13 November 2019

Financial Times: European politics rewards those who want to get things done

Amid a general sense of drift, the clearest display of determination has come from French president Emmanuel Macron. His interview with the Economist last week triggered reactions in part because of his willingness to sacrifice sacred cows — most notably by questioning, like US president Donald Trump, the effectiveness of Nato. Unlike Mr Trump, however, Mr Macron backed up his swipe at the defence alliance with an articulate world view, a reasoned argument about how Europe must change and above all a readiness to embrace means consistent with his ends.

The same readiness — albeit in pursuit of different goals altogether — can be found on Europe’s far-right, whose various incarnations share a determined opposition to liberal modernity and the institutions and structures that favour liberal values and supranational rulemaking. The clarity of their determination is rewarded by voters, and Sunday’s breakthrough for Vox in the Spanish elections is the latest illustration. In stark contrast, the centrist-liberal Ciudadanos party, which turned down a share in national power when offered it last spring by Socialist prime minister Pedro Sánchez, was punished by voters for the irrelevance it had proved itself to be.

This incongruous similarity between Mr Macron and the far-right illustrates the bigger truth that the EU political battleground is now shaped by those who really want to change things, while traditional parties watch from the sidelines. This is also why Greens are supplanting aimless social democratic parties almost everywhere. Soon enough, policy choices, too, will belong to those who demonstrate the will to act.

It is in this context we should judge last week’s initiative by Olaf Scholz. The German finance minister made news by writing in the Financial Times that his country would consider a European deposit insurance scheme as part of the EU’s completed banking union. While he was clear this would only come after requiring banks to deal (further) with bad loans, post equity against possible losses on sovereign bonds and submit to EU-level insolvency rules, it was broadly seen as a significant political move.

For aficionados of banking union debates, there was nothing new in the content of this initiative: it has been clear, and indeed admitted by German officials in private, that a compromise on European deposit insurance along these lines is where things will end up. Besides, what Mr Scholz contemplates falls short of a mutualised backing of deposits — though he also hints Germany could accept something short of outright risk-weighting of government bonds, such as a “concentration charge” for undiversified government bond holdings but not diversified ones. The ungenerous would see this as trading half-baked deposit insurance for half-baked reform of sovereign debt holdings.

But all this has been probed for years, in closed technical discussions at least. So why the excitement? Because beyond the specifics, going public looks like an attempt to try to move something forward. [...]

Ultimately, all good politicians know that the longer they appear to be doing nothing, the more they risk being replaced by rivals who look like they want to do something — anything. Therein lies a hope: that more leaders accept they cannot afford to let extremists look as if they are the only ones with a political purpose. For all the indecisiveness of the EU system and its member states, listen very carefully and you can hear the soft sound of people creeping towards compromise in order to get things done.

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