Europe's permanent austerity calls for a rethink
Writing for Project Syndicate in an article titled Macron and Europe’s Centrists Are Out of Good Options, Yanis Varoufakis describes how the constraints of European Union politics make it hard for centrists in France to fend off the extreme right juggernaut of Marine Le Pen:
There are three ways that such dissimilar economies [France and Germany] can remain within a single market. The first is through a proper federation built on a fiscal union – the path that Macron invited the Germans to take, to no avail. The second option is a gradual currency devaluation for France – a path that Macron and the rest of the political center have sworn not to take. That leaves the third option: permanent austerity, which is the root cause of today’s political impasse.
For over a decade now, we have known all too well that Europe’s de facto economic policy is austerity. There is no politically viable alternative within the confines of Europe’s economic governance, exactly because there is no Union-wide administration with the legitimacy to tend to the needs of the whole. The government of each member state is accountable only to its own citizens and, as it ought to, cares what its electorate wants (i.e. it promotes its national interest). Hence, the mismatch between policies with an EU-wide reach and democracies that form along national lines: a phenomenon I describe as “sovereignty mismatch”.
A fully fledged European federation cannot happen under normal circumstances. National governments that pursue their parochial agendas will not give up their sovereignty. The only way this can be done—and has been the modus operandi hitherto—is through a process of gradualism, of creating faites accomplis at the supranational level, waiting for a crisis to force the hand of politicians, and then consolidating those holdings in the form of a new treaty. Rinse and repeat. This is, in short, the history of the European integration process, which is how we have monetary union with no fiscal union; a central bank with no counterparty treasury; economic governance, but no European government.
What Yanis Varoufakis correctly points out is a fixture of European affairs, not some transient arrangement of factors that will change over the short-term. Leaders of all ideological persuasions have to deal with this reality. And, yes, this includes a potential Le Pen as president of France. She too will be in the same predicament:
- An EU federation is political anathema to nationalists (and not only);
- Euro-exit and devaluation of the currency amid radical market uncertainty is a calamity waiting to happen;
- Austerity is the only viable option.
Shrewd decision-makers know that they cannot wait for the world to change before they make their move. They will work with what is available, meaning that they will implement austerity where they have no other choice and push against it whenever that is expedient. For there to be a major upset to the status quo, there will need to be coalitions of governments willing to either cooperate outside the EU framework or force some kind of new exception to the economic governance of the Union. At any rate, one government cannot unilaterally change things.
A Le Pen presidency may not be a major problem for Europe per se, though it is dangerous in terms of the precedent it sets. A global power and core EU country will be making a decisive turn to the extreme right, departing from the liberal orthodoxy of the past decades. This will only embolden others to do the same at which point the EU will be in trouble.
The hard dilemma then for those on the left who are not unconditionally pro-EU is whether they run on a federalist platform for Europe or become more open about the repatriation of sovereign competences. This is not an easy choice prima facie because it runs the risk of injecting nationalistic palaver in many a discourse. Though it can be done right, by rooting it in a civic understanding of the nation as the only space where democracy is practised in the EU right now.
It is a mistake to equate everything national with the far-right: the nation does not belong to them. It is also strategically suspect to identify with the EU, given that thoroughgoing reforms to its policies are practically impossible. Even a potential European fiscal capacity of some sort is no guarantee that the perma-austerity will be dismantled. It might actually remain the default course of action and be supported by mechanisms that further limit what elected governments can do.
The experience of the Euro shows us that a one-size-fits-all approach is not equally viable for all member states. The needs of some countries cannot be met within those confines. We also know that incomplete legal-institutional arrangements, such as monetary union without a commensurate fiscal union, greatly limit what elected governments can do. Against this backdrop, the known magnitude of national democracy is more attainable than some theoretical European federation which may well continue to be too rigid for each country’s particular needs.