This month has seen European Central Bank President Mario Draghi and Italian Prime Minister Mario Monti, make pronouncements about the future of the Eurozone and their desire to save it. Antonio Lettieri argues that these statements in support of further financial and political union in Europe may be leading some of the crisis stricken countries of the Eurozone into a semi-colonial condition, with democracy being cast by the wayside to enforce the policies of the Frankfurt-Brussels consensus.
Given the results of the last meeting of the Governing Council of the European Central Bank (ECB) in February and the more recent ECB Monthly Bulletin earlier this month, it is worth taking a closer look at what real news has been introduced by ECB President Mario Draghi.
As expected, Mr. Draghi repeated his refrain that the Euro is “irreversible”, and that the ECB will adopt all necessary instruments for its protection, in order to defeat the speculators who bet on its disintegration. It was an important statement, although hardly surprising. A President who is at the very beginning of his long mandate would not question the safety of the Euro. The novelty was the public and intentionally reiterated comment on the isolated opposition of Bundesbank President, Jens Weidmann.
How could Mr. Draghi take this unusual step without worrying about the repercussions from Germany? The ECB president is likely aware of the need for Angela Merkel to support the Euro’s defense against different and more radical German opinions. She cannot afford the risk of facing the 2013 electoral contest having presided over the disintegration of the creature of her old sponsor, Helmut Kohl.
However, this is only one side of the matter. Angela Merkel cannot defend the Euro, and therefore assist the countries in trouble struggling against speculation, in essence, Spain and Italy (Greece is, by now, believed lost), without submitting this help to the conditionality and controls by the ECB and European Commission (with or without the IMF’s participation), as has been the case of Ireland, Greece and Portugal.
And that’s exactly what Mr. Draghi has said. The governments of Spain and Italy may be secured from speculation, but they have had to apply for aid from the European rescue Funds (EFSF /ESM). Following their request, European Governments who preside over the Funds’ functioning will establish the conditionality and tools to monitor their implementation. In essence, two out of four major founding countries of the Euro will be put under receivership.
To sweeten the potion, this will be considered as a step towards a fiscal union and an anticipation of the European Political Union. This is a strange perspective of Union, one that is hard to sell to the people, as it looks more like a process, by which some countries will be subjecting the others into a semi-colonial condition.
Mr. Draghi’s recent statement also has a contradictory side. If the ECB may decide to purchase sovereign short-term bonds as a proper monetary policy measure bound to insure the functioning of the Euro area’s financial market, why should its implementation be subject to prior agreement of the governments? If the central bank’s intervention requires the prior consensus of governments and, in the last instance, Germany’s agreement, in order to activate bailout funds, it is tricky to see how the ECB can be independent, something that is insistently claimed as an inviolable dogma.
As Sebastian Mallaby writes in the Financial Times it is clear why the ECB has made more than a trillion Euro available in almost free, long-term loans to private banks – which they partly deployed to buy sovereign bonds, gaining on the interest rate differential – instead of directly purchasing them, moreover in a smaller size, so cutting the wings to the speculation.
The explanation lies in the fact that the sovereign debt crisis has been considered by the European technocracy and by the large majority of centre-right governments of the Eurozone as a good opportunity to force through neo-liberal policies of “austerity and structural reforms”. This is a political standpoint that is deepening the present crisis, creating recession and unemployment in a vicious circle, which future historians will regard as a telling example of economic and political schizophrenia.
Italian Prime Minister Mario Monti’s recent controversial interview with Spiegel should be seen in this context. According to him, the role of national Parliaments has to be reduced to implement the European policies needed to face the crisis. Parliaments are, in other words, an obstacle; they have to be “educated”, he said. There is a grain of truth in this. It is not a coincidence that governments which failed to implement the policies set out by the Frankfurt-Brussels consensus have been constrained to give up, as happened to democratically elected governments, such as those of Papandreou, Socrates and Zapatero, who were weak in implementing policies decided in Brussels.
Monti’s mistake or, potential lack of political tact, was in underlining the truth about the diminished role of the old democratic institutions, notably, parliaments, whilst in Germany, a country where devotion towards the parliamentary democracy is rooted in the tragic political experience of the first half of last century.
Germany can take steps to dismiss governments in distressed countries, reducing them to a semi-colonial condition, but cannot accept any doubt about the sovereignty of the German Parliament and the Constitutional Court itself. Mario Monti’s mistake was to have said in the wrong place (in Germany, not in a speech to the City and or Wall Street) what he really thinks about the situation of democratic regimes in the face of the current crisis.
Note: This article gives the views of the author, and not the position of EUROPP – European Politics and Policy, nor of the London School of Economics.
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Antonio Lettieri – Center for International Social Studies
Antonio Lettieri is Editor of Insight and President of CISS – Center for International Social Studies (Roma). He was National Secretary of CGIL; Member of ILO Governing Body, Member of the OECD’s Trade Union Advisory Council and Advisor of Labor Minister for European Affairs.