Friday, November 26, 2010

Debt crisis: the long view

Confidence in Europe's ability to manage its debt crises is eroding by the hour, with bleak prognoses appearing on all sides. Credit for the most incendiary remark of the day--despite tough competition from the Bundesbank's Axel Weber, whose speculations on the size of the eventual bailout drove bond rates skyward--must go to Michael Pettis, financier and economist at the University of Beijing, for his vatic remark, below:

"This has been said before, but in a way this crisis is the European equivalence of the American Civil War. Once the dust finally settles Europe will either be a unified country with fiscal sovereignty firmly established in Berlin or Brussels, or it will be fragmented with little chance of reunion."

One can only guess which new financial instruments will replace the gatling gun and the ironclad warship in this post-modern replay.

Thursday, November 25, 2010

Is Europe Burning?

We know that flags are the most rudimentary of symbols, but what does this one symbolize? Perplexing question. For many years I have tried to share the idealistic interpretation which would hold that it represents the end of the internecine wars that have plagued Europe, and stands for a new era of peaceful cooperation. Some would add: the prototype for a post-sovereign world order, and not a decade too soon, as our species confronts a variety of earth-threatening problems. Au contraire, argue my friends on the far left: it is the flag of Capital, a more rational system of domination in which the particularities of local culture and participatory power are swallowed up in the interest of the global financial system.

Recently a couple of events have focused my attention on some particular aspects of this thorny question. First of course, the ongoing debt crisis that first threatened the Euro-status of Greece, now Ireland and Portugal, soon perhaps Spain, Italy, Belgium ... even France, says Mr. Roubini. And as Mr. Van Rompuy says, as the euro goes, so goes the union ...

On a more positive note Dominique Strauss-Kahn of the IMF has chosen this critical hour to propose a consolidation of labor markets and fiscal process across the eurozone, a bold proposal that would transfer major projects of national government--wages and regulation of labor, the entire social security network, and that central document of governmental authority, the national budget--to some trans-national european decision making-apparatus. Was he serious? Is this actually an oblique move by his purported presidential campaign to outflank some of his critics on the left? Or alternatively, as some have suggested, a bold if unorthodox play to claim the directorship of the European Central Bank? In any case, if taken seriously the proposal represents a large step, whether for better or worse, toward fulfillment of the vision of Europe-wide governance.

Finally, I was amused by the tone of questions at a recent forum at Harvard's Center for European Studies. The presenter was Tommaso Padoa-Schioppa, president of the think tank Notre Europe, and he was there to advocate for the most benign understanding of the EU as post-sovereign problem-solving friend of the human species. His high-minded approach made all the more striking the tone of realpolitik that greeted his proposal (for a shared US/EU global policy framework). Questioners all but demanded how many divisions the EU commanded, and the suggestion of the Union as immature in its delegation of security to its big brother in NATO was a discouraging moment for a Europeanist. Is the EU irrelevant in a dangerous, increasingly (once again) bi-polar world? Does that thought lend weight to the objections of a far-left France-firster like Jean-Luc Mélenchon, whose antipathy for the union is almost unseemly in a Euro-deputy? Or is the EU still slouching against all odds toward the progressive vision of its early advocates?