‘The euro has survived’
Photograph by Julian Herzog
From London Review of Books:
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, the Troika, is policing the countries that got themselves into trouble; governments are constitutionally bound to the principles of good housekeeping. Further measures will be needed for the banks – but all in good time. The euro has survived; order has been restored. The new status quo is already a significant achievement.
Seen from the besieged parliaments of Athens and Madrid, from the shuttered shops and boarded-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 Eurozone’s population – into perpetual recession. 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 grandparent’s 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 recession for the past two years, after a decade of economic stagnation, and 42 per cent of the young are without a job. In Portugal, tens of thousands of small family businesses, the backbone of the economy, have shut down; more than half of those out of work are not entitled to unemployment benefits. As in Ireland, the twentysomethings are looking for work abroad, a return to the patterns of emigration that helped lock their countries into conservatism and underdevelopment for so long. Why has the crisis taken such a severe form in Europe?
Part of the answer lies in the flawed construction of the European Union itself. Though Americans have been hard hit by the great recession, the US political system has not been shaken. In contrast to most European incumbents, Obama sailed through his re-election. Only in isolated pockets like Detroit has elected government been replaced by technocrats.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 industrial association embracing two large countries, France and Germany, with a population of about fifty million each, and their three small neighbours. It was then expanded, piecemeal fashion, to incorporate nearly thirty states, two-thirds of which adopted a shared currency at the height of the globalisation boom – a project aimed in part at preventing a significantly larger, reunified Germany from dominating the rest.
The EU’s hybrid constitution includes, among much else, a decision-making European Council (summit meetings of the heads of the 28 governments); an overarching secretariat, the European Commission, with thirty-odd departments (directorates-general) and its own bureaucracy; a Parliament 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.