IN a moment of truth after losing referendums in France, the Netherlands and Ireland, Jose Manuel Barroso, the European Commission president, admitted to me that the EU could seem like a conspiracy by political elites against their citizens. Never has that been truer than of the euro crisis, which really is crunch time for Europe. Angela Merkel and other solvent European leaders have an agonising choice of either sparking the certain fury of their voters by using their money to bail out the Greeks, or letting Greece go to the wall, and watch the euro implode. There really is no middle way; the rigour of the bond markets will not let the EU pursue the usual political fudge. Either good German taxpayers’ money props up Greek bonds enough to avoid default, or it doesn’t. It pitches politicians directly against their voters, and forces them to break their earlier solemn promises that they would never do this. It is every leader’s nightmare. The way out is not fudge but leadership, which has been disappointingly absent.
Eurosceptics who have long predicted the demise of the euro – of which I am one – should resist the temptation to indulge in schadenfreude. The Eurozone must either lurch forward to full fiscal union, or fracture; the euro has clearly failed in its half-baked form, leading to political and economic turmoil across the continent. But that was always going to be part of the process. The euro’s creators saw monetary union as a doable step that would inevitably lead to the far more politically difficult fiscal and political union. If the Eurozone now moves to fiscal union, it won’t be a failure of the euro, but its ultimate success: it has done what it was designed to do. It would be like saying a chrysalis had failed because it turned into a butterfly. Fiscal union will then lead inexorably to political union. Germany can only underwrite Greece’s debts if it has some control over Greece’s tax and spending policy – sovereignty over fiscal policy will become pooled in the Eurozone. And if European leaders are deciding what citizens in other countries pay in taxes, then clearly those citizens must have a say in who those leaders are: it would be unsustainable over the long term for Greeks to have their taxes decided by German leaders they have no chance to vote for. Remember the Boston tea party? Monetary union leads to fiscal union leads to political union, with each difficult step provoked by a crisis. Today’s events in Europe will be the subject of history books for decades to come.
Our chancellor is right that it is clearly in the UK’s immediate economic interest to avoid the turmoil of a Greek default, and for the Eurozone to take the fiscal union plunge. The UK would not suffer the political problems of fiscal union, but we would get some stability. The criticism that monetary union without fiscal union doesn’t work would be answered, and the Eurozone would get a new lease of life. But that all depends on Europe’s leaders being able to show enough leadership. And that is far from certain.
Anthony Browne is former Europe correspondent for the Times, and author of The Case for European Localism, published last week by Open Europe.