It’s getting pretty exhausting living inside the Eurozone. We screw up our nerves for the next moment of crisis, which is narrowly averted, only to find that the same old problems lie in wait just around the corner; but worse this time, because they were’t properly sorted out the first time.
Last week’s worries were put to rest for a short while: Greece is still in the Eurozone, the Euro hasn’t imploded, the banks are still open. Spanish banks teetered; a fix was found for the time being. But it doesn’t mean anything has been solved, and the moments of respite get shorter and shorter.
It seems to me that we’re strung out on Dani Rodrik’s trilemma of global politics in an increasingly dangerous way. His contention is that you can only have two of these three things:
‘hyper-globalization’ (in the EU context, the free market in goods and services and mobility of capital and labour);
‘national sovereignty’ (in which national governments have realistic choices to make between options that may be ideologically quite distinct);
and ‘democratic politics’ (in which there is meaningful involvement by actors and electoral accountability for decisions made).
Kevin O’Rourke (whose work I’ve mentioned here before) pointed out that the odd design of the Eurozone was meant to avoid it getting definitively boxed into any two options in this triangle. Trans-national oversight of the currency was delegated to the ECB. Nation states were charged with making fiscal and financial policy within a loose-ish trans-national framework of rules. Democratic debate was expected to internalize the requirements of pooled sovereignty.
But the sharp ends of the trilemma are becoming more and more difficult to span. The fuzzy compromises are under growing strain, and the Eurozone is being pushed into classic trilemma trade-offs. It’s at growing risk of ripping apart entirely.