In an important speech in Berlin, Poland’s Foreign Minister Radek Sikorski expressed a thought maybe has never been heard before on German soil from a Polish leader:
What, as Poland’s foreign minister, do I regard as the biggest threat to the security and prosperity of Poland today, on 28th November 2011? It’s not terrorism, it’s not the Taliban, it’s certainly not German tanks. It’s not even Russian missiles which President Medvedev has just threatened to deploy on our border. The biggest threat to the security of Poland would be the collapse of the Eurozone.
And I demand of Germany that, for your own sake and for ours, you help it survive and prosper. You know full well that nobody else can do it. I will probably be first Polish foreign minister in history to say so, but here it is: I fear German power less than I am beginning to fear German inactivity.
You have become Europe’s indispensable nation.
You may not fail to lead.
Poland is not in the euro. And Sikorski’s own background–as a Polish refugee in the 1980s who became a British subject–is as a Thatcherite free-marketeer. Yet neither he nor Poland can regard the risk to the euro as anything but a catastrophe–and neither can the Americans, nor British, nor anyone else.
The break up would be a crisis of apocalyptic proportions beyond our financial system. Once the logic of ‘each man for himself’ takes hold, can we really trust everyone to act communitarian and resist the temptation to settle scores in other areas, such as trade?
Would you really bet the house on the proposition that if the Eurozone breaks up, the single market, the cornerstone of the European Union, will definitely survive? After all, messy divorces are more frequent than amicable ones. My wife’s sister, once a divorce lawyer in California, told us of a case in which a couple spent $100,000 disputing custody of the family cat.
If we are not willing to risk a partial dismantling of the EU, then the choice becomes as stark as can be in the lives of federations: deeper integration, or collapse.
To avert this end, Sikorski unveils a solution as detailed and workable as anything yet heard. The speech demands to be read and studied in full, but the plan has three main elements:
1) The European Central Bank would assume ultimate responsibility for providing every member state of the EU the liquidity it needs to meet its obligations. Sikorski goes lightly here, because this is the “dessert” portion of the plan – and a dessert distinctly uncongenial to his German audience, who will end up shouldering more responsibility for other people’s past mistakes. To overcome this objection, Sikorski reminds the Germans that they are the biggest winners from the Euro currency:
We ask, first of all, that Germany admits that she is the biggest beneficiary of the current arrangements and therefore that she has the biggest obligation to make them sustainable.
Second, that you are not an innocent victims of others’ profligacy. You, who should have known better, have also broken the Growth and Stability Pact and your banks also recklessly bought risky bonds.
Third, that you have benefitted not just from the Single Market and the Eurozone, but from the crisis itself. Because investors have been selling the bonds of exposed countries and flying to safety, your borrowing costs have been lower than they would have been in normal times.
Fourth, that if your neighbours’ economies stall or implode, you will suffer too.
Fifth, that because of your size and your history you have a special responsibility to preserve peace and democracy on the continent. Jurgen Habermas has wisely said that “If the European project fails, then there is the question of how long it will take to reach the status quo again. Remember the German Revolution of 1848: When it failed, it took us 100 years to regain the same level of democracy as before.”
2) Now comes the spinach. If the surplus countries like Germany are to accept responsibility for the debts of others, they are entitled to demand in return tighter control over the wayward finances of others. On this subject, Sikorski offers more detail.
Financial discipline would be strengthened by giving access to rescue funds only to members abiding by macro fiscal rules, by making sanctions automatic and giving the Commission, the Council and the Court of Justice powers to enforce the 3% ceiling on deficit and 60% ceiling on debt. Countries in excess deficit procedure would have to present their national budgets for approval by the Commission. The Commission would get powers to intervene in the policies of countries that could not fulfil their obligations. Countries persistently violating rules would have their voting rights suspended.
3) Joining idea 1 & idea 2 is the most controversial but also most fundamental idea. If the EU is to enforce greater discipline upon member nations, the enforcers of that discipline must be held democratically accountable. Only elected federal politicians – not unelected commissioners – can accountably supervise elected national politicians.
The more power we give to European institutions, the more democratic legitimacy they need to have. The draconian powers to supervise national budgets should be wielded only by agreement of the European Parliament.
The Parliament needs to stand up for its role and tasks. Eurosceptics are right when they say that Europe will only work if it becomes a polity, a community in which people place a part of their identity and loyalty. Italy is made, we still have to make Italians, Massimo D’Azeglio said in the first meeting of the parliament of the newly united Italian kingdom in 19th century. For us in the EU it’s easier: we have a united Europe. We have Europeans. What we need to do is to give political expression to the European public opinion. To help it along I support the British idea of electing some seats in the European Parliament from a pan-European list of candidates.
We could also combine the posts of the President of the European Council and that of the European Commission. To make such a person a true leader of Europe he or she should not be selected behind closed doors but be elected directly by the European demos.
The increased power of elected officeholders at the Euro level need not lead to centralization and homogenization of all European laws and institutions.
The more power and legitimacy we give to federal institutions, the more secure member states should feel that certain prerogatives, everything to do with national identity, culture, religion, lifestyle, public morals, income and sales taxes, should forever remain in the purview of states. Our unity can survive different working hours in different countries, or gay marriages being possible in some member states and not in others.
American conservatives may disapprove of this call for a tighter European Union but they should note that this argument comes from an eminent Polish conservative. The ironic fact is that the most forceful exponent of the euro currency idea in this country was and is the Wall Street Journal editorial page, the lodestar of conservative economic opinion. They did not foresee the crisis inherent in a supra-national currency and the late Bob Bartley wrote against the very possibility of a crisis like Europe is now experiencing.
The euro’s recent recovery against the dollar almost certainly establishes its credibility as a permanent currency. While major eurozone economies remain troubled, practically no one so far is blaming the European Central Bank. This suggests success for the grandest reform of all, a supra-national central bank.
So wrote America’s leading conservative economic newspaper, over the objections from conservative monetarists and liberal Keynesians alike.
And also this:
With the advent of the euro, the world has evolved a system of currency blocs. The dollar and euro zones are perhaps each large enough not to be overwhelmed by currency changes.
Now the danger that was once deemed unthinkable has arrived, threatening to capsize European economies into a new depression, and if so, the US economy after them. Rescue from disaster has to be the first priority. Radek Sikorski has not laid out the plan that anybody would have chosen in advance, but a plan that can work now as both economics and democratic politics. The plan deserves the closest hearing in Europe and in this country too.