31 May 2012

John Wyles: Who will pull Europe back from the brink?

The reality facing the European Council and a world anxious to put Europe back on a path towards political and economic vitality is that the Union is drifting towards institutional rigor mortis and economic disaster.

Too much of the responsibility resides in Berlin. Merkel is now isolated and increasingly demonised. She is opposing a stronger firewall for the bailout economies, which may soon include Spain. She seems to be unaware that not even the ECB can keep the banking system on indefinite life support without steps towards a banking union. And she cannot muster any real public enthusiasm for the various ideas for stimulating economic growth currently circulating.

Merkel will not be blocking discussion on any of these remedies, some of which may well be adopted in one form or other at the summit on 28-29 June. Will she, or can she, persuade her fellow Germans to give the Union the additional political authority over national economic decision-making that she says is needed to ensure a stable and durable future for the eurozone?

The near-certainty that the crisis is worsening may concentrate minds. The institutional balance in the Union has gone through several treaty-induced mutations over the past 50 years, but it was never intended to put the responsibility for sustaining European integration largely on the shoulders of one Member State. For a long time, we have been wrestling with an economic and financial crisis spawned by a governance crisis.

With the consent of its president, José Manuel Barroso, the European Commission has been effectively neutered by the Lisbon treaty, which gave us a president of the European Council whose task is to ensure that the Council dominates crisis management. Only the ECB is setting a proper example of independence, through initiatives that are keeping some Member States solvent and saving the eurozone's banking system from collapse.

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