Financial Times columnist Wolfgang Münchau points a finger squarely at chancellor Angela Merkel in his article High Price of Europe’s Misguided Pragmatism.
As is typically the case, Münchau gets some things right while missing the big picture.
As for solutions, Münchau is nearly always wrong.
Sustainability is what this is all about. This is the main lesson from the Brexit vote. Britain will leave the EU not because David Cameron , the former prime minister, made a tactical error. He did, of course. But UK membership is ending because it was unsustainable. The EU has always been a project of political integration. The Remain campaign was premised on the notion that this was not so.
For the EU you can define a sustainable solution as the opposite of a pragmatic one. Sustainable solutions are task-oriented; pragmatic ones are often short-sighted. The German refusal in 2008 to recapitalise the European banking system seemed pragmatic at the time. Chancellor Angela Merkel goaded the other leaders into the decision that every country rescues its own banking system. Eight years later, the Italian banking system is still insolvent and awaiting an urgent recapitalisation. We are still debating what toxic assets may be hidden in the balance sheet of Deutsche Bank. Ms Merkel’s decision was the start of the eurozone crisis.
Or take the equally pragmatic decision in 2010 not to allow a writedown of Greek sovereign debt because German and French banks would otherwise have incurred unpleasant losses. The halfhearted programmes for Greece led to another crisis in 2012 and again in 2015. The latest news from Greece is that the recession is accelerating again.
Britain’s opt-outs are perhaps the most fateful example of misguided pragmatism. The opt-out from the single currency and the Schengen passport-free travel zone sounded sensible when agreed; they allowed a Conservative government to overcome its internal divisions for a short period. But they did not fix the underlying problem of a country deeply divided over its engagement in Europe.
The monetary union is the most important part of the EU, especially now the UK is leaving. The eurozone will require a higher degree of political and market integration. The eurozone, not the EU, is the only geographical unit for which a single market makes sense, especially in financial services. The eurozone also requires further market integration, most importantly in labour. It needs free movement as a macroeconomic stabiliser — with people moving from countries with high unemployment to those with a shortage of labour; EU countries not in the eurozone can happily live with less integration.
Sustainable Solution
Münchau concludes with the idea the “sustainable solution thus consists of a more integrated eurozone and a less integrated EU.”
As is typical, Münchau fails to get at the heart of the matter.
Impossible is Not Sustainable
Münchau hit at Merkel because she did not allow a eurozone banking bailout and repeatedly failed to do anything to help Greece.
He conveniently fails to point out the German constitution has already been distorted out of shape to do as much as it already has.
Münchau also fails to note the makeup of the euro itself is fundamentally flawed.
The “pragmatic” problems to which he refers are simply a guaranteed outcome of those flaws. And at this point there is virtually nothing that can be done to fix them.
Rise of the Eurosceptics and Anti-Immigration Forces
- Recent terrorism activity in France and Germany, and the coup attempt in Turkey are highly likely to help anti-immigration candidate Hofer in the Austria Presidential Election Take II on October 2.
- On June 25, Eurosceptic candidate Marine Le Pen met with French president Francois Hollande to discuss Brexit. Le Pen promised a referendum on the EU as well as promising to take France off the euro. I asked Can France Escape a Referendum?.
- In Italy, the Eurosceptic Five Star Movement (M5S) party won regional election in Rome and Turin, Italy’s first and fourth largest cities. See Stinging Defeat of Renzi in Italian Mayoral Elections; 40% the Proposed New Majority.
- Over the weekend, Hungary’s Prime Minister Praised Trump.
Brexit was not a pragmatic decision, but a common sense, sustainable one. Curiously, the second paragraph in Münchau’s article is as follows:
“Virtually all my continental European friends saw that UK membership of the EU was unsustainable. How is it possible, they asked, to refuse to be part of the eurozone and the banking union, but also be a full member of the single market for financial services?”
What part of his own paragraph does Münchau fail to understand?
Voters Sick of More EU/EMU integration
Voters are clearly sick of more integration, for good reason.
The Euro was supposed to lift all boats. Italy was left behind, and will stay there for two more decades according to the IMF.
Italy GDP Since Joining Eurozone
The main beneficiary of the Eurozone was Germany.
For discussion, please see Italy’s Miserable Eurozone Experience: 20 More Years of Woe Coming.
It is ridiculous to propose “solutions” that cannot work politically and are fundamentally flawed from the start.
Mike “Mish” Shedlock
This has been going on for how long now? I suppose they will do like they’ve always done and schedule some more meetings, talk, talk, talk, talk… until it all comes down in a wave of violence much bigger than we are seeing now.
https://s-media-cache-ak0.pinimg.com/736x/b1/35/2b/b1352b7d6fe785425c39937aff431fba.jpg
Germany has nothing on France when it comes to letting “just about anybody” in the Country.
I have found Kiev turning into on giant arms bazaar interesting though.
excellent video for the uninitiated. People just don’t understand because they aren’t paying attention.
When you are working and raising a family, you. Don’t have time to look into what seems to be bullshit from the news. My first hint was the employment of commissioned officers vs non commissioned officers and where they ended up after leaving/retiring from the armed services. Commossioned officers have connection and end up in the military indistrial complex. Noncommissioned into the genetal work force.
Thanks Greg!
I agree that the Eurozone/EU are doomed, but I think it is a stretch to blame the EU or Eurozone on the economic problems plaguing Italy, Greece, or other countries. It is not at all certain that the economies of any particular European nation would be stronger if they had never joined the EU or Eurozone. Many of the problems in Italy and Greece, for example, have to do with their own nation’s sclerotic bureaucracies and labour markets. I doubt very much they would have had more incentive to fix these problems had they never joined the EU.
The EU provides an excuse, defers responsibility for their actions. After all, who are they going to, to demand solutions?
I think ots a big plan to deliberaetly wipe out. European culture and reduce the population. Nothing else makes sense.
We are told continuously that all of the unintended consequences are just that…unintended, but after a while they really must assume we are completely stupid.
At some point it MUST be assumed that the consequences we continue to see are INTENTIONAL…..and THAT is truly frightening.
It is our PLANNED obsolescence.
EU, be ye not unequally yoked together.
There is no reason that Europe cannot have a real Free Trade agreement with no bureaucracy and no Euro. The Euro will destroy the economies of all those involved even Germany eventually if it tries to save the failed experiment.
France, Italy, Spain, Greece and Portugal are already basket cases, which country will be next? Even Sweden has suffered since joining the Euro.
Sweden has their own floating currency the krona and their own currency has enabled their economy to keep doing OK despite Sweden’s totally insane open doors immigration policy that has caused muslim immigrant ghettoes around Stockholm and Malmö where unemployed immigrant “youths” throw stones at police, ambulances and firemen and torch cars and schools.
Sweden also has the most rapes in Europe per capita and Swedish criminal bureau Brå has censored the ethnicity and nationality of rapists since 1990’s.
Only Scandinavian country to have been so stupid and idiotic as to join Euro has been Finland and the once mighty finnish industry has been completely hollowed out as a result and Finnish government debt has almost tripled and there is no Growth so on economic metrics Finland is nearer to southern europe than other Scandinavian countries.
Finland also was completely stupid and let Sweden push 32 000 asylum seekers to Finland that came through Sweden when the swedish asylum system broke down in 2015 under the huge numbers and finnish bureaucrats were totally naive and stupid at first and believed every lie told to them By asylum seekers despite the right kind of stories being circulated in Facebook groups By iraqis, somalis and afganistanis and granted most asylums as percentage of applicants for the whole year 2015 in Europe and this loose policy also continued in Spring 2016.
In the summer of 2016 there was finally some waking up By grossly incompetent bureaucrats and the europe’s highest acceptance rate was finally cut down closer to other countries
The fact that Sweden finally realized that too much is too much and closed their borders in January 2016 after Norway had closed their borders in december 2015 and Denmark closed their borders also in January 2016 has now stopped the rush of asylum seekers to Scandinavia dreaming of free apartments and free money for the rest of their lives plus all the other goodies welfare states provide for people abusing the asylum system to move to welfare countries.
Thanks for reminding that Finland exists, it completely dropped off the screen a couple of years ago after the True Fin ‘crisis’… quite amazing how this happens, and how whole countries just get ‘forgotten’.
A flawed plan and flawed edifice from the start, and worsened with time as powers flowed upwards to Brussels and then sideways to Merkel. Merkel may have accelerated things, but that is all to the good given the insufferable nature of the ruling EU bureaucracy in Brussels. Give some credit to the USA neo-Con War Hawks and Hillary, piling on economic misery with the Russia trade boycott and destabilizing multiple continents (Libya, North Africa; multiple Middle East countries; promoting refugee exodus to Turkey & EU). Better “stimulus” than QE and ZIRP, boosting terrorism and immigration.
Lots of credit or blame to go around. Time to stop scapegoating Merkel. Will be interesting to see if European Union outlasts Soviet Union in years. UK union, even if it splits up, looks much better in comparison to EU and SU. And whatever happens, EU will have outlasted Third Reich in terms of years.
Printing played a major part in the EU situation. First the bank printed too much to fund the reintegration east and west Germany, but this misallocated loans into silly ventures across the continent. Then when bankers demanded to be bailed out of misallocated loans, the bank printed wantonly to bail out bankers. This printing confiscated food from poor Mid Easterners, who then converged on Europe in search of food.
Divers weights and measures are always counter productive in the long run.
“Ask them [the EU]. Did you pay? But Turkey still hosts 3 million people. What would Europe do if we let these people go to Europe?” Erdogan told German broadcaster ARD.
I disagree with the sentence “the main beneficiary of the Eurozone was Germany”. Before the Euro was created Germany was an attractive destination for capital. Germany invested this capital into capital goods and new ideas and was a motor of progress. Sure, Germany lost its advantage in some older industries due to high labor cost but wealth was rising.
With the Euro Germany became a massive exporter of capital. It was so bad in the first few years that german SME companies could not get credit any more and there were 6 million unemployed. Only by wage and social benefit reduction and the Hartz-4 agenda the tide was turned.
Sure, today the old industries are looking strong but Germany missed the chance to develop new and profitable innovative industries due to lack of capital. And the profits that german companies make get exported to the rest of the Eurozone by cheap credit (Target II…).
Did some large companies profit? Yes. Did many SMEs get hurt? Yes, and badly. Does the german worker and taxpayer profit? No.
Before the Euro Germany was catching up to Switzerland in wealth. Today Switzerland is so far ahead that we can safely say that Germany will never catch up in our lifetimes.
” It needs free movement as a macroeconomic stabiliser — with people moving from countries with high unemployment to those with a shortage of labour;”
Munchau also seems to ignore that the real labour mobility as macroeconomic stabiliser is impossible in Europe for a number of reasons, but mainly because of massive language barriers, not to mention legal and practical barrier (someone trained in law in Italy cannot pracice, for obvious reasons, in Germany, anyone doing accounting in Spain would need years to learn the rules in Denmark, technical rules for engineers in Romania differs widely from the ones in Sweden.. and so on).
Intra-European mobility is for a tiny minority of technical hyperspecialists and for large groups of possibly highly educated people who will get low skills jobs (in restoration and hotel industries, in particular, leveraging their native language)
Worker mobility is a bad joke, you end up with mass exodus of local populations who mill around trying to eek an existence wherever they land. It ruins the local structure and contrary to claims brings little new learning given most is low skill . So Romanians fill Spain, Greeks fill Germany, Spanish and French the UK etc.
For what?
For political destruction of local integrity on the hope of forming an internationalized, hence EU, mindset and identity.
It is a very backwards way of going about it, just flooding the continent that way without a proper framework in place but just a few new rules and a lot of ideals.
Traditionally people moved only when they could properly secure a position ( not just work) in another country, and nations spent their time making sure that this was the case, that there was a clear ability and objective in practice.
Thus integration in Europe has a natural stable timeline of maybe centuries to forge a truly common identity, not a couple of financialized no responsibility decades that are more likely to destroy the concept if not retard it.
But then destruction was always the objective of some as a fast track to achieve power over what remained after implosion.
So talk of conflict in Europe is not idle, it is a reserve agenda.The population know it and will flock blindly to those who claim to override it… that or to those who propose returning national control of events to where it belongs.