The euro crisis as family drama
Sometimes big news stories seem unbearably dull. The euro crisis is often presented as an apparently endless stream of technical titbits that only a financial geek could love: alchemical recapitalisations of possibly insolvent banks, and the subtle differences between the European Financial Stability Facility and the European Stability Mechanism. But the mind-numbing details hide an exciting drama about the dysfunctional European family of nations.
Think of Greece as the wayward uncle who never seems to settle down and who keeps asking for a little money to tide him over. Spain is a younger sibling, finally interested in school but still reluctant to admit that she needs to change her ways. Italy is a voluble middle child, talented but with a taste for mischief. Germany is the slightly priggish older brother, who has trouble sympathising with his relatives’ weaknesses – although he usually relents in the end.
As in some tribes, the European family has appointed various councils of elders to guide group decisions. For the most part, the central authorities have worked well, but they have to be careful not to anger big brother Germany. Then there is the European Central Bank. When it was set up, most family members thought it would be just another elder-group, but the monetary authority is increasingly behaving like a sort of powerful Godfather to the whole clan.
If those stereotypes don’t please, others are available. The point is that the current debt crisis is a chapter in a story that started more than 2,000 years ago, with the ancient Roman conquest of Gaul and Britain. The European Union is the latest effort to create harmony within a group of diverse personalities, who are tied together by history and location and separated by history and character.
Will this chapter of European history end like that of Romulus and his twin brother Remus, who vied to found Rome? Their family struggle led to fratricide. Murder and war are not on the agenda now. Neither is the traditional technique for papering over European disputes – royal marriages. Instead, the members of the euro zone have to find a modern solution to the mess.
This is a family fight about right and wrong, because debts always raise moral issues. If nothing more prickly were involved than practical issues of regulations or money, as European leaders like to suggest, then there would be no crisis. After all, rules can be changed and the likely losses on the debts are not large by the standard of the euro zone – no more than 1 trillion euros in an economy with an annual GDP about 10 times larger. But behind each disputed detail of the euro crisis lurks an argument about the fair allocation of pain and blame.
This family fight is, naturally, bitter. It’s harder to accept betrayal from a relative than a blow from a stranger. Indeed, the acrimony and mistrust are far more dangerous than the actual bad debts. For the euro zone to survive, the European family must summon up large quantities of mutual goodwill. Their imperfect offerings of support and detailed commitments to fiscal virtue constitute what negotiators call trust-building exercises.
The intervention of an outsider, in the form of the financial markets, has worsened the crisis. European governments don’t only have to deal their internal debts and resentments; they must also persuade investors to continue to provide financial support. Politicians complain that these investors don’t understand how Europe works. That’s right – outsiders can’t really grasp the complexities of family relations. But then again, the politicians should never have thought that outsiders would have stayed faithful.
And the markets interloper is increasingly demanding. Last week, he dismissed the European bailout of Spanish banks, even though the 100 billion euros involved was twice as much as expected just a few weeks earlier. European politicians have been scrambling to create a more unified family front. Indeed, the external threat has provoked them to make more progress towards financial and fiscal unity in the last few months than in the preceding decade. But they have not managed to pacify those pesky investors.
Something more powerful is needed to keep the euro, the most tangible sign of family harmony, from ending in discord. Only the ECB Godfather has what it takes. The central bank might have to abandon some principles, but it has the ability to create enough money to keep governments and the financial system afloat for as long as necessary.
This chapter of the European story still has many tedious details to get through, but it has gone on so long that the only question that still matters is whether or not the ECB stands up for the family.