"A good day for Europe"

September 12, 2012 12:05 PM

Today was, according to Angela Merkel, "a good day for Europe" - but it might also be the start of something much bigger.

A good day has been a long time coming, but today the German constitutional court gave the final green light to the European Stability Mechanism, helping Spain, Italy and Ireland, and the European Commission released their proposals for a single banking regulator for the Eurozone to prevent (or contain) future failures.

In the European Parliament, something more forward-looking was taking place. Jose-Manuel Barroso, the President of the European Commission, called for a democratic federal Europe of nation states. Standard Eurocrat boilerplate? Not really - Barroso has never been a federalist (£). Since his line appears to be backed by Angela Merkel and François Hollande, it may mean that there is a huge discussion coming about "post-national" democracy and federalism in the EU - but don't expect any resolution soon. The Brits are the obvious nation-state curmudgeons, but they aren't the only ones.

Whatever future debates are ahead, Super Mario (Draghi, European Central Bank boss) might well have given the Euro a much-needed lifeline. Even Dutch voters, heading to the polls today, now seem to be laughing at the Eurosceptic right, rather than laughing with them.

posted by athenian (36 comments total)

Obviously a new supra-national regulatory regime is key to containing future crises, but we also still need to contain the current debt crisis, which is largely dependent on whether or not the ECB bond-buying program is instituted in full, or whether it's castrated in some way by Germany. Whether or not the ECB buys bonds is less relevant than whether or not the market believes it will do so while allowing inflation adjustment, rather than relying on "internal devaluation" and its 20+% unemployment rates. That's not a sustainable model for the Eurozone.

The ECB must backstop countries that are dependent on the euro for sovereign financing, and it must do so without inflicting death-spiral austerity. If Germany prevents this, the euro will eventually die, and a lot of countries will suffer the consequences for decades to come.
posted by mek at 12:20 PM on September 12, 2012 [3 favorites]

*whistles Ode to Joy*
posted by bebrogued at 12:21 PM on September 12, 2012 [5 favorites]

Two speed Europe is underrated. Get the UK out of it, into a trade area, and have the countries that want to (realistically the Eurozone) get closer together. Barroso might dress it up as open to others, but realistically it's clear that the UK and some of the Nordic and Eastern countries won't choose federation.
posted by jaduncan at 12:28 PM on September 12, 2012 [1 favorite]

Framed the post much? Disagreeing with a project that has consistently blundered into ever larger failures is hardly being a "nation state curmudgeon".
posted by Spacelegoman at 12:28 PM on September 12, 2012 [4 favorites]

The outcome of the German constitutional case must have been an open secret among top politicians. Otherwise, Barroso was hanging his balls out with a speech like that.

If we want economic and monetary union to succeed, we need to combine ambition and proper sequencing. We need to take concrete steps now, with a political union as a horizon.

I suppose the economic crisis was only going to go one of two ways, and this was always the "neofunctionalist" analysis, I'm sure.

That said, I do think the new-style parliament elections in 2014, with a Commission President candidate, will be an interesting step toward drawing together the political worlds of the different states into a shared EU political world.
posted by Jehan at 12:31 PM on September 12, 2012

"Ever closer union" ain't dead yet
posted by Bwithh at 12:46 PM on September 12, 2012

Go to the NY Times and do a search on "deal to save the euro".
posted by Pararrayos at 12:50 PM on September 12, 2012

No mention of real Money (Gold, Silver) in all of this... just lots of fiat. Eventually we'll have to deal with the collapse of paper money, I'm amazed at how long the can kicking has gone on.
posted by MikeWarot at 12:56 PM on September 12, 2012

Right, because countries on the gold standard never had financial crises...
posted by mek at 12:58 PM on September 12, 2012 [12 favorites]

Somewhere, Kaiser Wilhelm's ghost is smiling. Possibly smirking, even.
posted by Sonny Jim at 12:59 PM on September 12, 2012 [3 favorites]

No mention of real Money (Gold, Silver) in all of this... just lots of fiat. Eventually we'll have to deal with the collapse of paper money, I'm amazed at how long the can kicking has gone on.

Fucking gold bugs. What innate worth does specie backed money have? It has none. It only had worth because it was backed by thousands of years of tradition, common agreement and that people like shiny things.

The only difference between money by specie and money by fiat is that by specie you're fully at the mercy of the availability of specie. If a huge influx is found you encounter massive inflation (ask residents of 1800s mining towns how that worked out). At least with fiat you can have some semblance of control over the money supply.
posted by Talez at 1:03 PM on September 12, 2012 [28 favorites]

A series of blunders? Modulo the Balkans, we haven't had a European war for nearly seventy years. We have absorbed - painfully and by no means definitively - the Cold War buffer nations, and even us Brits have (whisper it) done rather well out of the whole deal. Compare pre-EU London with today's flamboyant model. And it's not as if the Eurozone shenanigans haven't been mirrored in other, notably federalist, major nations.

Given the huge disparity in culture and language, history and ethnicity, across the EU, this is all rather heartening. I'm happy to entertain talk of more, rather than less, democratic control across all the states - and, in fact, I'd like a pop at having a voice in the US too, given how much everything cross-couples these days.
posted by Devonian at 1:17 PM on September 12, 2012 [4 favorites]

Today was, according to Angela Merkel, "a good day for Europe"

She made the announcement after noticing an encouraging caption in the lights of the Goodyear blimp.
posted by The World Famous at 1:29 PM on September 12, 2012 [6 favorites]

...and even us Brits have (whisper it) done rather well out of the whole deal.

It's an interesting dynamic that none of the three major parties will commit to withdraw, even though we are often called "the most Eurosceptic state". It makes me feel as though everybody who knows anything is aware of the good the EU brings, but few are willing to stand up for it before the press. So much of the anti-EU feeling is media driven, and words knows that the media aren't keen to teach us the truth.
posted by Jehan at 1:42 PM on September 12, 2012 [3 favorites]

"The only difference between money by specie and money by fiat is that by specie you're fully at the mercy of the availability of specie. If a huge influx is found you encounter massive inflation (ask residents of 1800s mining towns how that worked out). At least with fiat you can have some semblance of control over the money supply."

I'd rather have accidental inflation over the discovery of a rich new source of precious metals than absolutely guaranteed inflation caused by central banks trying to paper over the results of fraud on the part of their buddies.

100% inflation once every few hundred years is MUCH better than 5% guaranteed every year.
posted by MikeWarot at 2:06 PM on September 12, 2012

Maybe let's not turn this into yet another argument about the gold standard vs. fiat currency, thank you.
posted by cortex at 2:20 PM on September 12, 2012 [10 favorites]

Aw man, I had such a nice long challenge typed out!

Foo.

Well, alright then, to the topic: anyone got a decent overview of the Dutch voting? I just cannot keep track of their internal politics and I don't trust most of the usual sources to actually tell me something useful.
posted by aramaic at 2:23 PM on September 12, 2012

Somewhere, Kaiser Wilhelm's ghost is smiling. Possibly smirking, even.

Edmund, thank god someone has finally told me that it's a German plot to take over Europe. If only there was some other people to bring up a hundred-year-old stereotype to bash the EU with little understanding of why this is a ludicrously simplistic statement. Why, I should write to the Daily Mail and Express and tell them of this fascinating new canard!
posted by jaduncan at 2:42 PM on September 12, 2012 [3 favorites]

100% inflation once every few hundred years is MUCH better than 5% guaranteed every year.

Actually, it's not. With relatively low, consistent inflation, it encourages individuals to invest rather than hoard money. Spending money multiplies it. I have a choice to sit on $250 or buy a chair. I don't really need that chair but I like it. I can leave it under my mattress where inflation will slowly erode its value or I can invest or spend it. So I choose to get a chair. The guys who sold it to me get $250. They spend their $250 on paying their staff a portion of their checks, and keep a bit for themselves, and in turn all, or nearly all of that $250 is spent AGAIN.

Or I choose to save it. Or invest it. Either way, it MOVES to other people who can then use it, and at some point I can get it back (from a bank account) or sell my shares. If I invested it in an index fund for any reasonable length of time, I get my $250 back PLUS approximately the amount it would have accrued over the years had I been able to inflate the money rather than deflate it under the mattress.

Money sitting around does nobody (arguably even the holder) much good. Money spent and invested helps everyone involved in those transactions. Consistent but not high inflation encourages this motion. Deflation or long periods without inflation encourages hoarding, which ultimately hampers growth.
posted by chimaera at 2:58 PM on September 12, 2012 [12 favorites]

Please don't let this be another gold derail. The real issues are:

At the moment the eurozone is a half-way house where neither the national governments nor the ECB seem to have the power to fix the crisis. Obviously the balance of power is off. But in which direction should it change?

What 'speed' should a multinational economy run at? Remember, Germany was in a slump ten years ago. The ECB lowered interest rates to stimulate the German economy, but this cheap money caused housing bubbles in the peripheral countries.

Can 'internal devaluation' (i.e. through reducing wages etc. to improve competitiveness) work? (My answer to this tends towards 'hell no').

etc.
posted by kersplunk at 3:19 PM on September 12, 2012 [1 favorite]

At the moment the eurozone is a half-way house where neither the national governments nor the ECB seem to have the power to fix the crisis. Obviously the balance of power is off. But in which direction should it change?

This is the same issue that has been plaguing the Eurozone since day one. And predicted by Euroskeptics all over: economic federation without political federation inevitably results in the situations you describe: stimulus for one economy became a blank check for others to paper over unsustainable practices. Higher tax compliance in one nation and lower tax compliance in others without a unified enforcement mechanism results in a situation where Greece comes to default, and the bondholders in Germany are accused of "invasion by bank" (a phrase I saw more than once).

The Eurozone is metastable at best. Either countries are going to have to leave, or they're going to have to accede to stricter enforcement from outside their borders. Which direction *should* it go?

My personal preference is that the countries leave the Euro rather than submit to a bureaucracy in Brussels that makes the US Congress look like it's in tune with the people.
posted by chimaera at 3:27 PM on September 12, 2012

The interesting possiblilty, chimaera, is that countries submit to Brussels, but to a more democratic less bureaucratic Brussels. That, I suspect, is what Barroso Merkel &c are trying to create, but I am sceptical that they will be able to bring the voters with them.
posted by athenian at 3:30 PM on September 12, 2012

Here's another way to take this discussion. Who gets to say what counts as "reform"? If we knew the gold standard (sorry) of how a nation should be run, then we could claim to know what counted as reform, and what was fiddling around. But there is no such standard. As long as we do not challenge the use of the term "reform", there is no obstacle to it becoming a synonym for "structural adjustments in favor of powerful interests".
posted by stonepharisee at 3:32 PM on September 12, 2012

The interesting possiblilty, chimaera, is that countries submit to Brussels, but to a more democratic less bureaucratic Brussels.

I'd like to see that as well, if the pendulum swings toward the "more federation" direction. But the EU Parliament in Brussels has, rightfully, a really horrible reputation.
posted by chimaera at 3:46 PM on September 12, 2012

I have always considered Barroso too bland for his office, but I have to give it to him: Speaking about fiscal union, federal political union and further empowerment of the European Parliament is important, especially now. An ever closer union indeed.

But the EU Parliament in Brussels has, rightfully, a really horrible reputation.

Is that the same Parliament that is one of the sanest institutions in EU despite its limited power (cf. rejecting ACTA or revising the Bolkestein directive) or are you thinking of the reputation of European bureaucracy in general?
posted by ersatz at 4:53 PM on September 12, 2012 [2 favorites]

I have a choice to sit on $250 or buy a chair. I don't really need that chair but I like it. I can leave it under my mattress

Okay, first of all, $250 in *any* combination of bills or coins is going to be a lot less comfortable to sit on than a chair. Secondly, any *mattress* is going to be a lot less comfortable with a chair under it. So I find your economic theories a bit sketchy.
posted by uosuaq at 4:54 PM on September 12, 2012 [8 favorites]

Okay, first of all, $250 in *any* combination of bills or coins is going to be a lot less comfortable to sit on than a chair. Secondly, any *mattress* is going to be a lot less comfortable with a chair under it. So I find your economic theories a bit sketchy.

What about one of those South Pacific currencies which use giant stones as legal tender? I bet some of those would be comfortable to sit on, especially if they're in the sun on a crisp fall day.

As for the second point, you haven't seen this. There are chairs under many of those mattresses.
posted by maxwelton at 7:02 PM on September 12, 2012 [1 favorite]

Sure, Super Mario is seeing fireworks after hitting the top of the flagpole, but will he be hoisted with his own petard?
posted by markkraft at 9:12 PM on September 12, 2012

Pro-Europe parties lead in Dutch vote.
posted by Pendragon at 11:41 PM on September 12, 2012

jaduncan: Edmund, thank god someone has finally told me that it's a German plot to take over Europe

But but the Riddle of the Sands and The Battle of Dorking!!

Sorry, James: that comment was supposed to have been obviously tongue-in-cheek, but it clearly didn't come out that way. Misdirected sarcasm, I guess.
posted by Sonny Jim at 4:39 AM on September 13, 2012

Sorry right back. I think I have spent too much time reading comments in more stupid places where people mean it.
posted by jaduncan at 4:55 AM on September 13, 2012 [1 favorite]

"Money sitting around does nobody (arguably even the holder) much good. Money spent and invested helps everyone involved in those transactions. Consistent but not high inflation encourages this motion. Deflation or long periods without inflation encourages hoarding, which ultimately hampers growth."

We need to get off the growth treadmill before we run out of everything (or even just a few critical things) and civilization crashes and burns.

Growth is not always a good thing, we can't keep it up. People need to be able to conserve their resources, having stable Money allows that. Inflation is theft.
posted by MikeWarot at 9:00 AM on September 13, 2012

Approval of the ESM was a do or die thing, according to Soros in this month's NYRB:
The Tragedy of the European Union and How to Resolve It
posted by snuffleupagus at 9:33 AM on September 13, 2012

Growth is not always a good thing, we can't keep it up. People need to be able to conserve their resources, having stable Money allows that. Inflation is theft.

This derail is over. However, I'm as anti-growth as they come, but not anti-inflation, so you've got me going here. If anything we need a massive increase in our understanding of what has value, rather than a decrease. We need to pay people to not work, we need to assign financial value to ecological assets, we need to tax carbon emissions, etc, etc. This is all doable with a fiat currency with baseline inflation. In fact I don't see how it's doable otherwise - it partly depends on our ability to intelligently and arbitrarily assign value to things that are important to us as human beings, where the market has failed to do so. Fiat currency was one step towards overcoming market failures, but we need to go much farther.
posted by mek at 9:41 AM on September 13, 2012 [1 favorite]

maxwelton: "As for the second point, you haven't seen this ."

Holy hell, is that stuff great! I get the feeling, though, that the prices would give me a stroke. Seriously great design work there, though.
posted by InsertNiftyNameHere at 1:43 PM on September 13, 2012

Just wanted to say thanks for this post. I can't seem to find such good info over here in the USA (at least not on my own).
posted by InsertNiftyNameHere at 1:45 PM on September 13, 2012