© The Financial Times Ltd 2016
FT and 'Financial Times' are trademarks of The Financial Times Ltd.
The Financial Times and its journalism are subject to a self-regulation regime under the FT Editorial Code of Practice.
June 24, 2012 6:41 pm
Just imagine it is this Thursday evening in the European Council’s gathering of Europe’s heads of state, and the Italian prime minister stands up and says this: “Mr President, dear colleagues. We are confronted with a simple choice: we can today either save the euro and build the foundation for a future political union, or we could flunk it and achieve neither. We all know what we need to do to save the euro. We require a banking union for Spain, a fiscal union for Italy and a political union for Germany.
“We can, of course, disagree on details. But we have to settle some of these differences this weekend, and take a decision on the steps that are needed right now. Our crisis resolution policies have failed time and again. We now need something that works fast. If we fail, I can assure you that I can no longer be part of this group, and my country can no longer be part of this project.”
Let me say first of all that I do not really expect Mario Monti to say such a thing, not even a more cryptic version. He is the leader of a technical government. His job is to fix things. Standing up to the German chancellor – grandstanding as some people might call it – let alone wagering Italy’s future is not part of his remit. Italy’s political parties appointed him because they needed a plumber to succeed the playboy, not a gambler. The last thing they wanted was a leader.
I believe there is a case for a calculated gamble. But its risks and pay-offs must be fully understood. The point is not so much to call Angela Merkel’s bluff, as some of my Italian and Spanish friends have been urging. She is not bluffing, despite the fact that a break-up of the eurozone would clearly be disastrous for Germany. Joschka Fischer, the former foreign minister, said recently that by allowing the eurozone to break up, Germany would for the third time in a century have inflicted utter devastation on Europe and on itself.
Those who advocate the strategy of calling Germany’s bluff often assume a degree of rationality that is plainly absent. The Germans have developed a strange narrative of the crisis. Following the debate there, as I do regularly, has a parallel universe feel about it. There is, for example, a denial that the current account surpluses are even remotely a factor. In the German narrative, the economy is like a football game, which Germany is winning. And the chancellor’s job is to support the team against another team – as she did in Gdansk last Friday when Germany beat Greece. Germany, like Ms Merkel, looks unstoppable.
The small number of intelligent officials and the economic elite understand what is at stake, but are willing to take the risk of an accident. The preservation of the euro is not their primary objective.
When Otmar Issing, the former chief economist of the European Central Bank, categorically rejects any form of debt mutualisation, as he did in a recent newspaper article, he omits to mention what would happen if the government were to follow his advice. The eurozone would break up.
When the pressure for a break-up comes, it will come from Italy. Silvio Berlusconi said ominously last week that a departure from the euro would be no blasphemy. He gave a simple set of choices: either Italy gets bailed out, Germany leaves, or Italy leaves. It looks to me as though Mr Berlusconi is preparing his party to run on a eurosceptic ticket in the next elections to see off the challenge by the anti-euro Five Star Movement and its leader, Beppe Grillo. Mr Berlusconi is said to have studied his speeches and writings in detail. What we are seeing here is the process of how an anti-euro stance can turn mainstream.
And when that happens, it may already be too late to save the euro. Eurozone leaders had more than three years to act. They wasted them. They may be intelligent people individually, but as a group they displayed an extraordinary degree of economic and financial illiteracy. Remember the notion of the expansionary fiscal contraction? Or the silly idea of leveraging the rescue fund? Or bailing in private investors on a voluntary basis? Do we really believe that these are the people who will do all the right things in a single day when they did all the wrong things in three years?
The only hope would be for someone from the inside to challenge Ms Merkel.
The challenger should veto the fudge that is likely to be proposed on Thursday. How credible is a political union in the future if we cannot save the eurozone today? This is our high noon.
No one is better placed to stand up to Ms Merkel than the Italian prime minister. He is the ultimate European insider. He is intelligent and eloquent. His country is next in line to be attacked by the markets. The European Union has no plan B.
A resignation threat would be credible, and would scare a lot of people. What has he got to lose anyway? His poll ratings have fallen, and he is also losing support within his coalition. Only by speaking truth to power can Mr Monti save his country, and the euro.
Copyright The Financial Times Limited 2016. You may share using our article tools.
Please don't cut articles from FT.com and redistribute by email or post to the web.