OVER THE past fortnight, as the economics of the euro zone crisis have moved into the most dangerous territory yet, there has been a historic shift in the politics of the single currency bloc, and the European Union more generally. In just two short weeks two prime ministers have been forced from office.
This has happened almost entirely as a result of pressure from the most powerful of their counterparts. The stick used to drive Greece’s George Papandreou and Italy’s Silvio Berlusconi from office was the threat, explicit for Greece, and implicit for Italy, to withhold financial support for their bonds unless they got their acts together.
Last week there were calls for a two-speed Europe, with the possibility being raised for the first time of a much smaller monetary union. That was an implicit sign to Italy that it could no longer take for granted its participation in the euro. Berlusconi – Europe’s great political Houdini – was gone in days. The previous week the specific threat of withholding support from Greece was made. Papandreou, whose out-of-the-blue referendum announcement had destroyed his relationship with his counterparts, was done for.
Both men not only failed their respective peoples, they failed to live up to their responsibilities to the 350 million citizens of the euro area. By so doing they contributed to pushing the single currency closer to fragmentation. The economic, political and social costs of the euro breaking apart are so great as to pose a threat to the way of life of all the continent’s citizens. It is the duty of each and every one of the zone’s leaders to do whatever it takes to avoid that outcome. Neither Papandreou nor Berlusconi met that responsibility. They got their just deserts.
But if the much more aggressive response of core countries’ leaders to the political failings of their peripheral counterparts is not disproportionate to the scale of the threat, it raises many questions and concerns. The effective unseating by the core countries’ leaders of two of their counterparts is unprecedented. Having set the precedent, other member states – the small and enfeebled ones in particular – cannot but be concerned that they too will be subject to similar pressures. In the absence of any real institutional counterbalance to the newfound “leadership” role that France and Germany, in particular, have taken upon themselves, there has to be a risk of a repeat with less justification. Such are the risks of unaccountable power.
Ireland also must be concerned at any pressure to force a member state to leave the euro. The forced departure of even one member could cause huge damage and threaten to cause the entire project to unravel. If one country can be forced out, then why not others, citizens and financial markets would ask. Confidence in those countries could evaporate with lightning speed, and a run on the weaker countries, including those too big to bail out – Italy, Spain and even France itself – could tear the project apart. The lesson must surely be: hang together or hang separately.