Saturday, 16 June 2012

The European Solution

A Faustian Pact
There comes a time when the destinies of all peoples becomes interwoven. Though it is oft-repeated in the media and policy circles it cannot be overstated that the fate of the entire European Project for at least the next generation presently rests on the German Chancellor's shoulders. A Greek exit is all but certain in the coming weeks. The European project, born out of the necessity of French-German reconciliation, is facing an existential threat.

Having fought no less than three major conflicts against each other in less than eighty years, France and Germany were encouraged at the behest of the then Cold War arrangement to commit towards an European Community in the 1950s, a political union to end all wars and mutual rivalries; which later rose to overcome Europe's centuries long stratified borders in creating in 1999 a full-fledged European Monetary Union.

At its simplest, this economic entity pooled the risks of the profligate and the weak. Allowing the workers of peripheral and still 'developing' economies to enjoy the living standards of the Teutonic core. In the sense that Black Swans exist only in the conditional randomness of future events, the 2008 Financial Crisis stemming from rich-world extravagance rolled the wrong dice for what is now a panglossian pipe dream of broad European Integration. Setting up an economic union before it had solid constitutional political roots was mislaid in a frantic scramble towards an undefined goal.

If one is to avoid the back-to-the-past mayhem and anarchy of European History the solution is straightforward. Having thus far committed to its bluff, Germany needs to act quickly to collect the pieces of the original European communique dating back to the Treaty of Rome and go back to the core set of willing participants. The German Constitution and the Fifth Republic have to come to an abrupt end in order to rebuild a politically federal Europe in the coming months. Only then in the space of the next year would it be possible to do what the U.S. took nearly two hundred years to accomplish: to fully insure the banking system, to create federally strong fiscal and financial regulatory bodies, and construct an economic union which is in essence united.

The European Economy is too big to fail; it is the largest trading entity within the Global Economy and its preventable failure would be nothing short of disastrous, ensuring a depression within a recession.