By J.D.R. Brown (The Cascade) – Email
Print Edition: November 16, 2011
The crisis in Europe has entered even more troubling waters this past week, if that’s even possible. Silvio Berlusconi, the now former Prime Minister of Italy, has been forced to step aside after losing a vote in the lower house of the Italian parliament to implement yet more austerity measures. These reforms were deemed necessary by the myriad of interests in the European Central Bank, the European Commission, and the governments of “core Europe” (read: Germany et al.) after the interest rates on Italian government bonds raced toward seven per cent – an incredibly high number for a country which is still solvent. The formation of a technocratic government, lead by the unelected Mario Monti, a former European Commissioner, is expected to be completed by Monday, November 14.
Various coverage in European and some North American media float the idea that this new interim government will calm the markets and allow Italy to continue to borrow as rates decline, thereby holding off complete catastrophe. I am not as convinced. Greece has just announced its own government of national unity which is also to be lead by a technocrat rather than an elected politician, and the bond vigilantes continue to circle as a complete sovereign default and exit from the Eurozone looms.
Europe now stands at a cross roads. The post-war project of European integration has been, up until this point, a resounding success. Despite the spectre of war between the Warsaw Pact and NATO during the Cold War, Western Europe has been without a major conflict since the end of World War II and that is perhaps the greatest evidence in favour of the ongoing European project. But the series of concentric circles that has, up until now, characterized the European Union and the various other organs and organizations of cooperation has run its course. Lehman Brothers collapsed at the end of George W. Bush’s final term in office, and we are very nearly into the last year of Obama’s first and perhaps final term. In all this time, Europe has been unable to effectively deal with the series of fiscal calamities that have come their way.
The various solutions that have been proposed up until now have been small potatoes in the very worst way. Bailouts by Germany and further commitments to backstop Greece, Portugal, Ireland and others have done nothing to solve the crises in any of these countries, and have generally exacerbated the terrible economy calamities that ordinary persons have to deal with – especially unemployment. What we are witnessing right now is the failure of otherwise rational actors to move beyond their petty jealousies and save not just the euro, but the future of the entire European Project.
There is only one proper remedy to what ails Europe, and it is certainly not tripling tuition fees and cutting pensions as David Cameron has done in the UK. No, it is full fiscal and political union: federalism. At least amongst the countries of the eurozone, a federal government with the powers of taxation and a democratic mandate would be able to backstop all of the countries now under threat from the bond markets and would be able to set up sane financial institutions. Or, at least, modify the existing financial institutions to be sane, such as making the European Central Bank into a lender of last resort. Some European elites have even begun to float this idea of federal integration themselves, including the former German foreign minister.
But Europe remains at the brink. We will see very quickly whether the politicians and technocrats of Europe will be able to stave off economic Armageddon, and in the process we may witness the birth of a truly federal Europe. And if we do not, I cannot even begin to imagine the consequences.
