Saving Europe

As a description of how the eurozone contracted its current ills and as a prescription for how it might yet cure them, Saving Europe has many virtues but one irredeemable flaw.

Carlo Bastasin, an Italian economist and journalist, does an admirable job in analysing the eurozone’s economic challenges and is a sure-footed guide through the seemingly endless European Union summit meetings that were supposed to resolve them. He also has an eye for the human detail that makes his sad account of institutional muddle surprisingly compelling.

In Bastasin’s view, Europe’s leaders have constantly allowed their national impulses to trump their common interests without fully appreciating that their only possible salvation lies at the European level. His contention is that it has been the national egoisms of the eurozone’s 17 members that have jeopardised the survival of the world’s most ambitious economic and political project. Only deep and rapid economic and political integration can save Europe.

“The European crisis had the potential to be the ‘worst’ economic crisis in the history of Europe. It has also the potential to be the ‘best’ political crisis,” he writes.

The future of the European experiment is important not just for the region’s 500m people, Bastasin argues, but for all those who believe in international co-operation as a means of tempering the harsh forces of globalisation. Yet the cruel paradox confronting the eurozone, which Bastasin never adequately addresses, is that perhaps the only economically rational course to save the euro may prove to be politically tortuous, if not suicidal.

Bastasin may be right that politicians pandering to national egoisms has worsened the crisis, but the national impulses to which politicians respond cannot simply be wished away. That would be like saying that food causes obesity, therefore the cure for obesity is to eat no food.

While acknowledging the problem of political legitimacy, Bastasin never suggests how it could be resolved beyond saying that “a political dimension at the euro level seems indispensable”. Given the electoral trauma the EU endured to pass the Lisbon Treaty, a relatively innocuous set of institutional rules, one wonders how the eurozone’s governments can ever persuade their voters to move rapidly towards a full fiscal union involving a radical transfer of real powers to Brussels.

Indeed, Bastasin himself highlights how European institutions have already resorted to diktat to force the adoption of their policies. In August 2011, the European Central Bank wrote to the Italian government insisting on fiscal rigour. Bastasin quotes Giulio Tremonti, Italy’s then finance minister, as saying that he received two threatening letters that month: “The first was from terrorists, the second from the ECB. The second was the worst.”

Where Saving Europe is stronger is in analysing the nature of Europe’s economic crisis and the origins and shortcomings of the “Frankfurt Consensus” that lies behind the eurozone’s fiscal compact and the politics of austerity.

In many respects, Bastasin is highly critical of Germany’s role in the crisis. He argues that most Germans have ignored the massive benefits that have accrued to their country through the creation of the single currency and have misunderstood the eurozone’s current problems.

In particular, the idea that fiscal profligacy caused the crisis is a “simple, single and wrong explanation”. As he points out, some of the countries worst hit by the eurozone crisis were far from being “fiscal sinners”. Ireland had a budget surplus in 10 of the 11 years leading up to 2007.

But Bastasin praises Germany for being one of the very few eurozone countries to conduct a grown-up debate about the EU’s future. Although Germany’s constitutional court acts as a brake on their integrationist tendencies, he suggests, German politicians are far more comfortable with the concept of a federal Europe than are their counterparts in most other EU countries. “[Chancellor Angela] Merkel is actually unique in building an ambitious strategy that leads Europe to the Political Union,” he writes approvingly.

The eurozone’s greatest challenge is how to reconcile this necessary political integration, which could take decades, with the imperatives of dealing with its financial crisis, which markets often measure in hours.

The eurozone has been left attempting to navigate a perilous course between the Scylla of financial catastrophe and the Charybdis of political reinvention. But, as Bastasin reminds us, Ulysses did not only have to navigate troublesome waters, he also had to master a treacherous wind blowing from Greece, known as the euro.

The writer is the FT’s News Editor