by john_evans
Tue Aug 18th, 2015 at 02:11:09 AM EST
Wolfgang Streeck, in the Guardian's Comment Is Free, has a summary of recent events in the Eurozone and future developments (if that's the word).
Brutish, nasty - and not even short: the ominous future of the eurozone | Wolfgang Streeck | Comment is free | The Guardian
Politics can make strange bedfellows, but sometimes just for a one-night stand. In the end Varoufakis was overruled by Alexis Tsipras and Schäuble was overruled by Angela Merkel. The latter, displaying truly breathtaking political skills, managed within a day or two to redefine the resounding no of the Greek people to their creditors' demands into a yes to "the European idea", defined as a common currency - allowing him to sign on to even harsher conditions than had been rejected in the referendum (called, it seems, at the suggestion of Varoufakis, who was sacked on the very evening the results were in). Afraid of the unimaginable economic disaster publicly imagined by fear-mongering euro supporters, and perhaps encouraged by informal promises by Brussels functionaries of future injections of other peoples' money, Tsipras was ready to split his party and govern with those who had for decades let Greece rot in clientelism and corruption, offering the parties of Samaras and Papandreou an opportunity to regain legitimacy as pro-European supporters of "reform".
Merkel, for her part, used Schäuble's exit plan as a bargaining tool, certain that Tsipras would eventually cave in and get rid of Varoufakis. The new three-year rescue programme will carry her beyond her next election; it also avoids, or at least postpones, conflict with France, which wants Greece in for the same reasons that Schäuble wanted it out (Merkel expects less of France than Schäuble does, which makes it easier for her to live with François Hollande). It also spares her having to eat her famous motto from 2011: "If the euro fails, Europe fails" - as well as, for the time being, from having to let German voters in on the fact, commonplace among the cognoscenti but still mercifully hidden from the public, that the Greek rescue money will never be repaid. Moreover, after Schäuble had in earlier rounds talked the other EMU countries into sharing the Greek public debt, Merkel could count on their support for her refusal to consider debt restructuring. Most importantly, with Greece staying in common currency, she can now reassure her core constituency, the German export industry, that none of the captive members of eurozone will ever be released, not even on probation - something much appreciated also by the German trade unions, the Social Democrats, and her geostrategically-minded American friends.
Of course none of this means the euro mess won't continue. On the contrary, with a historic window for a fundamental recalibration of the euro system missed we are in for more of the same, and the next act of the drama is already beginning.
I think the whole article is a must-read. Another teaser below the fold:
Brutish, nasty - and not even short: the ominous future of the eurozone | Wolfgang Streeck | Comment is free | The Guardian
Not that the limits of development assistance for backward regions in a currency union with high regional disparities were unknown. Germany and Italy have experience here that is far from encouraging: Italy in the Mezzogiorno (southern) regions, Germany in its Neue Länder of the former GDR - the latter being another case of a misconceived monetary union with disastrous economic effects. Both countries are today transferring roughly 4% of their annual GDP to their poorer regions just to prevent the difference in per-capita income getting bigger. German taxpayers grudgingly continue to pay a "solidarity supplement" on top of their income tax for aid to East Germany: a region, incidentally, whose entire economic and political elite was after 1990 replaced with West German personnel, bringing with them the entire panoply of West German institutions. Still, the difference in per-capita income between West and East Germany has for years been stable at about 20%.
Nothing even remotely resembling the personal and institutional reform applied to East Germany will happen in southern Europe - as it has never happened in the Mezzogiorno. The domestic politics of the eurozone, conducted through international relations, will remain both deadlocked and unfriendly. After the Schäuble-Varoufakis interlude there is no prospect in the foreseeable future of a re-nationalisation of monetary sovereignty. Nor is there any movement toward a de-nationalisation of political and fiscal sovereignty, with political union complementing monetary union.
On the contrary, each member state is today more than ever jealously guarding its national capacities to defend its interests against others.
Political integration as a result of, and by means of, economic integration was a paying strategy in the early years of the "European Project". Thirty years now have been wasted on monetary union. There are more wasted years to come.
