Much current discussion of the euro crisis focuses on the seeming irrationality or incompetence of decision makers. For example, Guardian economics editor Larry Elliot says that “there is a failure or an unwillingness to grasp a basic truth about the single currency: it doesn’t work”. While this may be true to a certain extent, one can also interpret the response to the current crisis as continuing a long established pattern of putting in place certain economic policies and insulating them from democratic decisión making.
The logic of Economic and Monetary Union (EMU) was always to ensure that the costs of economic adjustment were to be borne through ‘internal devaluation’ – the loss of monetary independence prevented countries from responding to a crisis by printing money, lowering the interest rate or devaluing the currency. The Stability and Growth Pact was intended to achieve something similar in the área of fiscal policy, and the Fiscal Treaty seeks to complete that unfinished task. Steve McGiffen has quoted an approving neoliberal economist as saying that “Either the euro subverts the welfare state, or Europe’s welfare state subverts the euro… smart money should bet on the euro”.
The mention of the fiscal treaty shows how, to a certain extent at least, the crisis is being used to advance a pre-existing agenda, along the lines of former Obama administration Chief of Staff Rahm Emanuel’s injunction that “You never want a serious crisis to go to waste. And what I mean by that is an opportunity to do things you think you could not do before.” Like the Fiscal Treaty. (Naomi Klein has used the idea of the ‘shock doctrine’ to describe this kind of stratagem).
And it is still in play. Many commentators see ECB lending to sovereign states as an essential component part of a proper response to the crisis, but a reason for its rejection has been put forward by the head of German Central Bank with reference to Italy, in November of last year: “Recent experience has shown that market interest rates do play a role in pushing government towards reforms… [ECB buying sovereign bonds would mean] there’s a risk that you mute the incentives that come from the market”. In other words, (one way of) defusing the crisis would take away the opportunity to implement the ‘structural reforms’ of the Italian economy that are deemed desirable. This approach may be playing with fire but it is, on its own terms, perfectly rational.
Now this is not a crude conspiracy theory – it is not as if the crisis has been concocted to advance these policies, but it is certain that it is being opportunistically made use of in that way. So those of us who are critical of what is (and is not happening) should perhaps place less emphasis on the seeming stupidity of what is going on and rather more emphasis on the amount of sense it makes if looked at from a certain perspective.