BERLIN -- From crisis can come opportunity. Out of this European crisis can come the opportunity, finally, to achieve a model of European integration that is sustainable. But right now this opportunity is heavily disguised. There is an old joke told about the stranger who asks the Irishman the way to his destination and is told "Well, I wouldn't have started from here."
We might be tempted to say the same about the way to resolve this crisis, and it would be equally futile. So I shall resist the irritating temptation of being the Brit outside the euro trying to tell everyone inside why it was a bad idea. First, because I don't think it is a bad idea. In principle, in the right political and economic context, a single currency along with a single market makes sense for Europe. Second, because in any event, we are where we are.
There is relevance, however, in understanding why this crisis is so acute. It is because monetary union was, in many ways, an idea motivated by politics but expressed in economics. So politics and economics had to be aligned. They weren't. So now, in the midst of crisis, they have to be. Countries whose economies are divergent have to converge. Since this requires a huge degree of integration in decision making, the politics will then have to shift to catch up to the economics. True economic union will imply a large measure of political union. This is the post-crisis challenge.
One odd but telling difference of opinion between Europeans and those from the investment community in the U.S., China and elsewhere is that the Europeans by and large believe the euro will stay. That is because they are focused on the enormous political will to ensure it survives. The outsiders by and large are deeply skeptical. That is because they are focused on the math.
The strategy so far adopted in Europe by political leaders, including by Chancellor Merkel, who has shown great skill and courage in handling the crisis, is entirely comprehensible as politics. It is to go step by step by a series of increments that are major, but do not deal with all the aspects of the crisis simultaneously. So the European Central Bank action and readiness to buy bonds on the secondary market has hugely helped the liquidity issue and given us some respite.
But it doesn't fully deal with the solvency or growth issues that also dog the euro. The European Stability Mechanism is still untested and, whilst deficit reduction plans are absolutely necessary, austerity makes policies for growth tough. Indeed, sometimes it seems as if the public is being given the choice of austerity with reform or growth without reform. We need growth and reform. And we need liquidity, solvency and growth issues addressed together. Without this, and especially without growth, the pain of the adjustment in debtor countries is frighteningly hard and several years of it may not be politically possible. This is again where politics and economics have to align.
The economics imply a strategy based less on incremental steps and more on a "grand bargain" agreement that deals with liquidity per the ECB: solvency with the necessary fiscal transfers, banking union, a large degree of fiscal coordination, far-reaching structural reform and the back loading, not front loading, of austerity plans, to protect growth -- and all at once. My feeling is that the only way, ultimately, confidence can be restored is with a fully comprehensive set of measures that convince markets and the public alike that the fundamental issues have been overcome. The politics of doing so -- particularly in Germany -- are fantastically difficult. But the economics of not doing so are even more difficult.
That is the immediate challenge. If it is overcome, then the politics of what comes next is also extraordinarily fraught.
Put simply, there can't be the integration of large areas of economic policy -- banking union, fiscal union, even the prospect of an EU Treasury -- without a commensurate political union. So, inevitably now, along with the resolution of the immediate crisis, comes the investigation of what such a union would look like.
We should conduct this investigation with the lessons of previous efforts at integration in mind. There are two crucial strategic objectives which any negotiation for such a political union should strive to achieve.
First, some differentiation in the speed of European integration is now inevitable as members of the eurozone seek to match political structures with integrated economic decision-making. However, this is done is of huge import to the whole of the EU. I can almost feel the relief in some euro-federalist quarters and amongst most euro-sceptics at the prospect of a two or three speed Europe. But I would give a stark warning: if eurozone structures end up with a Europe that is fundamentally divided politically as well as economically, rather than a Europe with one political settlement that accommodates different levels of integration within it, the EU as we know it will be on a path to break up.
Let's be blunt here and go straight to the UK position. It is massively in Britain's interest not to play short-term politics with this issue. Personally, I would like to see the UK take a constructive role in shaping this new union, recognizing the imperative of closer political union for the eurozone countries and trying to keep the necessary divergence in economic decision-making between ins and out, from spilling over into a complete divergence in political structures. It is a very tricky task. But it is an essential one if the UK is not to be side-lined and Europe to be without the active participation of such a large and significant member of the existing union.
The negotiations over the proposed banking union and possibly over the new EU budget will provide an interesting test case of whether such constructive engagement can yield an optimal outcome. But naturally the UK will expect this to be a two-way process. The rest of the EU will have to understand and hopefully accommodate the UK's very special position in the financial sector.
Secondly, we should be heedful of why, when monetary union came into being, structures of full scale political integration were not agreed. They were proposed, by the way. They just weren't agreed. And the reason still has validity as a sentiment today. Greater political integration is indeed inevitable. But any new political union has to balance more carefully than ever before the nation state and EU integration.
This is the hardy perennial of debates over European political union. But now the union proposed for economic decision-making reaches right into the heart of decisions normally reserved for national governments and parliaments. Though the British are often standard bearers of the nation state side of this debate, it is clear many march behind that standard. There is a reason for the referendum results in France and the Netherlands in 2005 and it wasn't just domestic politics overshadowing a European decision.
This has always been the dilemma facing the politics of the EU. People feel far closer to national governments and parliaments. In the minds of the people, there is no plainly unified, homogeneous polity in the way there is, for example, in the USA. Yet as Europe integrates, there opens up a democratic deficit -- namely the gap between the importance of the European-wide decisions and the accountability of the European institutions making them. Hence there is the drive toward more Europe-wide democracy at present formulated in extra powers for the European Parliament.
Here is the dilemma. Though in theory, as Europe integrates, people should demand more Europe-wide democracy, in practice, because they still feel a far closer affinity to national democracy, they don't. The Europe political elite does. But the people often don't. The danger is that the more we talk of "bringing Europe closer to the people," the more "the people" feel alienated from it.
The dilemma is deepened by another factor. As the EU has grown in numbers and as the complexity of decisions necessary for things like the single market has intensified, so, for reasons of efficacy, Europe needs to have institutions that can rise above any one individual national interest. It is why, despite UK objections, more majority voting in some areas can be justified, is even essential to make Europe work. Without it, we can get paralysis when we need movement.
On the other hand, take an area like a common defense policy -- launched by the UK and France in 1998. Here there was acceptance that it should be done at a Europe Council level rather than through the Commission.
So designing this new union will be very difficult. Let me make a few quick reflections. A Europe-wide election for the presidency of the Commission or Council is the most direct way to involve the public. An election for a big post held by one person -- this people can understand. The problem with the European Parliament is that, though clearly democratically elected, my experience is people don't feel close to their representatives. This could change, but only if the European Parliament and National parliaments interact far more closely.
Relegating the European Council, which represents the nation states, to a side show would be a mistake. Even eurozone members will look to their own governments first. But there are a myriad of ways of making the Council more open and its relationship with the Commission more transparent. There could even be more explicit links between the European Parliament and the Council.
We should also ask what political union really means. It doesn't mean simply a set of institutional common bonds. It means, also, that in the minds of the people of Europe, there is a close connection between them. This can't be legislated for. It has to be nurtured culturally and socially, as well as politically.
One thing I am certain of: Europe will mean more to people and be supported more by them if Europe refocuses on practical issues that improve their lives in tangible ways. They understand the need for European action on jobs, on trade, on making the financial sector work for their interests -- not against them -- on common energy policy, a common struggle against illegal immigration and organized crime, even on common defense in a world of increasing security risks and declining defense budgets.
I think they could be persuaded to understand the sense of common cooperation on higher education, on science and research on a much bigger scale than present efforts, and likewise with art and culture. If this were combined with a sensible push for subsidiarity -- relegating only those tasks to the center that the nation states themselves can't do -- this could amount to a package that would work.
So the balance will need to be struck. If not, then the whole project risks failure. I can't see any new political settlement being acceptable without direct popular consent through referendums.
So imagine this scenario. Suppose we find the will finally to resolve the eurozone crisis. Suppose we agree the major future steps of integration for European economic decisions as part of that resolution. Suppose we then push forward to a new framework of political union as a necessary part of economic integration. At this point, we need to be reasonably confident the political union will gain consent. Otherwise we will find ourselves with referendums lost and back in crisis -- this time with no clear way out.
One final point amidst all this anxiety about crisis. Despite the present doubts and crisis, we should recognize that the underlying, profound rationale for Europe and its union is stronger than ever.
Ultra euro-skeptics -- by which I mean those essentially in opposition to the whole Europe project -- are on the wrong side of history. The 21st century case for Europe is based not on war or peace but on power, or irrelevance.
A 21st century with China and India that in time, as GDP and population size realign, will become vast economic and political powers, with Brazil and Russia behind, a country like Indonesia with a population three times that of Germany and nations like Mexico, Pakistan, Nigeria and Vietnam all bigger than any European nation. In this new 21st century geopolitics, Europe carries weight, multiplies opportunity and makes sense for its individual nations.
In its essence Europe is the right idea, at the right moment of time and in the right geographical space between East and West.
Tony Blair is the former Prime Minister of Britain. His remarks are adapted from a roundtable discussion at the Berggruen Institute of Governance recent "town hall" meeting in Berlin.
This blog is part of a series on "Europe: Beyond the Crisis," produced by The Huffington Post and the Berggruen Institute. For more information on the Berggruen Institute on Governance, visit berggruen.org.
But the Europeans have another dynamic, that of conflicts between fiscally responsible states (Germany, et al) and fiscally irresponsible states (the PIIGS, France, et al). And given that the required political agreements ALL center around degrees of fiscal responsibility, I'm predicting that this ends badly.
Investment suggestion: an ETF, symbol EUO, which shorts the Euro.
Scotland & Wales are 2 countries which should be independent from England..
About the English,they belong to..their world,the English World,the Commonwealth...
They should completely depart from the EU.
They are not Europeans,they are ...global..
Blair was just another traitor of Englishism,who wants to turn England ( & that "Britain") to a subordinate of its historical enemies: French,Germans & the deadbeats of the Club Med...
These tug of wars are going to end, one way or the other... either we will dig deep and allow these systems to integrate or the whole thing, and I do mean, the WHOLE, world will come unglued and will take another 40 years for it to come back together in a way that works.
It is up to all of us to 'allow' the truth of what's trying to happen here to happen and that we allow it to be an easy birth.
I don't have the answers and I'm in no way an expert but I do know one thing... we live in a totally 'interdependent' world and if some part of it is in crisis then we are going to be pulled into it regardless.
The ice caps are melting and the sea's are rising. Just because it hasn't reached the steps to your front porch doesn't mean it isn't going to affect you big time.
The better way to go is to jump in and be a help... build good will every moment you can so that when the water reaches you (metaphorically speaking) you will have folks close by who will help you .
The argument you put forward is rational if you think there are going to be winners and losers but in these situations we all win or we all lose.
All the Very Best,
Allan
You do nothing in your entire piece to justify this statement. How, in your opinion, is the Eurozone fairing today?
Well, a big ship needs deep water!
Europe and the Trans-Atlantic system is in disaster. Democratic institutions of Europe have been swept away, 'technical governments' are installed by the private central bankers who direct austerity for the population as the remedy for their derivative loses. The systemic criminality, demanded by the monetary financial system, must be confronted. Terminate the Imperial monetary financial, debt based system. Statecraft must launch economy formation measures now. Only Full Employment fulfills the requirements of sustaining and perpetuating the population, enhancing its standard of living within the new perspective for development and the future.
The Presidency of Europe will have to wait, as the reality of the hovering catastrophe, the Trans-Atlantic system, demands rectification; millions of lives are depending on it. The United States must lead and cooperate with other nations in the reorganization of the economy, via the implementation of the Glass-Steagall standard in banking, within a fixed exchange rate credit system among sovereign nations. Then fund the necessary, several, coordinating economy platforms that create the higher order of existence humanity demands. Stop Perpetual War. No other options exist.