‘No frightened rabbit could be more petrified than the European Union, for the Covid-19 crisis has hammered all its weakest points: its democratic deficit, the fragility of its solidarity, and—most dangerous of all—the inherent faults in its financial and economic structure’
In classical tragedies, the point is to show how the characters of the protagonists lead inevitably to their doom. Hubris brings nemesis: a satisfying conclusion for those comfortably seated in the darkened stalls. It became fashionable in the 1960s to give the audience a jolt: I remember a performance of the famous Théâtre du Soleil’s open-air production of 1789, when members of the cast shoved their way into the audience to force us unwillingly into the action. I have a similar feeling now, but with a lot more at stake, and with the performance interminable. This is the tragedy recounted by Ashoka Mody in his EuroTragedy: A Drama in Nine Acts (OUP, 2018).
A crisis like the present one tests everything—individuals, nations, states, governments, health systems, bureaucracies, businesses. Their solidarity is stretched, their bluffs called, their promises and reassurances tested. The rabbits are caught in the headlights. No frightened rabbit could be more petrified than the European Union, for the Covid-19 crisis has hammered all its weakest points: its democratic deficit, the fragility of its solidarity, and—most dangerous of all—the inherent faults in its financial and economic structure.
The lack of genuine democratic support—which its creators thought they could dispense with—makes it almost impossible to take hard decisions imposing sacrifice. Its solidarity was immediately shown as hollow when member states began acting in their own interests. These problems might be bypassed or glossed over with time, as has often happened before. But what cannot be finessed is the financial system and its significance for the EU and beyond.
This is the tragedy that Mody analyses with the skills both of an economist and a historian, and indeed of a practitioner too. Now a Professor at Princeton University, he served previously as Deputy Director of the Research and European Departments of the International Monetary Fund, and as such was closely involved in the mishandling of the Greek sovereign debt crisis, on which he is unsparing. He covers the whole history of the idea and creation of the single European currency because the tragedy is not the result of one set of faulty decisions or one mishandled crisis. It was known to be there 30 years before the euro existed. A tragedy indeed, with hubris in excess and a nemesis that might burn all our fingers.
A European currency was suggested in the 1950s, and the French pushed it for nearly half a century with a persistence one might admire in other circumstances. They finally got their way. Their motive was and is to control Germany, their three-times invader. But beware of what you wish for: the outcome has been Germany controlling them. The fatal episode was the collapse of the USSR and German reunification. President François Mitterrand did a deal with the Germans, and did it ruthlessly: if Germany wanted unification, “you must show that you continue to believe in Europe”, or risk “a terrible backlash”. Chancellor Helmut Kohl readily gave in—he himself saw his mission as unifying both Germany and Europe, and he condemned objections as “nationalist”.
The outlines of the story are well known. What Mody shows is precisely how these decisions were taken: by individuals or small groups acting without public scrutiny, let alone democratic accountability. This was deliberate: ordinary people would not understand or approve a process that their enlightened rulers considered desirable. But were they enlightened? Elite decision-making might perhaps be justifiable if the elite really did know better. But Mody shows that they persistently ignored the warnings of experts. Their thought-processes were often hazy and illogical. In short, they did not understand what they were doing. He blames “groupthink”: the Europeanist narrative was of inevitable “destiny”, so everything would be all right on the night.
Hence the danger the eurozone has posed since its creation. In the absence of a federal authority able to shift resources from richer states to poorer—enormous resources in emergencies—the latter will get even poorer as they no longer control their monetary policy. I remember an economist colleague remarking, at the depth of the Greek collapse, that there is something seriously wrong when a cup of coffee in Athens costs the same as in Stockholm. By refusing to shift money from rich to poor the EU has in effect shifted it from poor to rich. Part of the tragedy is that both sides—the rich countries led by Germany and the poor led by Italy—have good arguments, or at least arguments that seem good to themselves and their national electorates. That is precisely why the euro is, as Mody’s title emphasises, a tragedy, with the potential to “bring the global financial system to its knees”.
In the final section of EuroTragedy Mody wrote that “a new crisis—and there will always be a new crisis—will test the eurozone severely, especially if, as is likely, Italy is the epicentre”. Rarely can a prophecy have been so rapidly fulfilled. In a substantial addition in the new paperback, Mody brings us up to the eve of the Covid-19 crisis. The eurozone, and hence the EU as a whole, are like those unfortunate sufferers with “underlying health problems”. The weaker members were already unsustainably indebted: they will now become hugely more so. Its stronger members were already unwilling to write off those debts and share the burden: they seem even more reluctant now, as the burden increased. So the EU repeats its past folly of lending even more to those who cannot repay, and refusing to recognise reality. If we have a sense of déjà vu, that is because, as Mody shows, we really have seen it all before.
The trauma of sickness and death is causing peoples and governments to look first to themselves, and regard their neighbours with suspicion and hostility. Unless there is a miraculous change of policy, attitude and sentiment, the euro tragedy is now entering its dénouement. Mody argues that “the bonds that tie Europe so tightly” should be loosened, and more freedom given to the nation states. The crisis threatens to make “loosening” both violent and terminal.
This article is taken from the May/June 2020 issue of Standpoint. To subscribe to the print and digital editions, including a full digital archive, click here.