Monday, April 02, 2007

The party's over

That's the view of Ambrose Evans-Pritchard, writing the "Monday view" in the business section of The Daily Telegraph today. The scare of a (European Union) superstate has passed.

He charts the growth of the "project" and its support from Washington but then argues that it had second thoughts in the 1980s. This turned to deep suspicion in the 1990s when Brussels acquired power ambitions, launching the euro as a challenge to dollar hegemony and the Galileo satellite network as a rival to America's GPS monopoly in space.

Now, fifty years after the Treaty of Rome, the Euro-imperialists defeated themselves by over-reaching on so many fronts. According to Ambrose, it began to fall apart in 1995 when Sweden, Finland, and Austria joined the club, eroding Rheinland supremacy. English displaced French as the Lingua Franca. The British and their allies quietly took control of key levers in the EU's engine room.

He continues:

Free market ideas won the argument, as they were bound to do given the Anglo-Saxon revival of the late 20th century. The dream expired in May 2004 with the arrival of escapees from the Warsaw Pact. To the astonishment of France and Germany, only Luxembourg and Belgium joined in denouncing the Iraq war. Washington's game paid off.

Brussels tried to ram through the European constitution before the East Europeans arrived, knowing it would be impossible afterwards. That act of hubris brought to a head the long-simmering revolt of Europe's peoples. France said No, and Holland delivered the shattering blow from which there could be no recovery.

Europols may prattle on about a fresh vote. Are they not listening to Nicolas Sarkozy, next strongman of France? Such a course would "tear Europe apart", he said, or threatened. It is unthinkable to override French, Dutch, British and Polish objections. Talk of expelling the Refusniks is preposterous.
Ambrose does not dismiss the fears of the Eurosceptics though. But, he says, the scare has passed. We are not in the euro; the EU army never got off the ground; there is no supreme court. The union has become too big to manage. Europe is now in the grip of an even faster demographic collapse than in the fourth century. And he predicts a grim future for the "project":

The most Brussels can do is to hold on to the powers it has and prevent the euro disintegrating as Club Med and the Teutonic bloc pull apart. As the Commission itself admitted in its quarterly report last week: "Persistent differentials in price competitiveness and concomitant widening current account imbalances have built up since the inception of monetary union." Rectifying this will require wage compression in the laggard countries and will be a "major challenge", it said.

Yes, EMU can keep going, but only if a resurgent Germany is willing to tolerate higher inflation. If not, Italy, Greece, Portugal, Spain and France must deflate. Will Latin democracies swallow that?

Brussels knew from the outset that the euro could not survive hard times without an EU treasury and debt union to back it up but they assumed this would work to their advantage: a crisis would force the pace of integration. It was a calamitous miscalculation, as we may see if the euro reaches $1.40. Germany can withstand the pain: the Latins cannot.
Thus Ambrose tells us, rather than fret about an EU superstate that is withering on the vine, it is time to ponder what might happen if monetary union breaks down in acrimony. "Do we want to lose the EU altogether?" he asks.

Is the Pope a Catholic?


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