Economy Euro

Eurozone crisis: Welcome to the union of unequals

4 November 2011
The Daily Telegraph London

Greek PM George Papandreou during a press conference at EU HQ, Brussels, June 2011.

Greek PM George Papandreou during a press conference at EU HQ, Brussels, June 2011.

France and Germany have been largely responsible for thwarting Greek PM George Panpandreou’s decision to hold a referendum on its EU/IMF bailout. A naked display of power that bodes ill for a union of equals.

It should surprise no one that George Papandreou’s proposal for a national referendum on the latest European bail-out deal should have lasted just 72 hours before being bulldozed into oblivion by the Germans and French. Angela Merkel and Nicolas Sarkozy made not the slightest attempt to observe any diplomatic niceties as they turned their fire on this troublesome outbreak of democracy. The Greek referendum must not be allowed to happen, they insisted – and lo, it will not. It was brutal to watch.

Welcome to the new Europe. It is now generally accepted that the move towards fiscal as well as monetary union is the only feasible way in which the single currency can be made to work. Yet it will mean such bullying becomes the norm, since national sovereignty will routinely have to play second fiddle to the diktats not only of the European Central Bank, but also of a central European Treasury, whose creation can now only be a matter of time. Both will, of course, be dominated by the monetary union’s pre-eminent economy, Germany.

While Greece may be a victim of force majeure, it is not blameless in this affair – quite the opposite. An economic basket case in which political corruption is rife, it has failed to meet its obligations as a member of the monetary union by living laughably beyond its means. But what of Germany? Has it met its own obligations? It continues to insist on the single currency, and the European Central Bank that services it, being run to suit its own economic agenda, not that of the wider eurozone.

This unholy mess

This is where all the high-flown verbiage about the great European project collides with the hard reality of power. Germany is able to assert its sovereign rights because it has the economic clout to do so. Peripheral nations such as Greece and Ireland are swatted aside. Transfixed as they are by their obsession with shoring up the euro, it does not seem to occur to Europe’s political elites that the seeds are being sown not of an ever-closer union of equals, but of an unhappy alliance with one dominant partner. This could bode ill for the entire European Union.

Meanwhile, the immediate crisis has now reached such a pitch that the International Monetary Fund will have to play a significant role in any recovery plan. David Cameron is right to argue that, while this country will not back any direct IMF investment in a eurozone bail-out, it stands ready – as a founder member of the fund – to make more money available if required.

This unholy mess is of the eurozone’s own making, and it ought to be up to its members to sort it out. But in the face of this disaster, every nation could find itself dragged into the abyss.