Thursday, July 16, 2015

Whither Europe?

The lull did not last long. Whatever Merkel and Hollande thought they had accomplished with their Potemkin bailout has now been exposed for the sham it is by none other than Mario Draghi. Draghi announced that the ECB will increase its Emergency Liquidity Assistance (ELA) to Greek banks to €900 million a week, but he also said that Greece "indisputably" needs debt relief, thus reinforcing the position of the IMF (or at any rate its research staff as opposed, thus far, to its policy arm).

L’homme fort de l’institution de Francfort a également clairement pris position dans le vaste débat sur la dette grecque. Selon lui, il est « indiscutable » qu’un allégement de la dette de la Grèce est nécessaire — dette dont le poids représente quelque 180 % de son PIB. « La question sera quelle est la meilleure forme d’allégement », a-t-il ajouté lors d’une conférence de presse à Francfort.
The question is now squarely on the table. The Eurozone as presently constituted does not work. It either needs to cease and desist or face the challenge of establishing central--and hopefully democratic--political control in place of the unworkable combination of deregulated markets, semi-sovereign member states, and ad hoc emergency arrangements. One of the staunchest supporters of the European project, Jürgen Habermas, has conceded that left-wing critics such as Wolfgang Streeck have a point: "Europe is stuck in a political trap," he says. But he disagrees with Streeck that "a return to nation-states can solve the problem."

I agree. For Habermas,
Such tendencies [toward de-democratization and growing social inequality] can only be countered, if at all, by a change in political direction, brought about by democratic majorities in a more strongly integrated ‘core Europe’. The currency union must gain the capacity to act at the supra-national level. In view of the chaotic political process triggered by the crisis in Greece, we can no longer afford to ignore the limits of the present method of intergovernmental compromise.
Indeed. But Habermas simply skips over the formidable, perhaps insurmountable, political obstacles to achieving this "ever closer union." Doubts about the wisdom of continuing with the European project are on the rise everywhere. The problem of the Greek debt is urgent, but the EU moves glacially when it moves at all. Still, denial of the Merkel-Hollande variety is becoming daily more untenable.