Europe’s political leaders let themselves be taken hostage by bankers

15 December 2010

Europe’s political leaders let themselves be taken hostage by bankers

All of a sudden silence has descended around the euro. After a period in which government leaders and finance ministers were falling over each other to take the floor, most politicians have begun to hold their tongues. This has come about because they have quite simply agreed collectively to say nothing about the situation.

Dennis de Jong, Euro-MP for the SP

This is in their view the only possible way to pacify the financial markets and refrain from bringing the euro into further danger. In other words, the banks and other financial institutions are deciding whether or not there can be a public debate.

Such a debate is certainly necessary. Whether they want to or not, government leaders will soon be taking crucial decisions over European integration. Should there be a permanent fund, one which will probably be many times greater than that which already exists, in order to come to the rescue of member states if they fall into financial difficulties? And how far should European Commission surveillance of national budgetary policy go?

These are matters which were not regulated in the Lisbon Treaty but which reach deep into the space which member states have reserved for their own national policy-making. Moreover, if countries cannot fulfil their obligations, will every hand-out from the emergency fund, such as the payment made to Greece and Ireland, take the form of a raid on the taxpayer? These things are certainly being discussed somewhere, but of a public debate there is no sign, just as there was never a clear public debate over the support loans extended to Greece and Ireland. We are repeatedly presented with the explanation that there is no room for manoeuvre, that we’ve got our backs to the wall. If we don’t leap in, Dutch banks and pension funds will also be reeling, so we have to do it.

But wait just a second: aren’t these the same banks and pension funds which profited from high interest rates on Greek and Irish bonds, rates which were high as a result of the greater risk which went along with them. But what does risk mean if you know that in the end the other member states will bail you out? The benefits of a higher interest rate, with no downside.

In short, during the whole of the discussion over the euro, the financial institutions appear to have had something to say. This situation can also be perceived in the European Parliament.

My urgent request to colleagues on the European Parliament Crisis Committee to take swift action regarding the Euro crisis can count on support. The various groups agree on the urgency. There is, however, no emergency meeting of the Committee planned and no preparedness to devote the Christmas recess to the drawing up of an emergency report. The reasoning is that too many different opinions exist within the EP and that such a discussion could only serve to stir up more unrest on the financial markets. So my colleagues, applying the same reasoning, prefer to leave matters to take their course than make them the subject of a public debate.

From informal talks with European Commission staff, it does appear that a thorough rethink regarding alternatives is under way. But as a senior Commission official told me, ‘of course we are considering things, but if we’ve a Plan B, consisting of a two-speed eurozone, with a stronger euro for the northern states and a weaker euro for the southern states, we’re not going to confirm this officially.’ This is not only because of the unrest on the financial markets, but also because every crisis in Europe to date has led to the transfer of further powers to the Commission, which is something they would very much like to see.

In contrast to European politician the media have been happy quite freely to consider the various possible scenarios and keep the public debate going to some extent. Yet the current situation can only be described as flawed and unsatisfactory. The European Union has a tradition of secret negotiations, the end results of which are simply forced through.

We stand on the threshold of an historic decision for which the choice of a more federal Europe within which Brussels would determine large parts of the economic policies of the member states appears a foregone conclusion.

The question is whether the political decision-making regarding this will be dominated by the financial institutions, or by the voter.

As a representative of the people I know what my preference is for and I call on all politicians to break the silence and have the courage, in view of the eurozone’s current problems, to conduct an open debate over all possible alternatives. And don’t let yourselves be held hostage to the financial institutions.

This article first appeared, in Dutch, in the national newspaper De Volkskrant of 15th December 2010.

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