miércoles, 10 de marzo de 2010

Crisis and my case for strong institutions

I often recall an enduring quote in Monnet's Memoirs: "Men take great decisions only when crisis stares them in the face." It was a reflection written after the announcement made by Nasser that the Suez Canal was under exclusive control of the Egyptian government, back in 1956. This announcement meant that all the trading system would be at the mercy of one country, threatening the oil imports to Europe. The French politician was thinking, more than any argument, on the awareness of public opinion of how vulnerable European countries were, and how much they needed to act together.

On 19th September 1956, the Action Committee in France passed a Resolution, where we can read: "The energy supplies of Western Europe determine the progress or decadence of our countries. Today, Western Europe imports a fifth of the energy it uses. The greater part of these imports consists of Middle Eastern oil. Such dependence results in insecurity and permanent risks of conflict. The possibility of bringing pressure to bear on Western Europe by means of Middle Eastern oil hinders the development of peaceful relations between East and West. But together, by developing and uniting their resources, our countries can produce atomic energy in time and in sufficient quantities to keep their oil and coal imports within reasonable limits". Obviously, the Suez crisis revealed a dangerous situation for world stability. After this resolution (and I must say, unusually quickly) the EURATOM Treaty was concluded and then ratified by the end of the year.

This story shows us how that crisis was a useful way to mobilize immense latent capacities, as Monnet noted, which go into action only when they are offered an ambitious and realistic point of convergence. I would say that this is precisely the very essence of the European integration process.

Today, 54 years later, crisis has stricken most of the European countries in such a way that it has shown that the European Union lacks political instruments to balance the situation when some of the countries get into difficulties, especially in the Eurozone, putting the Euro currency itself into question. This is why some see the Greek crisis as an opportunity to improve the government of the EMU, at the moment governed by the European Central Bank.

These days we are seeing a growing discussion between the two big ones, Germany and France. The former (which up to now had always been reluctant to establish a political counterweight to the European Central Bank), has now proposed the creation of the European Monetary Fund. The latter has forwarded a more political and more ambitious alternative. In this particular case, the European Commission is supporting Merkel's proposal, which means Barroso is seriously considering setting up such an institution, whereas the ECB remains more sceptical, that is the leaders of the Eurozone's central banks are against the idea. Some say that acceptance of the Euro in the world would be undermined. Well, it makes sense.

Nevertheless, it would be good to ask ourselves is if the ECB and its system is an effective institution, as we see the Eurozone gradually coming unstuck, due to asymmetries. As someone wrote today in The Guardian, "If a 16-nation economic club is to grow up, it needs serious institutions and regulators, and for member governments to recognise that they are in it together". It is true that the European Union should have proper political institutions to solve its own problems in the long term, particularly after the failure of the Eurozone in fighting the banking crisis, or the outbreak of the credit crunch in 2008.

After the Greek collapse, we have seen that sanctions have not been enough and probably the lack of an institutionalized economic government has only made matters worse. Probably the European Monetary Fund (EMF) would be just a financial instrument and not a new and fledged institutional body, but the truth is that the EU needs a mechanism to help itself in difficult times, not just a financial instrument. These debates come to confirm that Europe doesn't have to stay static, but, I must remind you to bear in mind that the creation of an EMF would require a new EU Treaty. Oh, Christ!