Furthermore, these three events took place five days after the European Central Bank (ECB) declared its intention to purchase, if need be, an unlimited amount of government bonds from the eurozone’s crisis nations to keep down their borrowing costs. This open-ended pledge was crucial for the financial markets’ confidence in ECB’s lasting commitment to Portugal, Italy, Greece, and Spain—the so-called PIGS—and led to stock market rallies on both sides of the Atlantic.
While the recent abominations in Egypt and Libya largely drowned out these events in the American media, they have been widely recognized in Europe as a possible turning point. Is this assessment justified?
In the short term, there is at least one reason for Europe to delight. An immediate effect of September 12 is that President Barack Obama almost certainly no longer need worry that a European meltdown will upset his chances of reelection. Polls indicate that almost 90 percent of voters in most European countries favor Obama over Mitt Romney. While conservatives don’t believe in large-scale conspiracies (society is too complex for them to succeed), the good news from Europe does bring to mind the rumor that Obama has asked sympathetic European leaders to avoid potentially harmful actions until after November 6.
But the judicial and political proceedings of September 12 do not tackle the long-term, fundamental political challenges to the European Union and the eurozone. They will, however, albeit unintentionally, achieve something else commendable: decisively expose the inherent and growing tensions within the EU that the political elites have scrambled to dodge or conceal for more than 20 years.
Already, reactions indicate that a final confrontation is brewing. When ECB president Mario Draghi pressed through his bond-buying scheme to save the euro, the German daily Die Welt headlined the news “Financial Markets Cheer the Death of the Bundesbank.” The president of the Bundesbank, Jens Weidmann, described Draghi’s plan as indistinguishable from printing banknotes to balance the budgets of the eurozone’s debt-ridden countries.
This lack of enthusiasm should come as no surprise. The inflation caused will harm the eurozone’s diligent countries and add to their ongoing economic sacrifices on behalf of countries that have spent too much and worked too little. This is the price of defending the unpopular dream of a post-national Europe.
In the long run, there is only one politically sustainable way to convince German voters to bail out Portugal, Italy, Greece, and Spain—especially since their recovery moves with the speed of a glacier—and that is to couple contributions with demands for structural reform and budget discipline. But as with Newtonian physics, such demands will meet a counterforce of corresponding strength. The recipient countries are being asked to sacrifice their sovereignty on the altar of European monetary stability; the stronger the restrictions, the stronger the domestic sentiment not to play along. Thus far, the inevitable showdown has been avoided, simply because the half-measures of all parties involved have been so insufficient. September 12, however, signifies that Europe finally is going all in to fulfill the dream of its political elite.
Barroso’s bold proposal is, in effect, a declaration to form the United States of Europe. Predictably, among the responses to Barroso’s speech were demands in England for a referendum on its secession from the union. For the first time in its history, serious debate is ensuing over which nations might leave the eurozone, or even the EU, or be forced to leave.
To date, the conflict between the eurozone’s political leadership and its member states has been characterized by hard demands and soft resolve. Regulations have spelled out in strong language the requirements for each and every member state, with noticeable penalties for those who do not comply. The member states, in turn, have all but ignored the mandates for budget discipline. The eurozone’s response has been to subsidize ill behavior: The short-term cost of enforcement has been too high.
The events of September 12 mean this inconsistency will no longer be tenable. President Obama will be able to meet the voters on November 6 without the burden of an immediate economic disaster in Europe. The next president of the United States will not be similarly spared. For the first time since the fall of the Berlin Wall, Europe will have a global impact. Odds are that once again it will be because of something falling apart.
Roland Poirier Martinsson is a Swedish author and philosopher in Austin, Texas.