Eric Reguly's
latest Globe and Mail column is another exploring the theme
touched upon last week of the European response to Greek insolvency paralleling the West Germany response around 1990 to East German insolvency, with the insolvent entity losing its economic sovereignty as a prelude to incorporation into a larger polity. The parallel isn't that close--a Greek nation exists in a way that an East German certainly does not--but the likelihood of a shift in sovereign power upwards and away seems pretty strong.
Greece is the birthplace of democracy. As a result of the financial crisis, it might become the first European Union country to, in effect, give up democracy as the debt crisis morphs into a political crisis.
We all know that Greece has already become a client state of the so-called Troika – the EU, the International Monetary Fund and the European Central Bank. The first two supplied €110-billion ($157-billion) in bailout loans to Athens a year ago and are preparing a second bailout package, worth perhaps €60-billion, as Greece teeters on the brink of bankruptcy. For its part, the ECB loaded up on Greek bonds and supplied liquidity to Greek banks.
In other words, Greece’s economic sovereignty has already vanished. Unless Greece does what the Troika wants it to do to get its financial house in order, it will collapse and become Cuba by the Aegean. If the government does regain control of its finances, economic sovereignty and the national pride that goes with it will be restored.
Or maybe not, because the euro zone debt crisis has handed the EU and the ECB a golden opportunity to create a supranational government. Actually, “government” might be the wrong word, because it implies that it is democratically elected. Better to call it a supranational bureaucracy that assumes it has the power of an elected government.
Ever-expanding power has always been the dream of the technocrats in Brussels and it is apparently the new dream of the ECB. Jean-Claude Trichet, president of the ECB, said as much earlier this month, when he accepted the Charlemagne Prize for European unity at a ceremony in Aachen, Germany.
He suggested the creation of a euro zone finance ministry, which in itself does not seem outrageous, depending on the degree of power it is allowed to exert over the national finance ministries. If a common currency and a common central bank (the ECB) already exist, why not a central finance ministry?
But he didn’t stop there. He suggested that euro zone “authorities” might be given the right “to veto some national economic policy decisions” in countries, like Greece, that prove incapable of living within their means. The veto could apply to “major fiscal spending items and elements essential for a country’s competitiveness.”
Then came the most ominous paragraph in his speech: “We can see before our eyes that membership in the EU, and even more so of EMU [European monetary union] introduces a new understanding of the way sovereignty is exerted. Interdependence means that countries de facto do not have complete internal authority. They can experience crises caused entirely by the unsound economic policies of others.”
[. . .]
The bailouts of Greece, Ireland and Portugal obviously changed the rules of the sovereignty game. If taxpayers in wealthy EU countries were shipping bailout loot to clapped-out economies, they gained the right to impose conditions, notably spending reductions required to crunch budget deficits.
But it’s going way beyond that in Greece’s case. The Troika is demanding a €50-billion privatization program. After dithering for a year, the government of George Papandreou finally capitulated and the first sale of a state asset (a 10-per-cent stake in phone company OTE) got under way this week. Athens is under pressure to hand the entire privatization process to an independent body, one that presumably would be controlled from afar by the Troika. There is also talk that Athens will lose direct control of tax collection, because government tax collectors are letting too much revenue slip away. Where will the control grab end?
Might all this lead to the creation, finally, of a European state? And what will the Greeks think of becoming this state's first new subjects? (Not so much "citzens", since a citizenry is fundamentally political, not economic.)
Thoughts?