Fritz Scharpf on the Eurozone mess

by Henry on June 7, 2011

This recent lecture by Fritz Scharpf provides the most compelling analysis of the political fallout of the eurozone mess that I have yet seen. Readers who aren’t familiar with political science debates on democratic legitimacy may find the opening pages hard going. But they should persevere. The synthetic analysis of the initial politics of the euro, and of the roots of the German monetary regime are excellent (although for my money he puts too much of the blame on the ECB, and too little on the governments of countries like Ireland, which were, as Niamh has noted less models of fiscal rectitude than temporarily lucky), and provide a lot of detail that is poorly understood among US commentators. But his conclusions are even more interesting and depressing. I quote at length, because blog readers are disinclined to read PDFs, and because this piece deserves wide circulation.

The opposite is true under the “rescue-cum-retrenchment” program that is presently being enacted. Here, all cruelties must be proposed, defended, adopted and implemented over an extended period by the national government. In fact, the program amounts to a greatly radicalized version of the supply-side reforms adopted in Germany during its (much milder) recession before 2005 – which destroyed the political support of the Schröder’s Red-Green government. But whereas Schröder had the chance of developing and defending self-chosen reforms, governments in Greece, Ireland and Portugal must implement policies which are likely to be seen as dictates of Commission bureaucrats and of self-interested foreign governments trying to protect their own banks, investors and export industries.
If these are extremely difficult political conditions, they will be exacerbated by the distributional implications. … As was true in Germany, the inevitable result will be a rise of social inequality and social protest. …. EMU member states cannot expect any help from the European level in managing the macroeconomic imbalances that are induced by European monetary impulses that do not fit the specific conditions of the national economy. Instead, they are expected to deal with potential imbalances through the use of their remaining policy instruments − but in doing so, they will be constrained by the rules of the Excessive Deficit Procedure and they will be controlled by the Commission’s discretionary interventions under the Excessive Imbalance Procedure.
… member states in the reformed Monetary Union will indeed find themselves in the worst of three worlds. Like the provinces or cantons in a federal state, they lose control over the instruments of macroeconomic management, and they are likely to suffer from uniform national policies that do not fit their regional economy. At the same time, however, the EU budget is miniscule in comparison to the budget of federal states, there are no European taxes and there is no European social policy to alleviate interregional imbalances. Instead, member states are expected to cope with all economic problems by relying entirely on their own policy resources. In contrast to members of the earlier EMS, however, EMU member states cannot use these policies autonomously, but are subject to the intrusive supervision and potential punishment imposed by supranational authorities – which are not themselves democratically accountable and have no reason to be politically responsive to the citizens affected by their policies. In fact, no democratically accountable national government in a federal state has ever claimed such control over the fiscal, economic and social policy choices of its constituent provinces, states, Länder or cantons.
From the perspective of citizens in Greece, Ireland and Portugal, the European and international agencies imposing the “rescue-cum-retrenchment” program are not, themselves, supported by democratic legitimacy. … political resignation, alienation and cynicism, combined with growing hostility against “Frankfurt” and “Brussels”, and a growing perception of zero-sum conflict between the donors and the recipients of the “rescue-cum-retrenchment” programs, may create the conditions for anti-European political mobilization from the extremes of the political spectrum. In the worst case, therefore, the attempts to save the Euro through the policies presently enacted may either fail on their own terms, or they may not only undermine democracy in EU member states but endanger European integration itself.

{ 73 comments }

1

dsquared 06.07.11 at 5:13 pm

I’m not sure about these bits:

EMU member states cannot expect any help from the European level in managing the macroeconomic imbalances that are induced by European monetary impulses that do not fit the specific conditions of the national economy. Instead, they are expected to deal with potential imbalances through the use of their remaining policy instruments − but in doing so, they will be constrained by the rules of the Excessive Deficit Procedure and they will be controlled by the Commission’s discretionary interventions under the Excessive Imbalance Procedure. [...] Like the provinces or cantons in a federal state, they lose control over the instruments of macroeconomic management, and they are likely to suffer from uniform national policies that do not fit their regional economy. At the same time, however, the EU budget is miniscule in comparison to the budget of federal states, there are no European taxes and there is no European social policy to alleviate interregional imbalances. Instead, member states are expected to cope with all economic problems by relying entirely on their own policy resources.

What’s the EFSF/M? Chopped liver? There is a trillion-dollar crisis management architecture being put in place right now – it’s not perfect by a long way, but it too is developing, and the debate over reprofiling/restructuring/default is a lot more live than Scharpf gives credit for – after all, official EU policy is to include restructuring clauses in sovereign debt from 2013 onwards, presumably with the intention that they be used if necessary.

There’s also a real lack of differentiation between PIGS economies. Ireland, as geographically inclined politicians keep telling us, is not Greece. In Greece, there is just, as the woman said, no alternative – it has to decide whether it’s going to make a good faith effort to collect taxes, or whether it’s going to pay lower social benefits because the income and spending are just not equal to each other; the EU can help with adjustment, but the problem isn’t an adjustment problem, it’s what they need to adjust to. In Ireland, it genuinely is an adjustment problem – if Ireland can get back to its 2004 output, it has no structural problem at all. Therefore, debt relief for Greece makes sense – it has a long term solvency problem – but for Ireland there’s a lot less of a case for providing a permanent large transfer payment to one of the world’s richest economies.

I think this is really a case of arming to fight the last war.

2

ejh 06.07.11 at 5:32 pm

It’s not really the last war to people who are living through it.

3

LFC 06.07.11 at 6:23 pm

“…there is no European social policy to alleviate interregional imbalances….”

I was under the impression (perhaps incorrect) that, starting long before the current crisis, there have been regular transfer payments from richer to less-rich EU countries, coordinated by the EU bureaucracy and considered to be a standard part of EU policy. Maybe he’s talking about something else when he says “interregional imbalances”.

4

Oliver 06.07.11 at 8:04 pm

What’s the EFSF/M?

It hands out loans, not subsidies. Officially at least.

official EU policy is to include restructuring clauses in sovereign debt from 2013 onwards, presumably with the intention that they be used if necessary.

By 2013 it will be over, one way or the other.

5

Barry 06.07.11 at 8:08 pm

D-squared: “In Ireland, it genuinely is an adjustment problem – if Ireland can get back to its 2004 output, it has no structural problem at all. “

When dealing with a massive austerity budget, and banks which might have a problem loaning to local clients, they are to do this how?

6

chris 06.07.11 at 8:12 pm

if Ireland can get back to its 2004 output, it has no structural problem at all

Isn’t Ireland’s 2004 output based on (a) measuring at the height of a bubble and (b) being a haven for cross-border tax avoidance w.r.t. the rest of the EU, not to mention the US? Or is that too harsh?

7

Kevin Donoghue 06.07.11 at 8:40 pm

Thanks Henry. A very good read. One thing that didn’t get much attention is the distinction between bank debt and sovereign debt, which is a sore point in Ireland.

What’s the EFSF/M?

It certainly isn’t a policy instrument.

8

mpowell 06.07.11 at 8:43 pm

I don’t understand the comment that Ireland doesn’t need any additional help because they just need to get back to 2004 output levels. Doesn’t this just skip the entire point that if you take away a federal government’s monetary control and restrict their deficit spending, they cannot successfully recover from a recession?

This gets to another issue, though, I think: if Ireland is somehow not allowed to default, but the market price for Irish government bonds is higher than for German bonds, isn’t this a transfer payment from Ireland to Germany? My feeling is that under the ECB has the option of loaning the Irish government money at a significant markup or insisting that Ireland cannot default, but not both. A low interest rate loan is not a wealth transfer if you are guaranteed repayment.

9

Kevin Donoghue 06.07.11 at 9:00 pm

@mpowell

To cut a long story short, the interest rate charged to Ireland is just a bargaining chip. If we let the French dictate our corporation tax policy we can have a lower rate. To which the answer obviously is: get lost, we need American investment a lot more than we need a few hundred million off our interest costs. Whether the margin can be justified in any moral sense turns, IMHO, on whether the official lenders have preferred creditor status. If they do then it’s a rip-off, if they don’t then it’s a very modest risk premium.

10

Henry 06.07.11 at 9:26 pm

bq. What’s the EFSF/M? Chopped liver? There is a trillion-dollar crisis management architecture being put in place right now – it’s not perfect by a long way, but it too is developing, and the debate over reprofiling/restructuring/default is a lot more live than Scharpf gives credit for – after all, official EU policy is to include restructuring clauses in sovereign debt from 2013 onwards, presumably with the intention that they be used if necessary.

dsquared – there is some discussion of the EFSF in the paper – but this all seems to miss the point that Scharpf is making, which is that this all (whether you think the Irish deserve it, or they don’t, whoever is to blame, etc etc) bollockses up whatever political legitimacy the US has left. When the Germans are unhappy that their euros are going to bail out the profligates, and the Irish and Greeks are unhappy that their countries are being run by a troika of the Commission, IMF and more powerful member states on the Council, there are obviously going to be political problems. I’ve no doubt you can make a technocratic case that this is the way that this has to be. But the politics stink. The Scharpf claim – as I read it – is that we are moving towards a kind of European integration, but one which doesn’t even have a pretense of democratic legitimacy, and, as a result, is likely to be politically very fragile.

11

Chris Bertram 06.07.11 at 10:05 pm

I’ve just been googling for the data, but can’t seem to get up to date. Is the per capita GDP of Ireland still higher than Germany and the UK, or not?

12

Henry 06.07.11 at 10:07 pm

Sorry – US in last should be EU.

13

dsquared 06.07.11 at 10:25 pm

Ah yes I see – I’ve always thought that the Eurozone was totally undemocratic and that makes sense, but on the other hand, nothing succeeds like success. If Europe manages to a) detoxify the Irish banking system, b) get the German political class behind the project of EMU once and for all, c) get Greece also used to the idea that shared economic sovereignty means what it says, then in five years’ time we could have an actual economic and monetary union, with the fiscal and monetary side put together. Which won’t make it any less undemocratic, but 1) this was always the project of “ever closer union” and 2) nobody will care about the democratic deficit any more than they did during the last boom.

14

dsquared 06.07.11 at 10:45 pm

Or more succinctly:

When the Germans are unhappy that their euros are going to bail out the profligates, and the Irish and Greeks are unhappy that their countries are being run by a troika of the Commission, IMF and more powerful member states on the Council, there are obviously going to be political problems

is true, but the Germans wouldn’t be unhappy if they thought they were continuing to be the China of Europe (using their excess savings to finance the customer base that underpins their growing industrial dominance), and the Irish and Greeks would be a lot less unhappy about the troika of [...] if they were all getting back into work. If (and therefore, with decent chance, when, if the technocrats get their act together) European Fiscal and Monetary Union was working well and delivering growth, the Irish Independent would be full of Thomas O’Friedman types explaining why it didn’t make sense for a country like Ireland to have an independent fiscal policy and that structural factors were what mattered etc etc.

15

Shelley 06.07.11 at 10:47 pm

1. The elephant in the room is always, always, corporate power.

People can’t think about it, because they can’t even visualize it.

2. Congrats on being on the NYT top ten list.

16

Shay Begorrah 06.07.11 at 11:43 pm

Internet educates and informs shocker.

Thank you for the pointer Henry, Scharpf’s lecture is worth printing, reading closely and taking the time to absorb (while underlining enthusiastically). At only 36 pages , double spaced, excluding the graphs and bibliography, it is the perfect way to spend an evening. Almost.

I really can not recommend it enough.

It seems to me like the best layperson’s guide so far as to how the collision of the GFC, the ECB’s “independence” from a moral purpose and the EU commission’s commitment to market liberalism threaten to destroy the legitimacy of the EU project. They will get their industrialists/financiers paradise (depending on whether you are Merkel or Trichet) and inequality and democratic accountability be damned.

As an Irish person I am particularly fond of how he found the time to relabel us as GIPS rather than PIGS. One in eye for LBS and his ilk.

17

P O'Neill 06.08.11 at 12:44 am

He puts a lot of weight on the IMF/EU programs as supply side by the back door. But one open question is whether the programs have done enough on public sector pay. I don’t know, but Ireland’s public enemy number 1, the aforementioned LBS has his views, on Greece at least

Just to give an example, if, over the last 10 years, Greek public sector wages had gone up at the same pace as inflation, and public employment had not increased, in 2010 the Greek budget deficit to GDP ratio would have been around 4 percentage points lower and the debt to GDP ratio about 30% lower.

I assume it’s this kind of thinking that has public sector pay in as one of the new indicators that the EU monitoring will look at.

Anyway the point is that if the EU/IMF programs were really concerned about restoring solvency, there would have been a lot less supply side stuff and a lot more steep cuts in public sector pay than actually occurred. In other words, the programs show a lot more deference to domestic interest groups than Scharpf gives them credit for. I don’t see how Ireland’s solvency prospects are enhanced by introducing an independent regulator for lawyers, or Greece’s by deregulating trucks. But solvency might be enhanced by debt restructuring — something that Germany appears to be pushing, and which matches the popular mood in the GIPS as well.

In short, I think a lot of the supply side stuff is essentially for show, until we get to the real negotiations over how much Germany thinks the Irish/Greek/Portuguese public sectors are overpaid traded off against a debt restructuring fudge.

18

dsquared 06.08.11 at 12:56 am

In short, I think a lot of the supply side stuff is essentially for show

For show, and for German domestic political consumption which matters too.

19

Beleck 06.08.11 at 1:07 am

gosh i think of the debt imposed on Germany after the 1st world war and how they led to blah, blah, blah and all that.

losing your right to elect your own crooks, rather than having Big Brother tell you who is your President, Banker, employer and all the rest is quite a step away from any kind of country i would want to live in. kind of like America today, with the appearances of two parties, being two parts of one party control, in reality.

that the Greeks would want some Nazi German, and don’t think that isn’t what the Germans would be called, that the Greeks would want some new “foreign” dictatorship other than their own, the movie “Z”, telling them how to live and whom to bow down to. Well, that is quite a leap of faith about what Greeks want and would do. and to have to sell their country to the German/French banks/overlords as a final indignity,too. only Germans need apply to run the Acropolis, and outright own Greek islands/cities/industries. that is quite a leap.

much less the Irish, after fighting Big Brother/English for hundreds of years, to say, Oh, i much prefer the German way of bondage over the English way.

though, not seeing the Irish revolt against their new Lords, ECU et al, is quite surprising and very saddening, after all the bloodletting. the timidity of response to their last election was quite shocking. to see sheep willingly be led to their own slaughter!!!

quite a leap of faith in economic policy indeed.
.

20

afu 06.08.11 at 4:11 am

“In Ireland, it genuinely is an adjustment problem – if Ireland can get back to its 2004 output, it has no structural problem at all. Therefore, debt relief for Greece makes sense – it has a long term solvency problem – but for Ireland there’s a lot less of a case for providing a permanent large transfer payment to one of the world’s richest economies.”

I’m not following the logic here. If Ireland has an output gap, than some official structure should step in to fill it through expansionary fiscal or monetary policy.

I can’t make any sense out of “there’s a lot less of a case for providing a permanent large transfer payment to one of the world’s richest economies.” There isn’t a fixed lump sum of euros available to the world, so I don’t understand what is being transferred permanently.

21

dsquared 06.08.11 at 6:35 am

If Ireland has an output gap, than some official structure should step in to fill it through expansionary fiscal or monetary policy.

An official structure is stepping in – the EFSM (when they get their act together and renegotiate the rate on the bailout loan downward). But there’s a limit to how much expansionary monetary policy you can push into a small subregion of a large currency union (ask Detroit how much they benefited from quantitative easing) because money is fungible and it just flows out again. There is, of course, massive countercyclical fiscal policy going on in Ireland – that’s why the budget deficit has gone from nothing to a significant percentage of GDP. But no matter how hard you try, there’s no Keynesian policy on earth that could have smoothed out the effect of a debt deflation as extreme as the unwind of the Irish property bubble.

I can’t make any sense out of “there’s a lot less of a case for providing a permanent large transfer payment to one of the world’s richest economies.” There isn’t a fixed lump sum of euros available to the world, so I don’t understand what is being transferred permanently.

Well, a large writedown or default on Irish sovereign debt would constitute such a transfer, wouldn’t it?

22

Random lurker 06.08.11 at 9:29 am

“supranational authorities – which are not themselves democratically accountable and have no reason to be politically responsive to the citizens affected by their policies.”

First of all, I admit that I didn’t read the whole PDF, but only the excerpts presented here and the comments.
However, I have some problem with this idea of “undemocratic EU” that seems very fashonable those days:
1) The EU commission is composed by members of the governments of member states, who are themselves democratically elected. Smaller states are, if anything, overrepresented.
2) The ECB is a non democratic bureocracy, but so are all central banks today: the central banks of Italy, Germany or Ireland are in no way more democratic than the ECB.
3) If the EU was more democratic by making every EU citizien vote any policy choice, the population of Ireland (4M), Spain (47M), Greece (11M) and Portugal (15M) would still be outnumbered by the germans alone (81M). Thus, in a “more democratic” EU, we would still see the Germans prevailing on the “PIGS”, in a perfectly democratic way.
4) If, on the other hand, there was no EU at all, every european state would try to exit the crisis with “beggar thy neighbour” policies. But European states are very tightly coupled, so that this would result in an even less democratic economy: for example, the Irish low tax rate are an exmple of beggar thy neighbour policy, and in fact has effects on the french economy (draining taxes away from the french state), though the French never voted for the Irish parliament. This is much less democratic than the French asking to dictate policy to the Irish in exchange for cheaper loans.

On the whole, I think that there are big problems in the EU today, but those problems are not caused by a supposed “lack of democracy”. Instead:
1) The chosen economic policies are very stupid because are based on a “neolib” understanding of world economy. This, however, is a problem generalized throughout Europe, including the “democratically elected” governments of member states.
2) Because of, mostly, linguistic barrier, popular political discourse in EU is still based mostly on national level. If what I see here in Italy is a guide for the whole EU, national politicians have all incentives to blame the EU for unpopular policies (that maybe they would implement anyway), thus undermining the EU legitimacy. This is, however, a “cultural” problemof EU citiziens, not a problem caused by EU “evil elites”.

23

Chris Bertram 06.08.11 at 10:27 am

I see the French are now saying they’ll veto any renegotiation unless the corporate tax rate issue is sorted.

http://ht.ly/5cPRz

24

Shay Begorrah 06.08.11 at 11:53 am

Random lurker@21

It is worth reading the entire paper, I think he addresses most of your points.

1) The EU commission is composed by members of the governments of member states, who are themselves democratically elected. Smaller states are, if anything, overrepresented.

The commission famously represents only itself and makes no claims to being in any way a democratic entity with the almost toothless parliament and the terrifically opaque council of ministers fulfilling this role. Sharpf argues that market liberalism has infected the commission to such an extent that it makes political decisions with neoliberal economic goals without a popular mandate.

2) The ECB is a non democratic bureocracy, but so are all central banks today: the central banks of Italy, Germany or Ireland are in no way more democratic than the ECB.

This is dealt with in the paper at some length, to oversimplify the arguments the problem with the ECB is that it is as least as undemocratic as the most undemocratic national CBs but substantially less accountable to the countries that its policies most adversely affect.

3) If the EU was more democratic by making every EU citizien vote any policy choice, the population of Ireland (4M), Spain (47M), Greece (11M) and Portugal (15M) would still be outnumbered by the germans alone (81M). Thus, in a “more democratic” EU, we would still see the Germans prevailing on the “PIGS”, in a perfectly democratic way.

Indeed, but in a pan European polity national interests might not be the main way by which constituencies are divided. A more traditional left/right divide might emerge. At any rate all democracies are faced with the problems of the dictatorship of the majority (which in Europe has turned into the dictatorship of the plurality),

4) If, on the other hand, there was no EU at all, every European state would try to exit the crisis with “beggar thy neighbour” policies. But European states are very tightly coupled, so that this would result in an even less democratic economy: for example, the Irish low tax rate are an exmple of beggar thy neighbour policy, and in fact has effects on the french economy (draining taxes away from the french state), though the French never voted for the Irish parliament. This is much less democratic than the French asking to dictate policy to the Irish in exchange for cheaper loans.

Perhaps you should read the lecture.

25

chris 06.08.11 at 1:14 pm

If (and therefore, with decent chance, when, if the technocrats get their act together) European Fiscal and Monetary Union was working well and delivering growth

How is that going to happen when they’re set on tight money and austerity? Growth is the last thing such a program is going to deliver. Qualified techocrats, if they exist, know that, but clearly aren’t at the helm.

26

Myles 06.08.11 at 3:24 pm

I see the French are now saying they’ll veto any renegotiation unless the corporate tax rate issue is sorted.

Makes one glad Great Britain isn’t in the euro, and can thus solve part of its problem by just printing money, doesn’t it? I can’t even begin to imagine how many pounds of flesh France and Germany will extract from London before they’re done. (At this point, it’s probably cheaper for Ireland to try to cobble together a Russian-Chinese-Saudi loan.)

Well done Gordo. Might not have been a great PM, but at the key moment made the right call.

27

mpowell 06.08.11 at 3:34 pm


An official structure is stepping in – the EFSM (when they get their act together and renegotiate the rate on the bailout loan downward).

Well, this is what I’ll be waiting for, I suppose. I wouldn’t expect the ECB or Irish creditors to just writedown a substantial portion of their debt, but I see no reason they should be paying the rates initially proposed in the bailout loan. Unless official EU policy is to be that member states can default and then suffer the consequences of higher rates in the future (or today, for that matter).

28

bert 06.09.11 at 2:36 am

Just finished this, many thanks for the link. Admirably clear, and free of axe-grinding.

That said, the citation at footnote 27 of a blogpost in the Telegraph by Dan Hannan should carry a massive health warning. In fact I believe there are European regulations to this effect. You can argue about the procedural legalities, and the Hannan type enjoys nothing better. You can also argue about whether fines should be levied at all. As a practical matter, though, a fines mechanism with a unanimity requirement would be in the chocolate teapot category of usefulness.

Scharpf dates the development of a distinct EU-level neoclassical agenda to the early 1980s. Since that time, a series of European countries have joined the EU, in a process that requires the complete adoption of the acquis communautaire into domestic law. Teams of Commission officials typically install themselves in national capitals to assist this process. I’d be interested in Scharpf’s view on the legitimacy or otherwise of this. Once you start pulling on the thread of democratic deficit, there’s a lot to unravel.

29

Glenn 06.09.11 at 5:47 am

Still, at the end of the day, either the euro countries get closer or a split (one or more countries) happens, and a split seems more likely. If I were in charge of one of the GIPS, or all, there would definitely some line I would not cross. At some point, there has to be a ‘damn the investors, damn the banks, damn the other members…’ mentality if it necessarily means extended penury (which I believe it will for Greece and Portugal, at least) for my citizens. But already Ireland accepting banks’ obligations as sovereign was a very odd and frankly, wrong, thing to do, so I realize when in the political realm, one cannot be fully rational. I recognize these are not easy decisions, all I’m saying is that no country leader should (or will) thoughtlessly and automatically jump through every hoop in order to satisfy ‘outside’ interests.

30

dsquared 06.09.11 at 6:01 am

At some point, there has to be a ‘damn the investors, damn the banks, damn the other members…’ mentality if it necessarily means extended penury (which I believe it will for Greece and Portugal, at least) for my citizens.

Greece’s problems fundamentally do not have much to do with monetary policy, and they are not really “austerity” in the sense of bad countercyclical policy. They stem from the fact that about fifteen years ago, Greece had to choose “are we going to be the kind of country that pays very generous benefits and public sector salaries, or are we going to be the kind of country that doesn’t collect taxes on the middle class?” and decided “why not do both?”

31

Glenn 06.09.11 at 7:13 am

dsquared – I understand that; why Greece is where it is. But are you suggesting that the ‘non austerity’ Greece iss currently going through, and will continue to for quite some time, is less painful and/or more socially acceptable than ‘genuine’ austerity?

I think my general point is still valid: at some point a local politician should and likely will cede to local wishes and what’s best for the locals. I’m not necessarily sure that means leave the EC treehouse and never play there again; maybe all concerned will find a third way. But I do think more and more people and politicians will decide that going to hell and back just isn’t worth it.

32

Herman 06.09.11 at 3:28 pm

The unprecedented scale and swiftness of the economic crisis deserves more weight when discussing the current state of the union, so does the hypocrisy of both politicians (carefree) and the people (responsible for accountability) for only complaining and wanting to act when it rains, rather than taking pre-cautionary measures.
Where was the scepticism when everyone had their place in the sun? Questions of EMU’s democratic legitimacy or the broadness of German shoulders or the concept of saving on a national level completely ignored.
Hindsight is a beautiful. But I suspect once economic recovery is underway, questions of accountability and legitimacy will not surface again with the exception of academic circles until the next recession.

33

dsquared 06.09.11 at 3:38 pm

But are you suggesting that the ‘non austerity’ Greece iss currently going through, and will continue to for quite some time, is less painful and/or more socially acceptable than ‘genuine’ austerity?

No it’s terribly painful. But default won’t make it any better. At present, Greece runs a primary deficit. If it defaulted, it would have to run a primary surplus. In other words, defaulting would reduce the long-term debt burden, but worsen the short term government financing position. Leaving the euro and devaluing would not help all that much either because the primary fiscal balance isn’t in surplus in drachma either. What is the policy you’re suggesting that would make things better in Greece?

34

Major Alfonso 06.09.11 at 9:44 pm

Excellent paper, taken in conjunction with the previously posted paper by Kevin O’Rourke on the twin structural trilemmas of monetary union and political institutions of the EU caught as they are in an evolutionary moment, one could foresee a deep antipathy popping up in different communities split across certain cleavages in the EU. Worth printing the paper and sitting down with a highlighter. (I notice my A4 paper is Finnish, highlighter German, printer Taiwanese, electricity likely Saudi oil derived, while my dread is 100% Irish) Also it poses an interesting question on status of unions in various economies and their utility as a proxy for economic management. Wonder will the Commission start “scoreboarding” countries in that area.

There’s more wonkish angst over here (http://www.iiea.com/blogosphere/professor-sinn-misses-the-target) on German angst at Target 2 payments imbalances and whether or not it constitutes a “shadow” bailout with Karl Whelan taking on Hans-Werner Sinn.

35

Oliver 06.10.11 at 9:30 am

Leaving the euro and devaluing would not help all that much either because the primary fiscal balance isn’t in surplus in drachma either. What is the policy you’re suggesting that would make things better in Greece?

Firstly, the deficit could be covered with the printing press.
Secondly, devaluation means less imports and more exports, especially in the tourist sector.

36

dsquared 06.10.11 at 9:44 am

But secondly, Greece is a surprisingly closed economy, and economic and political chaos are not usually all that great for the tourist sector, particularly since a lot of Greece’s tourist infrastructure is owned by German hotel chains who would be taking a pretty severe economic blow in having to write down the value of their real estate.

And firstly I don’t think this works because the structural fiscal balance isn’t in primary surplus. You can cover a deficit by printing in the short term if you’re sure that it’s cyclical and you’re expecting growth to recover, but if the reason that you have a structural deficit is that you fail to collect taxes, then it’s pretty straightforward to show that printing money to cover that is going to be hyperinflationary.

37

Oliver 06.10.11 at 8:57 pm

But secondly, Greece is a surprisingly closed economy, and economic and political chaos are not usually all that great for the tourist sector, particularly since a lot of Greece’s tourist infrastructure is owned by German hotel chains who would be taking a pretty severe economic blow in having to write down the value of their real estate.

Well, that cuts both ways. The more closed the economy is, the worse cutting demand by decreasing state spending and driving up joblessness is. Furthermore, a certain amount of chaos is now unavoidable. The choice is only between lesser and drawn out or dangerous and short.

And firstly I don’t think this works because the structural fiscal balance isn’t in primary surplus. You can cover a deficit by printing in the short term if you’re sure that it’s cyclical and you’re expecting growth to recover, but if the reason that you have a structural deficit is that you fail to collect taxes, then it’s pretty straightforward to show that printing money to cover that is going to be hyperinflationary.

A continued and fiercer austerity program won’t restore growth either. And growth needs to be restored at that level of debt. Collecting taxes won’t help otherwise.

38

Martin Bento 06.11.11 at 9:44 am

In terms of input legitimacy vs. output legitimacy, has there been any consideration given to the notion that the latter should be discounted for uncertainty? There seems to have been great overconfidence among pro-EU leftists that they knew how this would turn out and that, despite the democracy deficit and institutional factors deliberately favoring right-wing policies, that they could domesticate this beast and make it a welcome pet of the Social Democratic household. If you hold a fair election and do what the voters tell you, you can be reasonably sure you got the input legitimacy right. If you are going to defy their will because you know they will approve the results more than the contrary, even though they don’t know it, you’d better be damned sure of those results, and I don’t see how the European Left could have been so unafflicted by self-doubt.

Does anyone doubt that Scharpf’s digression into conspiracy theory is the truth? That there is an elite and half-hidden class in Europe that was always interested primarily in pushing Europe in a supply-side direction, sculpted European unification to inevitably further this end, and is sculpting the response to the crisis in a similar agenda-laden fashion? If the left intelligentsia realized this, why did they support unification under these circumstances, and, if they did not, why not? Is this not pretty much the end of Social Democracy in Europe? Perhaps the left has been too intellectually trained to discount conspiracy as an important vector in history? Perhaps elites tend naturally to have too much confidence in other elites? What led to this blindness? Wishful thinking perhaps? 4 years ago, Henry wrote this:

“But it’s a little odd to see a respected political scientist like Bogdanor making these arguments [that Social Democracy is being crushed by global economic forces], given the thriving academic literature ranging from Carles Boix’s work on how social democrats have regeared their economic policy by tackling the supply side of the economy to Geoffrey Garrett’s demonstration that openness to international markets appears to have positive rather than negative effects on welfare state size, which points to the opposite set of conclusions. There’s more of a case to be made that the EU is an inhospitable environment for social democracy – but even this is less true than it might have seemed a couple of years ago (the high tides of European market liberalization seem to be receding rather rapidly).”

Really? Looks to me like said high tides were receding in advance of a tsunami. I’m not just trying to pick on Henry here. It’s that he’s not just asserting that belief in the decay of social democracy from the operation of international capital is, in his opinion, incorrect. He’s stating that it is not even intellectually respectable. It is worth asking why not. I’m not familiar with Biox’s or Garrett’s work, but really, how solid do their conclusions look a mere 4 years later? Openness to international markets was a necessary condition of the US financial crisis becoming global. Sure doesn’t look like the welfare state will be growing now. While it’s easy to say “20/20 hindsight”, many of us were Euroskeptics for precisely these reasons. I expressed skepticism of these ideas when Henry cited them, in fact. Many in the anti-globalization left saw through this.

At this point, should the EU be saved? The prevailing thinking seems expressed in the end of this article:

“In the worst case, therefore, the attempts to save the Euro through the policies presently enacted may either fail on their own terms, or they may not only undermine democracy in EU member states but endanger European integration itself.”

This suggests, though it does not strictly state, that endangering integration is worse than undermining democracy. Why? Should not the commitment of someone of the Left be to something like Social Democracy with European integration only to be supported if it is a means to that end?

At this point, I see only two positions someone on the left can support:

1) Radically transform the EU. No democracy deficit. Drastically reduced independence for the ECB. Employment targets as well as inflation targets. Counter-cyclical deficits accepted. Europe-wide social welfare, labor, and taxation policies. The problem with this is that it is not at all clear how to achieve it when the democratic mechanisms of the EU are so weak. Can the parliament weaken the ECB? Can a group of nations collude to set some different set of rules than the EU as a whole to try to pressure the larger body? The bargain here is greater integration in exchange for a shift to the left. I don’t see the oligarchs going for this; they already have most of what they want from integration, so it is hard for me to see how this works, unless it is achieved under great pressure from option 2.
2) To hell with it. Break it up. Let some leave, though once the dam is punctured, it may all unravel. Yes, it will be very costly, and will have been a very expensive lesson. Social Democracy may well end up strengthened because people will fight for it and remember why they want it.

We must protect the EU at all costs cannot be an acceptable position.

Some may feel that the cosmopolitanism of the EU is worth the sacrifice of Social Democracy. Ah, to visit Italy without a passport! The greater fools, for they will get neither. Has animosity between European nations (other than Cold War belligerents) been greater at any time since WW2 that it is now? Is it not going to get worse? Integration does not necessarily produce community.

39

bert 06.11.11 at 2:35 pm

This suggests, though it does not strictly state, that endangering integration is worse than undermining democracy.

I don’t think it suggests that, let alone state it. Scharpf’s concern is with democracy. Yours, by contrast, is with what you label Social Democracy, although your policy prescriptions suggest an identification with the Benn/Lafontaine old guard. Interesting to watch the protectionist left find common cause with the nationalist right.

40

bert 06.11.11 at 2:35 pm

Daniel has strong views on the rights of creditors, and the perils of fucking with them. In his wake you’ll find a trail of Irish puppies and Icelandic sealcubs, impaled on spikes. That’s not a criticism, understand. He has clear premises, and follows them to clear conclusions. And he concedes a case for restructuring Greek debt. On restructuring, Barry Eichengreen on the Brady Plan is worth a read. It includes a good catch: the head of the Paris Club at the time was Jean-Claude Trichet.

41

Martin Bento 06.11.11 at 4:44 pm

Yes, and that is the rationale that the left used for justifying creating this whole mess: if you oppose the EU, you are siding with the nationalists! For the sake of not being on the side of the nationalists, let’s burn the European welfare state, democracy, and standard of living to the ground.

42

bert 06.11.11 at 5:24 pm

Take a moment to think about the first half of the twentieth century.
Then ask yourself if someone might reasonably consider your post at #38 careless and self-indulgent.
I’ve not picked a fight with you before. You take a leftist line and that’s fine by me.
But in this case you’ve indulged in the tantrum of a wrecker and a hysteric.
My strong advice is to put a sock in it.

43

Martin Bento 06.11.11 at 7:14 pm

Now I could with all justification cite you for a Godwin violation right there.

But I don’t believe in Godwin, so I’ll take the analogy on. If the justification for European unification is that the alternative is some virulent attempt to unify the continent under the rule of a single coalition accompanied by genocide, where is the evidence for this? Were we seeing, say in the 80′s, efforts by any European power to try to conquer another? Did we see genocide or attempts at such from European governments now in the EU? There was Cold War belligerence, of course, but that was primarily a conflict between the Soviet Union and the United States for which Europe was a theatre, and it was primarily ideological, not nationalistic.

Has unification made resurgent fascism more or less likely? Well, it was damned unlikely before, being more or less limited to the occasional band of drunken lout skinheads in the train station. It is probably still unlikely now, but less out of the question. Animosity between European nations, and specifically between Germany and some of the others, is increased. Democratic mechanisms for resolving grievances are undermined. Declining living standards will create frustration that will express itself somehow. And people will be less inclined to defer to governments they no longer see as legitimate.

44

bert 06.11.11 at 7:40 pm

Can I ask where you’re from?
I think it might be relevant.
I’m British, by the way.

45

Martin Bento 06.11.11 at 7:47 pm

I’m American. I’ve lived in Europe, though. No, I don’t think it’s relevant.

46

bert 06.11.11 at 7:57 pm

Turns out it’s not.
The reason I asked is I’m surprised that when I mentioned the first half of the twentieth century, you zeroed in so enthusiastically on the Nazis. There was also the small matter of the First World War – a nationalist cockfight – and the Great Depression – exacerbated by a competitive retreat behind protective barriers.
Listen, guests have just arrived, but you deserve a proper response.
I’ll get back to you before long I promise.

47

Shay Begorrah 06.11.11 at 9:36 pm

bert@42

Take a moment to think about the first half of the twentieth century.

Never mind Godwin, did you catch a glimpse of the swastika tattooed sharks through your skis as you flew over them?

Which brings us back to bert@40.

Daniel has strong views on the rights of creditors, and the perils of fucking with them…He has clear premises, and follows them to clear conclusions.

The premise is that European Integration of the current free market variety is a good thing, the conclusion is that anything against it is wrong.

I think that you and dsquared, and I and the European left, are on opposite but not equal sides of a division in Europe, a division between a new transnational class, the EU Institutionalist, and a rag tag army of idealists and nationalists – not all of them savoury types.

In the the first group are those think that further EU integration is a good thing regardless of whether or not this entails a less socially just and more “market fundamentalist” Europe. This is a broad church, it contains geopolitical realists, those in the European financial sector who need a bigger pen to play in, industrialists and the swelling ranks of the EU bureaucracy and intra-governmental “shadow legislature” with their hangers on. It is a distributed Nationalism 2.0 with no flags, fraternity, hoi polloi or nations. It does however have a shared identity in its upper echelons and it craves the global influence that Europe used to exercise in the good old days before the natives revolted (dirty nationalists getting in the way, then as now).

The second group is those who see European integration merely as a tool for making a better world (for many definitions of better, green, left, right). This group is highly fragmented, probably their only common feature is the belief that more popular democratic input in the EU would be a good thing. As the group is fragmented it has not been able to mount a defence against the ICEs (lets go French) .

The fascinating thing about the first groups EU Institutionalism is that is that it is a post political phenomenon, at its early stages the policies required to build it were most definitely left of centre, at the moment it needs pro-creditor liberalism to keep it on track. Not quite corporatist but close.

Now do not get me wrong, the ICEs have a clear strategic vision of the world where by if we fail to embrace market liberalism with enough sincerity we will find ourselves at the economic mercy of those who do, like the US and India, or displaced by those who do without the liberalism altogether, like the Chinese and the Russians.

I just have bigger hopes for the EU than surviving the rush to the bottom with some global clout left.

48

Martin Bento 06.11.11 at 9:44 pm

Why did the assassination of an archduke in Serbia launch a world war? Because of trans-national alliances. The European elite believed that creating explicit military and economic links among countries would prevent conflict among them, a line of thinking not unlike that underlying European unification today. In fact, it meant what should have been a regional conflict at most became a conflagration involving all. The level of economic integration and trade as a share of GDP that existed prior to the First World War was not regained until the 90s. And democracy was more limited before WW1, so that the countries were governed more by elite consensus, a circumstance the EU restores. In a Europe that was more institutionally nationalist, that is, one where countries had fewer enforceable obligations to one another, it is hard to see how WW1 would even get off the ground. So why is WW1 associated with nationalism? Well, the elites had to get people to volunteer as cannon fodder, an unpleasant occupation. Since it was a war mostly of white Christians against white Christians, race and religion were out. So that left nationalism as the drum that could be beaten. But that doesn’t mean that only nationalism can inspire such things. The Cold War was fought between two mostly white, but multi-racial, secular superpowers, it justified enormous carnage and was ideological. Pol Pot’s slaughter was ideological.

Now, one might argue that the deeper causes of the trans-national alliances were nationalist, but this also has problems. If a trans-national alliance formed by nations in their own interest as perceived by the elite is nationalist, then the EU is nationalist too. Is it that the nations in question, the major ones, were imperialist? Well, there is not much old school imperialism from Europe anymore, either before or after unification. Militarist? Before unification, Europe was almost religiously anti-militarist, save for tolerating American militarism for Cold War purposes. Militarism was, however, explicitly pushed as a means of unifying Europe during the Kosovo conflict, which was referred to as a “military Euro”. One could agree or disagree with the merits of Kosovo, but it made the linkage between militarism and European unification explicit. In the same period, and by largely the same actors, NATO was enthusiastically expanded, which had a lot to do with pulling Eastern European members into the EU (at a minimum, it made it impossible for Russia and allies to prevent it).

As for the Great Depression, forget exacerbated, it was caused by much of the same sort of financial industry games that have caused this financial crisis. And the EU has greatly enabled such games. In the US, it was also exacerbated by a return to what we would now call supply-side solutions, including deficit hawkery of the type Europe enforces by law, by the second Roosevelt administration (and thankfully abandoned after a couple of years).

49

Shay Begorrah 06.11.11 at 10:10 pm

me@47

EU bureaucracy and intra-governmental “shadow legislature”

That would have had made more sense if I had used the prefix “inter”. Wrong conspiracy.

50

Martin Bento 06.11.11 at 11:00 pm

Shay, I basically agree with you, except that I don’t see how the first group is “post-political” and don’t see them as all that broad – it’s the economic elite, the military, and the (meta)state bureaucracy, three groups that are not always, but are often, aligned. And power is the whole game, so I don’t know what you mean by post-political. As for the second group, I would count myself in that, but to me you are only in that group if there are circumstances under which you would consider the EU not worth it.

I should say that there is a lot I do like about the EU. The privacy directives, the development aid, the concessions the left has been able to get. I don’t know how much of that will last though. A pan-European movement to restore Social Democracy if it can force change could be a good thing. It will have to be willing to seriously disrupt operations, though. I suggest calling it that – The Movement to Restore Social Democracy – by invoking a previous state, it almost sounds small-c conservative. Many progressives will have a knee-jerk aversion for that very reason, but I think that wrong-headed, though that is a different discussion, But the essence of the movement could be: restoration of the welfare state, reduction of financial industry power, increase of economic and political equality, etc. It would be a movement for democracy and relative socialism: it is good to see those two expressly wedded, rather than having putatively socialistic elites disdainful of the popular will.

51

Shay Begorrah 06.12.11 at 12:23 am

Martin Bento@50

except that I don’t see how the first group is “post-political” and don’t see them as all that broad

Ya got me. “Post political” was not a good choice of words but post-ideological does not quite do the job for me either.

I think it is time for a mixed sporting metaphor.

The EU institutions, and strengthening them, have an attraction to the political classes outside of either representing national interests or trying to promote EU policies that match philosophical objectives (freer trade, cleaner water, more workers rights). The EU also represents a “bigger league” of politics to play in which is appealing to politicians collectively from the points of view of self actualization (sorry), status and remuneration. The collective excited bed wetting over the idea of a European president seemed to capture this nicely. What a prize for a premier knocked out of national politics due to ungrateful voters or one from a small country looking to make it big.

The end result seems to be that there is not, and will not be, a European polis to whom the EU governing classes collectively owe responsibility and that EU’s “pooled sovereignty” is exercised with a constituency of ruling parties and not governed peoples.

A political scientist could set me right (if they were patient) but how about I say the ICEs are “post popular democratic politics”?

52

Martin Bento 06.12.11 at 12:50 am

Shay, agreed, and of course this was one of the demons that drove the European powers into WW1: grandiosity.

53

Martin Bento 06.12.11 at 4:24 am

bert, to get this more succinct:

If you want to defend the EU on the twin bases that:

1) Alternative to EU = nationalism

2) nationalism = (something like) WW1

You have to be able to defend the implication of substitution, namely: Alternative to EU = (something like) WW1. Otherwise, either something is wrong with at least one of the asserted equalities, or nationalism nationalism, i.e., the word is being used in different sense. The notion that Europe before Maastricht was headed for a WW1 situation is absurd.

54

Martin Bento 06.12.11 at 4:26 am

I put in a does not equal sign that got stripped. In the second to last sentence, I meant “nationalism” does not equal “nationalism”, i.e., the word is being used in two different senses.

55

bert 06.12.11 at 1:13 pm

Evil, evil hangover…
But for the last ten minutes it’s not the hangover that’s given me the most trouble.
I’ve been trying to work out what it is you’re saying.
I’m honestly not clear, for the simple reason that you’re not clear either. Have another read through posts #48 and #50, posted an hour and a quarter apart. Does the socialist reawakening depend on severing international ties, or on the formation of a pan-European movement? Do you want to reform an EU you partially favour, or does membership of your gang imply its rejection? Really, it’s anyone’s guess.
Fisking all this would be too tedious to contemplate, so let me pick something I agree with:

If a trans-national alliance formed by nations in their own interest as perceived by the elite is nationalist, then the EU is nationalist too.

Read sympathetically, that could be the premise of the Milward classic ‘The European Rescue of the Nation State’, capsule review by Fritz Stern here. He concentrates on the original six, but the principal applies to later entrants too. Spain has gained enormously from European membership. At the root of these gains is the creation since Franco’s death of a modern democratic state within a common European framework. If you believe that the relative spread of secularism, material progress, cultural confidence and general world-historical contentment in Ireland since 1973 is a good thing, then the European context is one of the things you’ll be grateful for. I choose Spain and Ireland as examples because they are two of the most prominent victims of the current crisis. The euro has turned around and bitten those who joined it. There’s a clear populist temptation to blame the EU. You however would not be so foolish as to let local politicians and bankers off the hook, I’m sure.
You dismiss the possibility that the threat of nationalism could justify support for the EU. Imagine yourself in Slovenia, in 1990. The state you were born and brought up in is breaking apart. The largest provinces are making zero-sum territorial claims against each other, and are carving off bits of the military to advance those claims by violence. I won’t run you through the details. Google is your friend for that. It’s enough for me to make to make one point: Europe was the solution to Slovenia’s problem. I don’t think that’s even disputable.
Of course, you may find today’s Slovenia a sorry disappointment. Small. Plump. Bourgeois. No longer a province of Yugoslavia, it has lapsed back into Habsburg complacency. And this leads me to my final point. You are adamantly committed to a particular political programme. Because this programme has failed to secure meaningful support in the Commission, or the Council, or the European or national parliaments, you prefer to tear Europe up and start again. Whatever you want to call this, it’s not democracy. The contrast with Scharpf’s sincere commitment to Europe’s democratic underpinnings is only one of a range of unflattering differences between you.

56

bert 06.12.11 at 1:13 pm

#47:

… a rag tag army of idealists and nationalists …

How romantic. Are ewoks involved?

Shay, you stepped in after I left.
I know you had a run-in with dsquared, and if you’re still smarting I sympathise. Console yourself with the fact that you have company.
As far as your argument with me is concerned, you’ll really have to do better than this. Your attempted division of the world is comic. I hate to be the one to break it to you, but posing for admiring glances as you bravely set about an imagined opponent only invites ridicule.
There is a division of the world. Unfortunately, right now, it involves you sitting at the kiddies table.

57

Shay Begorrah 06.12.11 at 1:56 pm

bert@56

I know you had a run-in with dsquared, and if you’re still smarting I sympathise. Console yourself with the fact that you have company.

That is not how I remember Rashomon.

58

Cranky Observer 06.12.11 at 3:13 pm

> I should say that there is a lot I do like about the
> EU. The privacy directives, [...]

Realistically, the privacy directives are always bargained away in the end for something the EU bureaucracy wants from the US (or just threatened away by the US). They sound good on paper, but I wouldn’t count on them to protect me in any significant dispute.

Cranky

59

William Timberman 06.12.11 at 5:12 pm

Mmm…this thread has gotten interesting again. Meanwhile, I’ve been muddling my way through Bernd Lucke’s Euro-Retter auf der falschen Spur in FAZ, and marveling at the spectacle of a German economist quoting Krugman. Will Eurocrats, all-American post-Keynesian technocrats, Chinese party satraps, idiot Republican supply-siders, or Berlusconian proto-Mussolinis ever understand the politics of need, I wonder? (as I’ve been wondering in this or that forum for nigh-on the last fifty years.)

Will it take a revolution? European (German and French) rearmament? Robert Gates, in his farewell whining about the sad debilities of our NATO partners should be more careful what he wishes for, and at this point, somebody my age should probably carry his easel out into the garden and have done with it. I doubt I could be any worse at the paintpots and brushes than the late bulldog of the British Empire.

60

Martin Bento 06.12.11 at 8:09 pm

Bert,

Since you say you are confused, let me lay it out more schematically for you:

1)What I advocate for Europe is a system where popular control of government, industry, and the financial sector, including central banks, is at least as great as it was prior to Maastricht. If this can be done while maintaining unification, great. However, I will not hold unification to be a value that trumps all other values.
2)Returning to that prior level of control, which I would call “Social Democracy” in a broad sense, is a substantive commitment I am willing to sacrifice for small-d democracy. If the people vote to move to a more liberal (in the European sense) system, fine, but they must clearly vote for it, and voting for a party that does this without making their intentions clear beforehand does not count. And they must be able to vote to restore the system as well. If they can vote out Social Democracy for Liberalism, they must be able as well to do the reverse.
3)Since the legitimacy of European institutions is very much and increasingly in doubt according to Scharpf, whom you seem to endorse, the legitimacy of their failure to embrace the policies I favor is also in such doubt. They have never had a popular mandate for what they are now doing, and the whole project was largely shoved down Europe’s throat. I would be happy to put my policies against the current EU policies in an election. Let the legitimate democratic result prevail.
4)Nationalism can only justify the EU as constituted to the extent that it was a realistic problem in the member nations before Maastricht. Otherwise, you are just using the word “nationalism” the way people use the word “boo!” Saying we must have an EU to forestall a WW1 or a Yugoslavia situation only is valid if a) such things were in prospect among these countries before Maastricht, and b) the EU has clearly made such dangers (war between members or major ethnic or racial conflict) significantly less likely. The first is clearly untrue, and the second is unlikely. There is now, for example, serious animosity between Greeks and Germans that did not exist before and looks likely to worsen over time.
5)The EU was achieved in stages, and one can endorse some stages without endorsing others. ISTM, that if you looked at what the EU had achieved prior to Maastricht, and what it was capable of within the framework then in place, which included aid to Spain and Ireland, the balance sheet looks pretty good. Since then, not so much. One could call that opposition to Maastricht rather than the EU, but Maastricht is designed to be irreversible. Opposition to Maastricht means opposition to the specific institutional form of the EU as of today, though not necessarily to the project of unification. However, it can, and does for me, mean opposition to unification if unification necessarily means Maastricht unmodified.

If you google Slovenia yourself, you will see that it seceded in 1991, not 1990. Things were moving very fast back then, so a year made a real difference. I know. I was, in fact, living in the area at the time. I was in Yugoslavia in 91 and in 92 as the country was starting to break up. I didn’t go where the fighting was, but I saw the columns of tanks and troops headed towards war, I talked with people in the bars. The lesson of Yugoslavia is that if you really do have serious ethnic or religious conflict, you are not going to be able to fix it by imposing a unified polity. There have been times in European history when this has worked, more or less, but not for a very long time; it is not something that works in our era, which has instead seen many of the old “cobblings together” unravel or come under serious strain. Yugoslavia spent half a century promoting a “Serbo-croatian” identity without taming the conflict between Serbs and Croats. It suppressed the conflict by force (and prosperity by Communist standards) for a good, long time, but the long-term effect was just freezing that conflict and their other internal conflicts in amber. And, yes, Slovenia has benefitted from the EU and is a very nice place. This doesn’t change the overall point.

61

Martin Bento 06.12.11 at 9:29 pm

The more I think of it the more I really like the idea of a pan-European movement to restore Social Democracy. Much better than just unraveling the thing. It could not be called utopian because it aims at a state that already has existed and is therefore possible in principle. If it does not seem possible in the current world context, one can look at why and how to change that, which can have ramifications elsewhere in the world.

62

Shay Begorrah 06.12.11 at 10:32 pm

Marton Bento@61

The more I think of it the more I really like the idea of a pan-European movement to restore Social Democracy.

An excellent idea, though there would be many forces to work against, one prominent example being the majority of the current EU financial and political elite.

There might also be a problem with attracting much of the social democratic political talent, given how thoroughly subverted by the the institutions of the EU the current body politic is. Who wants to spoil their chance of a shot at a tasty DG post after all?

On the positive side the Christian Democrat Hegemony is currently looking vulnerable (at last), the contradictions inherent in protecting both the rentier classes and some degree of economic and social justice are glaringly apparent, notwithstanding the attempts to blame the whole problem on lazy southerners, burkhas and the Irish corporation tax rate.

No serious person.

63

Shay Begorrah 06.12.11 at 10:38 pm

me@62

No serious person.

This sentence is part of a major new work of blank verse on EU political mores and should not have been included in the post. Please forget you ever read it.

64

Martin Bento 06.12.11 at 10:49 pm

Shay, yes, I recognize that I am talking about something very “anti-establishment”, as they said in the old days. One thing such a movement could do is create a genuine pan-European identity. I’m skeptical that deep political identities can be created top down anymore. I don’t see a way to get there within current institutions, so the pressure must come from outside the institutions.That’s why I say it’s anti-EU. It would be better, to me, if it were not anti-unification per se, as a less oligopolic unification could be a very good thing, and disintegration would be very painful. But disintegration would be one of the few credible threats such a movement could make, so it belongs on the table.

65

bert 06.12.11 at 11:49 pm

#60
That’s somewhat clearer, Martin. I appreciate you taking the time to set it out at length.
I’ve made my response clear and don’t have an enormous amount to add.
Two points, though.

Firstly, on the neoliberal conspiracy — a notion that Scharpf may have some sympathy with, but in his paper raises only to steer away from — I’m intrigued by the way you’ve chosen to use ‘Maastricht’ as a shorthand. It’s not a choice I’d have made if I was complaining about a surreptitious agenda which had never been voted on. The Maastricht agenda was very widely understood. It was self-evidently a plan to create Economic and Monetary Union by reproducing the Bundesbank model at a European level. All the features were in the prospectus: central bank independence, sound money, inflation targeting. As conspiracies go, it was an extraordinarily poorly kept secret. The British arranged to stay out of the plan during the treaty negotiations; the legislation approving this arrangement was passed by both houses of the UK parliament. The Danish negotiated an opt-out after the electorate voted against the treaty in a referendum; as a result, Denmark has never joined the eurozone. France and Ireland had referenda. Others had elected representatives do the voting.
I’m not going to overstate the case. There are, clearly, questions about the type of legitimacy conferred by the treaty ratification procedure. But if you’re talking about Maastricht, they got a mandate. If you’d prefer to move the conversation on to the inadequacies of eurozone governance, particularly since the crisis, I think there’s a chance we’d disagree on less. Would us disagreeing on less be a problem, though?

Secondly, on nationalism.
A minor objection: I never mentioned Slovenian secession. I understand the urge to score cheap points. Resist it if you want to convince someone of your case.
If as you say you had first hand experience of the Yugoslav War, I don’t believe your stated wish for “a Europe that was more institutionally nationalist, that is, one where countries had fewer enforceable obligations to one another” shows much of a capacity to learn from experience. I think I understand your logic — links with others are a vector for conflict. I simply think your logic is dementedly wrong.
More fundamentally to our discussion, it’s a problem that you appear to have no sense of the centrality of concerns about nationalism to the development of Europe. To take an obvious example, there is a reason why things started in the 1950s with coal and steel and the Saarland. The founders wanted to move beyond destabilising and destructive national competition for resources, particularly between France and Germany. By pooling resources they created a shared network of common goods. Throughout and from the very beginning the problem of nationalism, and Europe’s promise of a solution to the problem, has been at the core of German thinking. They were prepared to give up the Deutschmark precisely because of this.

Good luck with your new movement. If I see you rattling a tin, I promise not to cross to the other sidewalk.

66

Martin Bento 06.13.11 at 9:58 am

You’re going to whine about “cheap points”? You changed your tone with this last comment, but you do realize you’ve been inordinately rude throughout this discussion, right? And that I have refrained from responding in kind to try to elevate the tone? That the 1991 comment was specifically a response to your presumptuous cheap shot that I should google Slovenia? And you made remarks like this:

“careless and self-indulgent…
you’ve indulged in the tantrum of a wrecker and a hysteric.
My strong advice is to put a sock in it.
Fisking all this would be too tedious to contemplate”

This is intended to convince me? And how nicely am I really obligated to talk to you after that? And why? To convince you? You’re spraying vitriol like spit all over the room. You’re not going to be convinced of anything. And you’re complaining about a remark that’s not even rude. I suppose it could be considered pedantic.

“Would it be a problem if we disagreed less?”

WTF? Go reread the thread, and you tell me who’s picking a fight here. In fact, you even said you were picking a fight.

As for the substance, I’ll try to get back to it later. It’s late now.

67

bert 06.13.11 at 10:58 am

Actually, I think you’ve just put a knife through the ball and stomped off.
Which, if memory serves, was your initial approach to the EU.

68

Shay Begorrah 06.13.11 at 12:17 pm

Martin Bento@66

This being the Internet it is worth remembering that not everyone posting is necessarily in their full health.

69

bert 06.13.11 at 12:29 pm

Quite true.
And if you’re a sensitive sort the internet might not be for you.

70

Martin Bento 06.13.11 at 7:54 pm

Your memory is serving you poorly. What I said in #38 is that people on the left should support either reforming the EU or abolishing it. I later said that I preferred reforming. And, no, I’m not upset at your hostile tone. It just seemed that your “Is it a problem if we disagree less?” and “you won’t convince me by scoring cheap points” comments were extremely bizarre in the context of it. As though I were the one being combative, as though I must stick to the strictest and most generous standards of debate while you lodge stink boms, and as though you were open to persuasion, when you were obviously strongly emotionally invested in your position. If I did convince you, you would have to eat major crow to admit it, given your rhetoric, and no one likes the taste of crow.

If the purpose of European integration was to keep national egos from tipping into war, this was achieved by the early 80′s at the very latest and the further integration was unnecessary. If its purpose was to stop bigotry generally, it is doing very poorly, as there is now more of this within Europe now than in recent decades, it is directed primarily at Muslims and gypsies, so that erasing national boundaries does not help, and the EU has done little to counter it. Meanwhile, tensions among the members are higher than they have been for decades and look likely to go higher still. And the EU made this possible. Without the EU, Greece’s problems would not be everyone’s problems, for example.

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bert 06.13.11 at 11:25 pm

I’m glad you came back, Martin.
I was beginning to feel a bit rueful about aiming a kick at your retreating backside at #67. It wasn’t justified.
I’m also glad you’re not upset at my hostile tone. You’re right to notice that I picked a fight with you. One of the countless ways in which the internet improves on real life is that neither of us were at any point at any risk of getting hurt.
And finally I’m glad because I think you’re making an important case. Importantly wrong, in my view. But it’s clear that parts of the left are turning on Europe. The immediate impact of the eurozone crisis is hitting people hard. Awful choices are being forced on policymakers. Serious mistakes have been made and more are no doubt coming.
Years ago I did a trivial bit of work alongside a Commission economist who had just resigned to publish a book attacking the ERM and EMU. From what I remember, which may at this distance be wildly inaccurate, it was for the most part a long and careful analysis of the intricacies and failings of European monetary arrangements up til the early 90s. But at some point, presumably at the insistence of his British publishers, a strange additional section had been grafted on, warning about the danger that monetary union might create the conditions for another European war. Back then, I thought it was forgiveable hyperbole. He was trying to sell a book in a context where the English right was hungry for anti-european tracts. In the years since, I’ve hardly thought about it at all. But reading Scharpf’s baleful conclusion brought it back to me.

I hope rather than expect this’ll turn out well. But everyone reads Krugman, and there would quite rightly be very few takers for an attempt to pretend things are going swimmingly. What I very strongly believe is that the European project, including the desire for monetary union if not its current practice, is a friend of the left and of Europeans in general. I hope I’ve been able to explain, in between volleys of abuse, why I think this is.

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Martin Bento 06.14.11 at 12:18 am

I wasn’t retreating. It was just 3 AM where I was. But I do see your viewpoint, and I’m glad we have settled down to a more reasonable discussion. I expect this thread to close soon though, so I don’t think this is the place to continue.

73

Martin Bento 06.14.11 at 5:15 am

Every time I say a thread is going to close, it doesn’t. At any rate, I was tired in that previous comment, so I may have been irritable, but I wasn’t leaving. In fact, I said I was going to try to get back. Perhaps you don’t realize that these threads close, so there is a deadline on getting back.

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