Is the Euro crisis incurable?

My review of David Marsh’s new book on the Euro published by OMFIF Thu 1 Aug 2013 Vol.4 Ed. 31.2

The long-lasting euro crisis Thoughts on the commentariat’s output

By Denis MacShane

Is the euro crisis incurable? Every day we can read commentaries tugging this way and that. At times, it is almost as though the collective commentariat in London needs an enduring euro area crisis. If it did not exist it would have to be invented, as otherwise, what would fill the pages of our newspapers and what would we discuss at the endless euro crisis seminars and breakfasts? It is perhaps a little easier in Britain; as Florian Eder, Brussels correspondent of Die Welt, wrote tartly on 6 July, those in London who love giving the Germans advice on what to do ‘never have to persuade their voters to pay for the mistakes made in Spain, Greece or Cyprus.’ Eder’s argument is that the euro area is edging back to normality, thanks to the rough and hard austerity cures dictated by northern Europe to the south and transmitted via the Commission, with a little help from the International Monetary Fund and European Central Bank.

Eder is no Dr. Pangloss, but one can see that a sense of imminent doom and the bust-up of the euro is not quite as taken for granted as it was 18 months to two years ago.

But the equal and opposite danger to the belief that the euro was about to collapse is to pretend. In the words of the ineffable former British prime minister who returned from a Caribbean G7 meeting in December 1978, to the horrors of the winter of discontent: ‘Crisis? What crisis?’

There is a continuing existential crisis surrounding the euro and pretending otherwise does neither the currency nor the cause of moving Europe forward to growth and coherent public finances any good. That is why we should welcome a provocative essay by David Marsh, OMFIF chairman and leading expert on the Euro’s birth, early life and now adolescent acne. His book Beim Geld hört der Spass auf (Europa Verlag Berlin. Published by Yale University Press in the US and UK as Europe’s Deadlock: How the Euro Crisis Could Be Solved – And Why It Won’t) will be required reading for all who have to think through the policy of what to do on the euro.

Marsh begins by asking if the euro crisis is incurable. In 20 short punchy chapters he seeks to answer his own question. The language is vivid. Europe survived three years of the trenches of the First World War and forty years of the Cold War, therefore the old continent will survive the present currency crisis. It is not quite clear who Marsh believes should win the euro crisis, in the sense that the western Allies won the First World War and indeed went on to win (sort of) the Cold War. Like Macbeth, he sees the bankers and politicians of Europe ‘so steeped in blood’; it is as impossible to go back and just as hard to move on.

Marsh’s experience as a journalist during the birth of the euro and his in-depth knowledge of Germany (and the German language) has allowed him to write extensively on the currency, though very much from the German perspective. This is not a bad thing. In my time working with Downing Street on European policy, there was no politician or senior official who had German (French, yes, but the English ruling elites have always looked down on Goethe’s language) and to this day, Britain has never had its top Europe man to Brussels with a working knowledge of German.

But the euro and the euro crisis go beyond the case of Germany. The current joke is the little boy who asks his father if he can go to the loo. ‘Sorry, son, you’ll just have to wait until after the German election!’ This waiting for Angela Merkel is frankly pathetic and the real solution, if one is to be found, will come from national capitals and a new class of political leaders willing perhaps to bribe voters less and ask them to accept more responsibility for their own and their nation’s future growth and prosperity.

‘Fear is a bad counselor’ is the heading of one of Marsh’s chapters, and he is quite right. For all its difficulties, Europe is in a much stronger place with more wealth and stable institutions and a better educated, healthier population than at any stage of its history. Think back to the misery of the 1970s, the endless mini currency crises of the 1980s, the sudden impoverishment of Germany following unification in the 1990s, or the underdevelopment of so many ex-Soviet imperium nations when this century begun.

Are we really sure Europe would have come out of the 2008 banking crisis if every national currency was devaluing against every other currency? It would have been Christmas 24 hours a day for the currency traders and panic after panic amongst governments. In the 1930s, the US legislated its panoply of ‘Buy America’ laws which still shuts federal and state procurement to competition from abroad. Is that the Europe we want – every government indulging in beggar-my-neighbour, sauve qui peut policies?

Marsh ends his essay with a plea for a less ambitious Euro-Politik. I believe he is right. The German title of his book could be translated as ‘Money isn’t funny’ and too important to be left to politicians. General de Gaulle’s economic adviser, Jacques Rueff, wrote ‘L’Europe se fera par la monnaie, ou ne se fera pas’ (Europe will come into being via its currency, or it won’t exist). Oui, up to a point. What is taking place remains sui generis – a common currency and some incipient common banking rules. Nonetheless the stubborn reality of the continuing independent, separate existence of sovereign, separate nations within the broader EU framework remains its defining characteristic. And that will still be the case well after the German elections in September 2013 or even after Mrs Merkel’s retirement in 2015.

In the satire ‘Beyond the Fringe’, prime minister Harold Macmillan, describes his meeting with the German chancellor, Konrad Adenauer, whose name the ageing Macmillan has forgotten.

‘I met with Herr, eh, Herr, eh, Herr and There. I said Britain could be the Honest Broker in Europe. He agreed with me that no country could be more honest. I agreed with him that no country could be broker.’

The pleading of poverty by Britain whenever a European problem needs a little oil to permit the cogs to mesh and turn to everyone’s advantage remains the British contribution to much EU debate and policy-making.

Too much of British discussion on the euro and on the EU has been a Brit-Brit discourse by people who have never opened a French or German paper in their life. Thanks to David Marsh, we have some British insights into the problems of the currency and at times the quite dreadful mistakes the constructors and first stewards of the euro actually made. But the day a banker or a politician admits to such mistakes has yet to come. In the meantime, Marsh’s book will have to do.

Denis MacShane is Britain’s former Minister for Europe and OMFIF Advisory Board member.

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