Negotiations in Brussels to resolve the Greek fiscal crisis appear deadlocked, with Athens heading toward default on Tuesday. German Chancellor Angela Merkel insisted that Greece make a deal before the markets open Monday: Germany “will not be blackmailed.” Greek Prime Minister Alexis Tsipris responded by denouncing “blackmails and ultimatum” and scheduling a referendum on the deal on July 5.
The European Union was supposed was supposed to create a de facto United States of Europe. Although the original constitution was rejected by Dutch and French voters, the Eurocratic elite forged ahead with a treaty, which did not require popular ratification. Only the Irish voted, and they first said no. But under pressure from virtually every establishment individual and institution across the continent, the Irish did as they were told and voted yes the second time.
In 2009 the Lisbon Treaty finally took effect. The result was supposed to be a new Weltmacht, a putative superpower with a president, foreign minister, and parliament, moving toward ever greater centralization. The Europeans prided themselves on answering Henry Kissinger, who so many years ago sarcastically asked for Europe's phone number.
Alas, after last January's Greek election it was obvious that whoever answers that line does not speak for Greece. Indeed, it isn't clear if the EU's leaders, many appointees confirmed by parliamentarians elected by national voters primarily using their ballots as protest votes, represented anyone in Europe other than themselves. And the Eurocrats, an amalgam of bureaucrats, academics, journalists, businessmen, politicians, and lobbyists who dominate Brussels.
To most EU leaders common people are an impediment. The Eurocrats reflexively intone “more Europe” in answer to every question, but voters increasingly are supporting protest parties, some populist, some worse. In countries like the Netherlands the rabble-rousers seem destined for government. In London it is the government, led by Prime Minister David Cameron, which is seeking to weaken Brussels’ control, after which it will hold a referendum on continuing membership in the body.
The most fundamental problem remains the “democratic deficit,” which then Czech President Vaclav Klaus spoke of. The EU began as a forum for economic cooperation, mainly to help integrate West Germany back into Europe. The later Common Market created a relatively free trade zone for member states, breaking down import barriers. But a forum for increased economic liberty offered little to the Eurocrats, who, like most denizens of Washington, D.C., are by inclination and profession meddlers. Their objective is to coercively reorder society. That requires a strong central government. Hence creation of the European Union.
Advocates weren’t shy about their ambitions. In 1992 German Chancellor Helmut Kohl predicted “creation of what the founding fathers of modern Europe dreamed of after the war, the United States of Europe.” Of course, Kohl and his fellow Eurocrats were about the only people with such a fantasy. But that didn’t matter, since they had the power. Or so they thought.
After all, they surmounted the embarrassing defeat of the European constitution. The Euro was another step in the unification process. The commercial union added a monetary union, currently joining 19 nations. The drafters recognized that leaving fiscal policy to individual members created a dangerously unbalanced system. But for the Eurocrats this flaw actually was a benefit: they believed further political integration would be necessary in response. A more powerful EU was expected, one that really would be more like the United States of America.
Alas, the European Union exalts process not substance. The EU has three presidents, who compete for attention and authority. The parliament has only passing connection to the people of Europe. No one salutes the flag. Obnoxious, meddling rules poured forth from Brussels, and, like those issued by Washington, D.C., do more to obstruct than advance daily life. Most important, virtually no one feels loyal to the new behemoth emerging one dictate at a time. When it comes to football (soccer), no one identifies with Europe, but with Germany, Spain, Portugal, England, and every other individual country. There are no EU patriots. No European would die for Brussels, not even the Belgians, who barely averted the break-up of their badly divided nation.
But the EU carries on as a conglomeration rather than a unit, secure in the support of the vast majority of the continent's elite, including national governments. The Euro crisis has shaken this political foundation, however. The EU was sold as an organization of equals, which promised its peoples there would be no bail-outs. It turned into a transfer union. In wealthy nations, most notably Germany, people have tired of subsidizing their neighbors. In deeply indebted countries people have tired of economic sacrifices imposed to secure outside aid. And everywhere Europeans increasingly resent the growing internationalism and cosmopolitanism imposed by the center.
Until January the popular revolt was contained. But then radical left-wing Syriza, many leaders just a step or two away from communism, won a near majority. The new government rejected the Brussels consensus, overturned previously negotiated austerity, and demanded debt relief. However, the other European nations, especially those which had implemented their own wrenching reform programs, were not inclined to toss more good money after bad to those who tore up past agreements. Tsipras and his colleagues spent the last five months frittering away what little good will with which they were greeted. Now default threatens, which most likely would mean a Greek exit from the Eurozone (“Grexit”) and possibly even from the EU.
However the crisis—running so long that it should be referred to as a regularly scheduled soap opera—is resolved, the march toward ever greater power in Brussels appears over. Euroskeptic parties are on the rise and other radical left and independent groups have followed Syriza's example in Italy and Spain. If London wins concessions to hold it within the EU, other nations likely will follow with the own demands, leaving the European project something less.
Nevertheless, the ongoing drama continues to entertain. Who are the dozen most spectacular villains?
- Helmut Kohl. The first chancellor of a united Germany, Kohl agreed to sacrifice the legendary German Mark for the Euro even though he knew he was creating a monetary union without a fiscal union. He assumed that the resulting problems would push Europe toward greater fiscal coordination and central control. Instead, the Eurozone risks a crack-up.
- The Greek political establishment. Both the dominant parties, Pasok and New Democracy, profited from the sclerotic and venal state which they created, filled with clients dependent on government hand-outs. Athens lied about its fiscal status to meet the Euro’s criteria and then borrowed wildly to throw a grand party for a people more inclined to security and leisure than entrepreneurship and productivity.
- Greece’s creditors. They lent money at near-German interest rates to a nation as unlike Germany as exists. After all, what could possible go wrong? Athens had been inducted into the sacred Eurozone. Many European banks, including in Germany, went in deep, risking their own solvency. Thus, the entire bail-out program was more a rescue of banks than Greeks, who ended up saddled with more debt, though with longer maturities and at lower interest rates.
- The International Monetary Fund. Long one of the world’s least popular organizations, the IMF used to spark riots in foreign nations when its officials arrived to negotiate a new “adjustment” program. Originally created to support a system of fixed exchange rates, it transformed itself into a “development” bank, subsidizing socialist and authoritarian regimes and creating long-term financial dependency around the globe. Since then it has become one of the primary financiers of troubled European nations, most notably Greece.
- Valery Giscard d ‘Estaing. One of the primary architects of the initial, and later rejected, constitution, he pushed forward with the Lisbon Treaty, constructed to leapfrog the European people in creating a more powerful European Union, a consolidated government more characteristic of a traditional nation state. He exemplifies the corrupt establishment which benefited most from Brussels’ rise.
- Alexis Tsipris and Syriza. This disparate movement of the left believed in fiscal alchemy—more government spending, taxing, and regulating would turn into a roaring economy. Filled with the chutzpah of deadbeat borrowers, Greece’s new government believed that the plurality which brought it to power could overrule the electorates in 27 other countries which would pay for additional bail-outs. Perhaps even worse in the high stakes personal negotiations, the Greek government believed studied insult would generate concessions instead of the contempt.
- The European Central Bank. With the traumatic memory of post-World War I hyper-inflation still haunting Berlin, Germany agreed to cede monetary authority to a common central bank only after receiving due assurances of fiscal propriety. However, the ECB shifted from economics to politics when it began buying the bonds of deeply indebted European states, most notably Greece, providing a sub rosa subsidy to the improvident. Like America’s Federal Reserve, the European Central Bank believed itself to be responsible for protecting elites rather than the people ultimately stuck paying the bill.
- The Greek people. Life long seemed wonderful in Greece, which gloried in its system of relaxed but corrupt inefficiency. Life became even better with Euro-subsidized borrowing, which allowed people to prosper despite their economy being littered with bloated bureaucracies and privileged cartels, and hamstrung with debilitating regulations and profiteering politics. When the bill finally came due, they reacted with shocked outrage and insisted that someone somewhere had to be responsible.
- British Prime Minister Tony Blair. The heir to the world’s longest and most influential parliamentary democracy, this exemplar of “New Labor” sacrificed national sovereignty in ratifying the Lisbon Treaty. Now the British people are inclined to reverse course without major concessions (“Brexit”), and the Eurocrats are reluctantly retreating, promising change. To Britain’s great gain Blair was unable to drag his nation into the Eurozone; then Chancellor and later Prime Minister Gordon Brown helped block that fool’s errand.
- The French political elite. France has one of the most venerable and celebrated histories in Europe. However, its people suffer from the stultifying state controls and high taxes for which their nation is famous. Avowedly conservative Nicolas Sarkozy proved that the right could be as statist as the left, while socialist Francois Hollande, who took power in a close election, doubled down. He was forced to reverse course as the economy crashed and burned. So poorly is he regarded that the National Front’s Marine Le Pen could edge him out for the likely run-off with the conservative candidate, expected to be Sarkozy again, in the 2017 presidential contest.
- The European Parliament. Nominally the one democratic arm of the EU, the EP has been pressing for more authority. Yet it may be the one legislative assembly in the world which no one votes for on its own merit. The best predictor of EP election results is the status of ruling parties in individual nations. More often than not voters use MEP contests as an opportunity to protest against unpopular rulers. The exact parliamentary make-up therefore results more from political happenstance than conscious choice.
- Angela Merkel. Into her supposedly safe hands she has thrice convinced German voters to place their government. However, she represents the most insipid and disappointing qualities in a politician. Blessed with responsibility for governing Europe’s most prosperous and populous nation, she has spent her years in office doing as little consequential as possible. The liberalish economic reforms which enable Germany to prosper today were put in place by the last Social Democratic Chancellor, Gerhard Schroeder. When ruling with the business-friendly Free Democratic Party Merkel allowed policy to drift. Her most important legacy will have been to force her people to bail out virtually everyone in Europe. But she is a Eurocrat to the core. Opined Merkel: “We have a common currency, but no common political and economic union. And this is exactly what we must change. To achieve this—therein lies the opportunity of the crisis.”
What an opportunity!
The European story is reaching its climax and no one—since the show is live, not prerecorded—knows how it is going to turn out. Almost certainly the European confederation is going to loosen. The Eurocrats no longer can stop the retreat. Worried an overwrought Merkel: “If the Euro fails it’s not just the currency that fails, but Europe and the idea of European unification.”
Actually, the bigger threat to the grand European Project is rising popular resistance. At the time the Lisbon Treaty was ratified, polls indicated that majorities in half of the EU members would have rejected the pact. Since the treaty was not put to a vote, however, the Eurocrats were able to ram the changes through. But populist forces are gaining ground in national and EP elections. Even in Germany opposition to the Euro has spawned a new party, Alternative for Germany. France’s Le Pen, who has an outside chance of winning the French presidency in 2017, called the Greek election a “victory for the people against European oligarchy.” Earlier this week she declared: “Today we’re talking about Grexit, tomorrow it will be Brexit, and the day after tomorrow it will be Frexit.”
Greece and the European establishment might yet come to terms and the Euro might stagger along. But this almost certainly is not the Eurozone’s last crisis. And it certainly is the end of the easy assumption that the incantation of “more Europe” will solve all problems. It appears that many Europeans have had just about as much Europe as they can stand. In coming months and years the debate is likely to be over how much and how fast they can roll back “Europe.”