inisolated pockets like Detroit has elected government been replaced by technocrats. In Europe,private and public debt levels were generally lower before the financial crisis struck. But the

polity of the European Union is a makeshift, designed in the 1950s to foster an industrialassociation embracing two large countries, France and Germany, with a population of about fiftymillion each, and their three small neighbours. It was then expanded, piecemeal fashion, toincorporate nearly thirty states, two-thirds of which adopted a shared currency at the height ofthe globalisation boom a project aimed in part at preventing a significantly larger, reunifiedGermany from dominating the rest.

The EUs hybrid constitution includes, among much else, a decision-making European Council(summit meetings of the heads of the 28 governments); an overarching secretariat, the EuropeanCommission, with thirty-odd departments (directorates-general) and its own bureaucracy; aParliament that discusses Commission proposals; and a supreme court to rule on any disputes.

The blueprints for the euro that were drawn up in the 1990s added a further layer of confusion,for they bore no intelligible relation to any of the above.

The euro is essentially a foreign currency for every Eurozone country, the French economistMichel Aglietta and his co-author, Thomas Brand, write in UnNew Deal pour lEurope. It bindsthem to rigidly fixed exchange rates, regardless of their underlying economic realities, and stripsthem of monetary autonomy. For Aglietta, a currency is essentially a social contract: behind itstands a sovereign guarantor with the power to tax its citizens in return for the public goods andservices it provides for them. The euro had no such support; it bears a promise of sovereigntythat has not been kept. Un New Deal pour lEurope contrasts the scheme for the euro embodiedin the 1992 Maastricht Treaty with the 1970 Werner Plan for monetary union, a Franco-German

attempt to protect the European economies from the buffeting of floating exchange rates at atime when the US was pulling out of the Bretton Woods system.

The earlier project had envisaged the six EEC member states defining a collective fiscal policymarked by a strong social dimension. The single currency agreed at Maastricht lacked thebacking of a taxable citizenry; its guiding principle was price stability, guaranteed by anindependent European Central Bank that would operate in splendid isolation, underwritten atarms length by the member states. The idea was that the euro would give free rein to financialliberalisation across the continent; market efficiency would see to it that savings were reinvestedin an optimal manner, ensuring a general convergence of the eurozone economies. Aglietta andBrand attribute the difference between the two plans to the intellectual sea-change of theintervening decades the triumph of monetarism and rational-choice theory. Europe, they write,is now a prisoner of its leaders decision to embed the flawed concept of an inflation-targetingcentral bank in institutional marble.

Just as important was the international context. A single currency might have worked for the coregroup of closely aligned economies France, Germany, the Benelux countries envisaged in theWerner Plan. Instead, the architecture of the Eurozone, concocted in response to the fall of theBerlin Wall, became fatally entangled with the project of EU enlargement. As it took shape from


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the mid-1990s, the single currency became available to any country that could claim to meet theminimal convergence criteria, in a spirit of geopolitical expansionism strongly backed byWashington and London. The result, as the vanity of the leading continental powers combinedwith the venality of the smaller ones, was a heterogeneous group of 17 economies, withdivergent dynamics, tied to a uniform exchange rate and enjoying a shared credit rating. Rather

than helping them converge, the common currency exacerbated the underlying differencesbetween them. Domestic manufacturing in the Mediterranean countries was squeezed by Chineseimports at the lower end textiles, ceramics, leather goods while German companies gained anincreasing market share at the upper end: cars, chemicals, machinery. At the same time, the easycredit of the globalisation bubble created the illusion that Europe was equalising upwards, assouthern consumption was fuelled by northern banks cross-border lending.

When the crisis came in September 2008, the EU governments loyally toed the G20 line,pledging public funds to save the banks and shore up the economies. The 2009 Vienna Initiativeunderwrote the exposure of big Austrian and German banks in Central and Eastern Europe withgovernment and IMF funds. By the start of 2010 the bank rescues, combined with recessions

exacerbated by burst property bubbles, had widened deficits and piled up government debts. Theratings agencies began targeting the most indebted states Greece, then Ireland, Portugal, Italyand Spain. Speculation on an exit from the Eurozone or a collapse of the currency helped drivethe rates of government borrowing to unaffordable levels.

What followed was a thirty-month tug of war between the financial markets and the Obamaadministration, on the one hand, and Berlin and the ECB on the other, in which Germanygrudgingly agreed to guarantee the debts of other member states on condition it was allowed todictate the outlines of their national budgets. No guarantees without control, as Merkel put it. Ineffect, Germany was to stand in for Agliettas absent sovereign power. On every occasion thatpanic came to a head in May and November 2010 with the Greek and Irish bailouts; summer

2011 with tremors over Spanish and Italian bonds; November and December 2011 with theousting of Papandreou and Berlusconi, followed by Camerons veto of the Fiscal Compacttreaty; and summer 2012 with the Greek elections and the spectre of a Spanish banking collapse Berlin acquiesced to the demands of the US Treasury.

Merkels one attempt to forge an independent path, the October 2010 Deauville agreement toforce Greeces creditors to write off some of their lending, was swiftly quashed. Washington waswilling to go along with German austerity policies Obama himself phoned Zapatero in May2010 to harangue him about the need for Spanish spending cuts as long as the chains of debtleading back to Wall Street were guaranteed. In September 2011 the US treasury secretary flewto Poland, gatecrashing a meeting of EU finance ministers to press his agenda. The list includedemergency bailout loans, ECB bond purchases, bank funding, quantitative easing, eurobonds andEurozone equivalents to US bank resolution and deposit insurance mechanisms. The USTreasury line was backed by the German SPD and Greens, the financial press and the worldmedia.

In May 2010 the European Council agreed to set up a temporary 440 billion European FinancialStabilisation Facility (EFSF), later supplemented by a permanent 500 billion European StabilityMechanism (ESM). Underwritten by the Eurozone powers (with the help of Goldman Sachs,


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BNP Paribas, Socit Gnrale and RBS), these entities would borrow money on the markets toprovide loans to any country requesting help in meeting the billion-dollar interest payments onits national debt, on condition that the country agreed to an externally administered programmeof fiscal austerity and structural reforms. For the financial markets, however, what mattered wasnot Berlin-inspired economic policies but an open-ended guarantee by the Central Bank. This

involved a change of the guard at the ECB, which had to abandon its founding no-bailoutmandate. At Merkels insistence, ideological cover was provided by the Fiscal Compact treaty,committing member states to inscribe a 3 per cent deficit limit in their constitutions. Once thiswas agreed in December 2011, the ECB dispensed a trillion dollars to Eurozone banks in super-cheap long-term credit. Even this was not enough; it was only in September 2012, when MarioDraghi, the president of the ECB, announced that the bank was ready to buy unlimited quantitiesof member states bonds again with strict conditions attached that the markets bets againstthe euro were taken off the table and the furore over Europes monetary policy could subside.

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The EU that has emerged from this epic battle is significantly more autocratic, German-dominated and right-wing, while lacking any compensatory charm. The catastrophists, its true,have been proved mistaken. Far from disintegrating, the Eurozone has continued to expand:Latvia is adopting the euro in 2014, as Estonia did in 2011. Croatia joined the EU or rather itsperiphery, as two sardonic Croats put it in the Guardian this summer. But the EU hasntsimply muddled through either. Instead, driven by the financial markets, with the US Treasuryand the German Chancellery tugging at the tiller, it has lurched into a new phase of unification,characterised by the same skewed mix of centripetal and centrifugal logic that has shaped itscourse since Maastricht: asymmetrical integration, combined with inegalitarian enlargement.

At supranational level, the controls demanded by Berlin have produced an ad hoc economic

directorate with no legitimation beyond the emergency itself. The Troika it has no officialname was scrambled together in April 2010 to take over direction of the Greek economy, as thecondition for its first EFSF loan. Composed of functionaries from the European Commission, theECB and the IMF, it now governs Portugal, Ireland, Cyprus and Greece, and has beenpermanently inscribed in the European Stability Mechanism. The Troika issues Memoranda ofUnderstanding on the same model as the IMF, which dictate every detail of the member stateslegislative programmes: The government will ensure that the legislation for cuts in health andeducation, public sector redundancies, reductions in the state pension is presented toParliament in Quarter 3 and agreed by Parliament in Quarter 4; the government will present aPrivatisation Plan to Parliament and ensure it is speedily passed; even, the government willconsult ex ante on the adoption of policies not included in this Memorandum.

The Troikas record of economic management has been abysmal. Greek GDP was forecast to fallby 5 per cent from 2009 to 2012; it dropped by 17 per cent and is still falling. Unemploymentwas supposed to peak at 15 per cent in 2012; it passed 25 per cent and is still rising. A V-shapedrecovery was forecast for 2012, with Greek debt falling to sustainable levels; instead, the debtburden is larger than ever and the programme has been renewed. No one has been held toaccount for this debacle. Further rounds of cuts are scheduled for 2013, without any economicrationale. Another 15,000 public sector workers have to be sacked to meet the requirements of


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this summers quarterly review; the entire staff of the Greek broadcasting corporation has beendismissed. The number of doctors by headcount must fall by another 10 per cent this year, as in2012; hospital costs are to be cut by another 5 per cent, after 8 per cent in 2012, and the Troikawants to see a substantial further reduction in hospital beds.

The most aggressive component of the Troika is the European Commissions Directorate forEconomic and Financial Affairs. Its public face is the beefy blond Olli Rehn, usuallyphotographed haranguing Mediterranean lawmakers in viceregal style. In his native Finland hehas been compared to Bobrikov, the hated tsarist governor-general who tyrannised the country inthe early years of the 20th century until a patriot shot him dead. Rehns understanding of his jobwas revealed in the comment he made as he lashed out against the IMFs mild criticism of theGreek programme: he informed theFinancial Times that the Troika should march in together,out together, on the model of the Nato powers in the Balkan war.

Like many European commissioners, Rehn had been summarily rejected by his own electorate.Educated in the US and at St Antonys College, Oxford, he entered the Helsinki Parliament as a

29-year-old in 1991 and was quickly seconded to the office of Esko Aho, the Centre Party primeminister. Ahos government was detested for the harsh spending cuts it imposed, exacerbatingthe already severe early-1990s recession. When the party was consigned to the oppositionbenches in the 1995 election, Rehn made his way to Brussels, where he landed the plum job ofchef de cabinet for Finlands European commissioner, into whose shoes he stepped in 2004.(Aho became executive vice-president of Nokia.) His first brief was EU Enlargement; Romaniaand Bulgaria were whisked into the fold in 2007, with evidence of massive political andeconomic corruption brushed aside. An ardent disciple of Merkels finance minister, WolfgangSchuble, and his hardline stance on budgetary and labour market discipline, Rehn was promotedto Economic and Financial Affairs just as the Greek crisis was erupting in 2010.

Since then, the European Council has successively extended the Commissions remit foreconomic surveillance and enforcement. First came the European Semester (2010), a newprocess in which Brussels sets annual targets for all member states, whose budgets must besubmitted to Rehns office before they can go before the parliaments. Countries considered to beat risk are subject to the EUs excessive deficit procedure and face fines of up to 0.2 per centof GDP. A series of overlapping intergovernmental agreements (the Euro Plus Pact in 2011, theFiscal Compact in 2012) and EU regulations (known in its miserable jargon as the six-pack andtwo-pack) gave the Commission greater powers to intervene if any state was not alreadyfollowing its strictures on lowering unit labour costs, increasing labour market flexibility andmaking the requisite budget cuts. Within the Commission, the Economic Directorate has beengiven more sway: Rehn must be consulted about other commissioners initiatives if they affectgovernment spending.

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The new powers of the European Commission and the Troika mark a real diminution ofdemocratic control. Before the crisis, the EU had left major decisions on taxation, pensions,unemployment pay, public spending, health and education in the hands of national governments,considering them sensitive enough to require parliamentary legitimation. Now they are


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effectively subject to the diktat of EU functionaries. The constitutional niceties have beenpreserved, so far, in that parliamentary majorities have been found to vote the emergencymeasures through. But in countries where unemployment and economic misery are running high,the MPs are supported by a minority of voters. In Greece, barely 30 per cent of the totalelectorate cast a vote for the winning New Democracy-Pasok-Dimar coalition in June 2012;

those who did so were mostly pensioners and rural voters, worried for their savings, while in thebig cities and among under-55s, a majority voted for the anti-Memorandum Syriza. In Spain, thegoverning Peoples Party is down to 23 per cent in the polls, the centre left Socialists even lower,and Madrids budget strictures are fiercely contested by Catalonia. In Italy more than half thevoters opted for Eurosceptic parties in February 2013 and Mario Monti, the EU establishmentfavourite, crashed out with 10 per cent.

Is electoral democracy compatible with the type of economic policies the EU backed at adistance by Washington and Wall Street wants to impose? This is the question posed by theCologne-based sociologist Wolfgang Streeck in Gekaufte Zeit, a book that is provoking debate inGermany. Streeck argues that since Western economic growth rates began falling in the 1970s, it

has been increasingly hard for politicians to square the requirements of profitability and electoralsuccess; attempts to do so (buying time) have resulted in public spending deficits and privatedebt. The crisis has brought the conflict of interests between the financial markets and thepopular will to a head: investors drive up bond yields at the risk of an election. The outcome inEurope will be either one or the other, capitalist or democratic, Streeck argues; given the balanceof forces, the former appears most likely to prevail. Citizens will have nothing at their disposalbut words and cobblestones.

Brusselss response to the curtailment of democracy has been to propose a commensurateincrease in the role of the European Parliament, to lend democratic legitimacy to theCommissions expanded powers; but the Parliament is constitutionally incapable of that. Its

electoral process cant do what voters expect of parliamentary elections i.e., determine themake-up of the ensuing government. The Parliaments first incarnation, the Common Assembly,was established in 1952 as a gathering of MPs from the national parliaments to provide ademocratic sounding board for the High Authority of the European Coal and Steel Community,forerunner of the Commission. The Assembly was granted power of dismissal over the Authorityand could vote down its budget. From the start, however, both institutions saw their relationshipas one of close co-operation: unanimity would strengthen their bargaining power vis--vis thenational governments, represented in the Council of Ministers and later in the European Council,where real power came to reside.

De Gaulle had mocked the idea of direct elections to a consultative body, but in the 1970sGiscard gave it the green light, in exchange for the small states conceding a greater role tointergovernmental summitry. The first Europe-wide elections were held in 1979, but theParliaments function was still advisory. The MEPs were not lawmakers; their task was to issue amajority opinion on the directives drafted by the Commission and agreed by the Council, withthe details hammered out in closed committees. The creeping extension of the Parliaments co-decision capabilities over the past twenty years relates to its capacity to propose amendments tothe Commissions wording, which the Council can override. The cosy relationship continues: thevast majority of co-decision directives are agreed beforehand in informal trialogues between


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representatives of the Commission, the Council and the Parliament. The condition for MEPssuccess in getting an amendment adopted is its acceptability to the other institutions, not itsimportance to European voters.

Most of the MEPs work is done in the twenty-odd committees set up to cover specific policy

areas: foreign affairs, agriculture, transport, justice, the EU budget. Committee appointments arecontrolled by the leaderships of the party groups the centre right European Peoples Party(EPP), centre left Socialists and Democrats (S&D), liberal Alliance of Liberals and Democratsfor Europe (ALDE) and allocated on a proportional basis. At the monthly Strasbourg plenaries,the groups issue voting cues to guide their members through the bewildering sequence ofresolutions: regulations for EU airports, animal feed, cellphone registration procedures and soon. The EPP and S&D groups control two-thirds of the seats, so agreement between their leadersensures a majority of plenary votes. The Commission has had nothing but praise for the speedwith which the Parliaments committees and party groups put their stamp on the draconianmeasures for the Eurozone. In an inter-institutional tweak that is supposed to lend the EuropeanCommission a democratic lustre, each of the party groups will nominate a candidate for the

Commission presidency, to succeed the hapless Barroso in the run-up to the Parliamentselections in May 2014; names being touted include Donald Tusk, Guy Verhofstadt, Jos LuisZapatero, Pascal Lamy, Martin Schulz and Barroso himself. If turnout continues to fall as it hassince 1979, the winner could end up with the support of less than 10 per cent of European voters.In sum, the European Parliament appears unreformable.

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A substantial section of Europes intelligentsia has rallied to defend the new round of market-driven integration as the best of all possible outcomes. Jrgen Habermas devotes The Crisis ofthe European Union: A Response to demonstrating that the balance of power has shifted

dramatically within the organisational structure in favour of the European citizens. Although thecitizens themselves are regrettably apathetic about it, post-national democracy is well on its wayto being realised through the European Parliament; the mass media should do more to help themappreciate its significance. In a recent essay taking issue with Streeck, Habermas argued thatfailure to offer full support for the emergency Eurozone measures amounts to a capitulation toright-wing populism that repeats the errors of 1914. He hopes the German elections willproduce a truly grand coalition CDU, SPD, FDP, Greens to push through the supranationalblueprints for fiscal and political union. Only the Federal Republic of Germany is capable ofundertaking such a difficult initiative, he concludes, with a flourish of the sort of provincialarrogance that used to be a British prerogative but has become common in the German media.What has been obliterated here is France. (The former leader of the Greens, Joschka Fischer, hasclaimed that Germany is and has been the driving force behind European integration.)

For Europe!, a manifesto co-authored by the German Green Daniel Cohn-Bendit and the BelgianLiberal Guy Verhofstadt, has even wilder pretensions. Only the European Union is able toguarantee the social rights of all European citizens and to eradicate poverty; only Europe cansolve the problems of globalisation, climate change and social injustice; the shining example ofEurope has inspired other continents to go down the path of regional co-operation; nocontinent is better equipped to renounce its violent past and strive for a more peaceful world.


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Cohn-Bendit and Verhofstadt out-catastrophise Habermas: if the single currency fails, so doesthe European Union two thousand years of history risk being wiped out.For Europe! is ahymn to discipline, which emerges surprisingly as green-liberalisms central theme. Astrong authority is required to enforce compliance; discipline is vital to the Eurozone. Askedby aLibration journalist whether the European Stability Mechanism was not a technocratic

dictatorship, Verhofstadt preferred to call it a transitional stage after all, nation-states hadexisted for centuries before universal suffrage.

The Munich sociologist Ulrich Becks German Europe at first strikes a refreshingly critical note.It opens with his incredulity on hearing a radio newsreader announce in late February 2012:Today the German Bundestag will decide the fate of Greece. For Beck, the new inter-statehierarchy in the Eurozone has no democratic legitimacy: it is entirely a product of economicpower. Spain, Greece and Italy are being subordinated to austerity policies prescribed by Berlinand designed with the German electorate in mind, and as a result entire regions are beingplunged into social decline. Debtor nations are becoming the new EU underclass, theirdemocratic rights reduced to acceptance or exit. Merkel may have had her leading role thrust

upon her but she has made the most of it. The test for Eurozone measures is whether or not theypromote Germanys national interest and Merkels domestic position. The upshot is brutalneoliberalism for the outside world, consensus with a social democratic tinge at home.

Beck relates Berlins swaggering universalism, its arrogant conviction that Germany has theright to determine the national interests of other countries, to the former West Germanystakeover of the GDR. Its know-it-all attitude and quasi-imperialist sense of superiority to EastGermans is now the template for Eurozone crisis management, with the critical difference thatsolidarity has no place here. But the confidence of Europes schoolmasters in GerhardSchrders 2003 neoliberal package is misplaced, Beck argues, for its effect in Germany hasbeen to create a universalised precariat: of the new jobs, 7.4 million are mini-jobs at 400 per

month, three million are temporary positions, one million agency jobs. German growth has comemainly from exports, not least to the southern Eurozone. Yet Becks final prescriptions bear norelation to his diagnosis. His enthusiasm for a non-accountable Eurozone economic directorate isno more qualified than that of Habermas, Cohn-Bendit or Verhofstadt. Like the others hebelieves that it must be defended against complaints that it is above the law on the grounds thatit is necessary in order to save the EU order.

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Counterintuitively perhaps, German debates have concentrated on the politics and sociology ofthe European crisis, while the most imaginative economic alternatives have come from France.Michel Aglietta and Jean-Luc Grau offer proposals for democratically constituted Eurozonebudgetary federations, while inLes Dettes illgitimes Franois Chesnais mines the experience ofthe Latin American debt crises for useful lessons, drawing especially on Ecuadors successfuldebt audit, which examined in detail what obligations had been accrued in the name of the stateand which ones might legitimately be repudiated. Aglietta has also outlined a step-by-step paththat Greece could take to a new currency, via a structured default and devaluation, while stillremaining within the European Union. The price would be high, but no higher than the price theGreeks have had to pay anyway, and relief would have been in prospect by now. (As for the


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effect of a Greek default on Spanish and Italian bonds, that price has been paid as well.) In theJune issue of the Cambridge Journal of Economics, Jacques Mazier and Pascal Petit envisage amultiple European monetary system: a single external euro, which would float against the othercurrencies on international markets, but coexist with non-convertible national euros, which inturn would have fixed but adjustable intra-European parities a variant of what China envisages

as a middle stage for the convertibility of the yuan.

Whatever their merits, in a Europe run from Berlin, Brussels and Frankfurt, the political forces tochampion such ideas are lacking. Yet German dominance during the Eurocrisis has dependedabove all on French compliance: active collaboration under Sarkozy, passive absence ofopposition under Hollande. There is something anomalous about the neutralisation of France asan actor on the European stage and the brittle character of German hegemony must stem in partfrom it. The conventional explanation is that the French economy is too weighed down by itsstatist legacies for the Elyses word to carry much authority, but the figures dont bear this out.France has now overtaken the UK, after a swifter recovery from the crisis. Its public debt,including bank rescues, is lower than Britains and its manufacturing sector is in better shape.

Unemployment is worse, but average household income is higher, inequality lower andinfrastructure and healthcare in another league. France faces the same global problems as theother advanced economies, but the reason it has ceased to play a leading role in Europe must lieelsewhere perhaps in a sclerotic political system and intellectual entrancement with Atlanticliberalism, as well as the cross-border entanglements of BNP Paribas and Socit Gnrale.

For the longer term there is no shortage of proposals for European economic union andpolitical union, headings that cover a wide variety of arrangements, many of which have beenunder discussion for years. All the schemes work on the assumption that economic policy shouldaim at reduced public spending and low-cost labour markets, as the failsafe recipe for stabilityand growth; all see political union as a means by which to apply this policy; nearly all gesture

towards the European Parliament as the mechanism for lending it legitimation. Where theproposals differ is in the respective weight they give to intergovernmental bodies as opposed tosupranational ones, and in their minimalist or maximalist versions. Decisions will depend notonly on the balance of forces between the states Germany, historically a champion of the smallstates supranational agenda, has shifted towards intergovernmentalism in the course of the crisis but also on external shocks, as the current negotiations over banking union demonstrate.Supranational oversight of the national banking sectors by the ECB is relatively uncontroversial;but Berlin is leading the resistance to the Commissions proposals for EU-wide deposit insurance(backed by the ESM funds) and a supranational authority which would have the power to takeover bankrupt German banks. Still, another financial tremor could see an emergency mechanismcobbled together which, like the Troika, would become part of the EU system.

Minimalist intergovernmental versions of economic and political union sketched in VanRompuys European Council report in June 2012 and currently backed by Merkel lean towardsintegrated frameworks, whereby the national governments agree to co-ordinate budgetary andeconomic policies (deficit limits, competitiveness, pensions etc), monitored by theCommission. A maximalist intergovernmental version, favoured by Schuble, envisages explicitpolicy co-ordination for the Eurozone alone, perhaps upgrading the Eurogroup finance ministersmeetings to quasi-cabinet status. Supranational or federalist versions of political and economic


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union focus on strengthening the Commission as a proto-government, with the EuropeanParliament given a higher profile. Maximalist supranational variants include BarrososSeptember 2012 report to the Parliament and the Commissions November 2012 Blueprint for aDeep and Genuine Economic and Monetary Union, which set out longer-term plans for anautonomous Eurozone budget and a eurobond market, conditional on tight central controls over

national spending.

The problem is Europes citizens. Substantial new powers for supranational or intergovernmentalbodies would require another treaty, which would entail referendum campaigns over ratificationin at least two member states effectively, an invitation to voters to make their dissatisfactionknown. In Spain, the number expressing mistrust of the EU has risen from 23 to 72 per centover the past five years; in Germany, France, Austria and the Netherlands the figure is around 60per cent. Fewer than a third of Europeans now trust the EU; a majority give unemployment andthe state of the economy as their chief concerns.

Still, much could be done without involving the voters, as Jean-Claude Piris points out in The

Future of Europe: Towards a Two-Speed EU? Piris was the EUs chief lawyer for two decades,responsible for the technical drafts of the Maastricht, Amsterdam, Nice, Constitutional andLisbon treaties before his retirement in 2010. He is a stern judge of his own handiwork:expansion has robbed the EU of its coherence and identity; the Parliament has failed to winvoters confidence; the Commission is intellectually weak, the Council hampered by unanimityrequirements; voter disaffection rules out a much-needed institutional fresh start. Instead, Pirisargues, Article 136 of the Treaty on the Functioning of the European Union gives the Eurozonecountries ample scope for fiscal and economic co-ordination; a core group could use a politicaldeclaration to provide themselves with a coherent identity and future project.

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What will become of the EU countries outside a more tightly co-ordinated Eurozone? InAuRevoir, Europe: What if Britain Left the EU? David Charter, a Times journalist, argues that thecombined dynamics of growing Euroscepticism in the UK and increasing integration in theEurozone mean that London will either have to negotiate a form of second-tier membership some have proposed making a virtue of a looser outer ring, which could include Turkey and theBalkan states as well as Britain or quit the EU altogether. One can see why many in Europemight welcome that possibility. Britain has loyally fulfilled De Gaulles prediction that it wouldserve as a Trojan horse for US interests in Europe. Cameron has lately spared no efforts indefending Londons derivative traders mostly subsidiaries of US banks from EU regulation,let alone taxes, while backing savage austerity programmes and urging Germany to step up to themark.

Charters history of the UKs relationship with Europe is a useful reminder that much of whatpeople loathe about the EU has been the result of British intervention. Polls say a majority wouldfavour a single market Thatchers dream without the mass of EU regulations, but the latterare a precondition for the former. By the 1980s, every advanced industrial economy had built upits own web of health and safety rules, not without reason: specifications for product labelling;safety requirements for electrical appliances; protocols for food standards and abattoir inspection


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agencies; restrictions on toxic substances, such as lead paint on childrens toys. National importtariffs could be removed by fiat, but to create a single market these non-tariff barriers to tradeneeded to be brought into alignment, sector by sector, across a growing number of nationaleconomies. Naturally the Brussels negotiating committees charged with the task became a targetfor corporate lobbyists. Then, from 2006, the EUs bid to become the global leader in

environmental regulation eagerly backed by Blair, who hoped to greenwash his reputation helped to produce a plethora of further edicts, on everything from plastics to lightbulbs.

Au Revoir, Europe offers a brisk cost-benefit analysis of what leaving the EU would mean forBritain. Charters findings on the economic effects broadly concur with those of theEconomist,in its anti-exit intervention of December 2012. On the plausible assumption that the UK couldnegotiate a bilateral trade deal with the EU, the medium-term effects would be negligible;Charter effectively demolishes Cleggs claim that 3.5 million UK jobs depend on membershipof the EU. The short-term impact on investment would be more dramatic, perhaps comparable tothe financial crisis, when foreign investment fell from 196 billion to 46 billion between 2007and 2010. Over the medium term, investment would recover in tandem with growth, once post-

EU arrangements were on a solid footing. As for the UK contribution to the EU budget, 11.3billion is barely a blip in the public accounts: 1 per cent of total government spending.

Leaving the EU would allow the UK to adopt a tightly controlled visa system for otherEuropeans; EU nationals make up 40 per cent of net UK immigrants and currently have freeentry for up to three months, with indefinite leave to stay if they have a job or are self-employed.But Brits would be subject to equivalent barriers on trying to enter the EU; around a million areresident in other EU countries, above all Spain, where they can collect their UK pensionsthrough the local post office and enjoy free healthcare. Post-exit, the repatriation of Costa Bravagrandparents would add to UK social service costs; demographic recalibration would be furtherratcheted towards the elderly and dependent by the exclusion of fit young Poles and Romanians.

For theEconomist, cheap immigrant labour is a principal reason for remaining in the EU (alongwith being useful to Washington and having a voice in financial sector regulation); Chartersuggests that costs and benefits in this area cancel each other out.

Au Revoir, Europe was published before Cameron promised to hold an in-out referendum in2017, but Charter anticipates something like it. He sketches an exit trajectory unfolding over thenext ten years. In the 2015 election, all three parties include an in-out referendum pledge in theirmanifestos, a reluctant Edward Miliband having been convinced by his advisers that Labourcant afford to be the only party not to offer voters a choice. Labour scrapes in and duly holds thereferendum. Boris Johnson, who has replaced Cameron as leader of the opposition, leads anenergetic Out campaign, trumping the lacklustre Ins. On a 54 per cent turnout, the UK votes by51.4 to 48.6 per cent to leave the EU. Milibands lame-duck government limps on to conclude aUK-EU free trade agreement, with London now paying substantial fees for access to the singlemarket and agreeing to take account of EU legislation in drafting its own laws. Geography andtrade dictate that Britain is still closely entwined with its ex-partners; exiting the EU doesntmean adieu to Brussels.

How plausible is this scenario? The Labour leaders gratitude for White House guidance on thein-out referendum popular consultation was curtly dismissed by Obama as unhelpful


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ensures that it wont be featuring in Labours election campaign. The Liberal Democrats had noqualms about dropping their own referendum commitment for the 2010 coalition agreement. Sothe referendum will depend on a clear-cut Tory victory in 2015, which at present looks againstthe odds. The population drain to the South-East has left constituency boundaries heavilyweighted in Labours favour, and in 2010 UKIP denied the Tories a dozen marginal seats, by

skimming off a few thousand votes in each. A Conservative pollster has predicted a ninety-seatmajority for Labour, which sounds far-fetched, especially given low turnout and tactical voting Tories warning that a vote for UKIP means a vote for Miliband, who has also, to his credit,mortally offended Rupert Murdoch. But a Lib-Lab government would rule a referendum out.

If one were to be held, though, the likelihood would be a vote for the status quo. UKIPs rise isnot due to a sudden, post-crisis surge of Euroscepticism in England (Scotland will have none ofit) but to the collapse of support for the three main parties. For the first 15 years of its existence,UKIP struggled to get 3 per cent in national polls. Its breakthrough came in the 2004 EuropeanParliament elections, fought on the basis of PR. As the others slumped to unprecedented lows Labour brought down by Iraq, the Tories still wandering in the post-Thatcher wilderness UKIP

garnered 16 per cent of the vote and 12 MEPs, a sixth of the UK cohort, whose ample salaries,perks, office staff and resources could be diverted to local party-building. In the 2009 Europeanelections, Labours rout barely 15 per cent of the vote put UKIP, on 17 per cent, in secondplace to the Tories.

Since 2010, the Liberal Democrats embrace of spending cuts and student fees has created a tri-partisan consensus, leaving UKIP the best-known receptacle for the protest vote. Meanwhile theEnglish political mainstream has shifted so far to the right that UKIPs domestic policies limited visas for immigration, grammar schools, sacking teachers and local government workers are only mild exaggerations of what the others proclaim. Academy schools, pursued with equalzeal by Labour and Tory education secretaries, select or exclude pupils on the basis of

management diktat, not even bothering with an exam. Phil Woolas, Labours immigrationminister, pledged his party to a war on undocumented immigrants; his 2010 election leaflet,attacking a Liberal Democrat rival who had been wooing the local imams, was reminiscent of theTories famous 1960s slogan, If you want a nigger for a neighbour, vote Labour.

Opinion polls currently indicate 41 to 54 per cent for EU exit, 24 to 38 per cent for staying in and8 to 30 per cent dont knows. But these are soft figures, measuring off the cuff political viewsrather than hard-headed calls on material personal advantage. The transatlantic bully pulpit willmake much of short-term financial upheaval and higher interest rates; fear will favour the statusquo. In the 1975 referendum, a much more anti-European population voted two to one to remainin the Common Market. A pioneering mood of national confidence, a willingness to strike outinto the unknown, is lacking in England as much as it is in Scotland. The Trojan horse will bestaying put. Europes luck is out on that front, too.

As for the immediate future, the Berlin-Brussels axis can probably continue to manage the crisison Germanys terms as long as its worst effects are confined to the small peripheral economies Greece, Cyprus, Portugal and Ireland. The latest figures indicate a fragile 0.3 per centimprovement in second-quarter Eurozone growth compared to 2012, sustained almost entirely byGermany and France. But if the world economy were to take a turn for the worse, Spain and Italy


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would pose problems on another scale. The ECBs bond-buying programme would oblige theiralready discredited politicians to submit to Troika rule. Yet the financial market turmoil thatgreeted Ben Bernankes murmur this summer about a cut in quantitative easing was a reminderthat the lull wont last for ever. Five years of zero interest rates and $14 trillion from the FederalReserve have produced only stuttering American growth. China, with falling exports, teeters on

the brink of a bank and local government debt disaster. Europe is vulnerable from bothdirections: higher interest rates will raise the risk of default by its states and banks, whileGerman exports depend increasingly on Chinas construction boom. This summer theBundesbank revised down its forecasts for 2014. The austerity regime has yet to be tested in itshomeland.

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Vanity and Venality