9 Nov 2011

Democratic deficit as eurozone battles Italy’s debt woes

Alastair Darling has given Patrick Wintour one of the most candid assessments I’ve yet seen of the Euro-crisis from a British politician. He says:

“This is far worse than the banking crisis of 2008 in its seriousness and, if it is not solved by Christmas, I think the whole of the euro will break up.”  (Remember, this is the soothsayer who warned you in August 2008 that “the economic times we are facing… are arguably the worst they’ve been in 60 years.”)
The government doesn’t feel it can say anything about the Eurozone as bold as Alastair Darling is saying, but you can bet it’s thinking it. It sees the roaring price of Italian debt as not just a comment on Italy but also a statement on the Eurozone’s progress so far in getting the EFSF bail-out fund up and running.

The government doesn’t think it’s a good idea to scream at Germany in public and I understand the PM hasn’t been in contact with counterparts in the Eurozone since Friday when the G20 ended. It thinks Germany might just pull the lever and let the ECB be a bank of last resort IF it thinks all other levers have failed and it is truly looking over the abyss. But even if Germany pulls that lever, the whole project still needs to reshape to have a chance of surviving and countries that want to stay in the Eurozone must become more like each other and pool much more sovereignty. 

Today we saw outgoing Greek PM Papandreou address his people and Silvio Berlusconi start emptying his drawers … thanks in no small part to the actions of the Frankfurt Group (Angela Merkel, Christine Lagarde, Nicolas Sarkozy, Mario Draghi, José Manuel Barroso, Jean-Claude Juncker, Herman van Rompuy and Olli Rehn). This group has been busy opening trap-doors under European heads of government and has been compared with the old Soviet Politburo wielding power over the Eastern bloc. To be fair to President Sarkozy, Chancellor Merkel et al, it is probably more like “late Politburo” – replacing Erich Honecker with Egon Krenz – than mid or early period. But it’s not particularly democratic. Anyway it is what “pooled sovereignty” can look like when the going gets tough and one Whitehall source said they’re in for a lot more of it.

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