Adrian Hamilton: Forget about fiscal integration. What Angela Merkel wants is political union

It will have to be done through common defence and economic policy

Share

So the eurozone totters on, despite all. Of course it does. David Cameron is quite wrong, as is President Obama, in talking of abysses and final chances. It isn't like that. At each point, Europe manages, as it has always done, by muddling through with some measure or agreement which avoids the worst and staves off the immediate. And, at each point, the markets react first with a brief burst of relief and then with a renewed chorus of a crisis unresolved.

There's no reason why this can't go on for some time yet. Commentators talk of Spain's 7 per cent borrowing costs as if it were the final threshold before collapse. It isn't. It might be in the long term, but so long as the country can actually fund itself, 7 per cent is not an absolute barrier.

So, too, with Greece. Of course, the elections haven't sorted out its debtproblem. But so long as the new government can keep talking, and its eurozone partners aren't given a clear reason for pulling the plug, they won't.

The problem isn't an economic one. It's political. What Cameron is asking for is a unity of action from Europe for which there is no consensus and would probably be unacceptable to him if there was.

Germany, increasingly fed up with being made the whipping boy for European inaction, is now digging in its heels. In a switch of policy that has received far too little attention, Angela Merkel is moving from a demand for fiscal union as the price of further help, to a call for total political union.

In a series of speeches and statements over the past week, the German Chancellor has laid down Germany's position on this crisis. Germany, she has said loud and clear, is not going to go along with a pooling of debt or a direct purchase of troubled sovereign bonds, however heavy the pressure on it to do so. The constitution won't allow it and the politics are against it.

If the rest of Europe wants Germany to shoulder the burden, then it will have to be done through a decisive move towards political integration, including common defence as well as common economic policy and the loss of sovereignty to Brussels oversight.

This is pretty heady stuff, particularly coming from a country which seemed happier with a looser alliance of separate states in the past. It would require radical new treaties. It would push Germany straight up against France, which is heading in the opposite direction under President Hollande and is opposed to handing over power to Brussels.

Ms Merkel's position also poses a real challenge to Britain, which has always been able to count on Germany to resist too much federalism. We are now faced with a Germany calling for political integration, which is anathema to the Conservatives, and a France calling for a neo-Keynesian economic policy and a tax on financial institutions, which is equally inimical to this Government.

Germany may not get its way, of course. Indeed, Ms Merkel's call for political union may be a tactic for getting its partners off its back. If that's what you want, she is saying, then this is where it will lead you.

The practical problems of doing what she suggests are huge. But then the logic of her argument is equally strong. If Europe, as its critics keep carping on about, cannot go on like this, the most obvious alternative is a truly federal solution.

Britain has a huge interest in this debate yet absolutely refuses to join it. Instead, it sits on the sidelines declaring that this is a financial crisis which the eurozone must solve on its own. More than ever before, the country stands isolated in Europe. More than ever before it seems possible, likely even, that it will end with us falling out of the Union.

Brotherhood's bad call

 

The Muslim Brotherhood in Egypt must surely be ruing the day that it decided to go on taking part in the country's presidential elections after the courts had dissolved the parliament.

The alternative would have been for it to withdraw from the race, leaving an election without a choice, a president without legitimacy and a military rule without support abroad or at home.

The Brotherhood has only itself to blame. Conscious that it was the one group with an organisation capable of taking power in elections when President Mubarak fell to popular revolt, it chose to separate itself from other elements in the revolution and to temporise with the generals in pursuit of its aims.

Now, whether the Supreme Council of the Armed Forces uses the Constitutional Court to make sure that its favoured candidate, former PM Ahmed Shafiq, wins – which is what most of the proponents of the Arab Spring believe – or whether it allows an empty victory for the Brotherhood's Mohammed Mursi, the army will remain firmly in power.

a.hamilton@independent.co.uk

React Now

Latest stories from i100
Have you tried new the Independent Digital Edition apps?
iJobs Job Widget
iJobs General

Recruitment Genius: Sales Administrator - Spanish Speaking

£17000 - £21000 per annum: Recruitment Genius: This is a fantastic opportunity...

Recruitment Genius: Sales Administrator - German Speaking

£17000 - £23000 per annum: Recruitment Genius: This is a fantastic opportunity...

Recruitment Genius: Sales Administrator - Japanese Speaking

£17000 - £23000 per annum: Recruitment Genius: If you are fluent in Japanese a...

Recruitment Genius: Graphic Designer - Immediate Start

£16000 - £25000 per annum: Recruitment Genius: This is a fantastic opportunity...

Day In a Page

Read Next
 

Forget charging by the page - with books, heart matters more than heft

Katy Guest
Nai or Oxi: whether Greece says Yes or No today its citizens will continue to struggle  

Greece crisis: Referendum exposes a gaping hole at the heart of the European Union – its lack of genuine legitimacy

Rupert Cornwell
Is this the future of flying: battery-powered planes made of plastic, and without flight decks?

Is this the future of flying?

Battery-powered planes made of plastic, and without flight decks
Isis are barbarians – but the Caliphate is a dream at the heart of all Muslim traditions

Isis are barbarians

but the Caliphate is an ancient Muslim ideal
The Brink's-Mat curse strikes again: three tons of stolen gold that brought only grief

Curse of Brink's Mat strikes again

Death of John 'Goldfinger' Palmer the latest killing related to 1983 heist
Greece debt crisis: 'The ministers talk to us about miracles' – why Greeks are cynical ahead of the bailout referendum

'The ministers talk to us about miracles'

Why Greeks are cynical ahead of the bailout referendum
Call of the wild: How science is learning to decode the way animals communicate

Call of the wild

How science is learning to decode the way animals communicate
Greece debt crisis: What happened to democracy when it’s a case of 'Vote Yes or else'?

'The economic collapse has happened. What is at risk now is democracy...'

If it doesn’t work in Europe, how is it supposed to work in India or the Middle East, asks Robert Fisk
The science of swearing: What lies behind the use of four-letter words?

The science of swearing

What lies behind the use of four-letter words?
The Real Stories of Migrant Britain: Clive fled from Zimbabwe - now it won't have him back

The Real Stories of Migrant Britain

Clive fled from Zimbabwe - now it won’t have him back
Africa on the menu: Three foodie friends want to popularise dishes from the continent

Africa on the menu

Three foodie friends want to popularise dishes from the hot new continent
Donna Karan is stepping down after 30 years - so who will fill the DKNY creator's boots?

Who will fill Donna Karan's boots?

The designer is stepping down as Chief Designer of DKNY after 30 years. Alexander Fury looks back at the career of 'America's Chanel'
10 best statement lightbulbs

10 best statement lightbulbs

Dare to bare with some out-of-the-ordinary illumination
Wimbledon 2015: Heather Watson - 'I had Serena's poster on my wall – now I'm playing her'

Heather Watson: 'I had Serena's poster on my wall – now I'm playing her'

Briton pumped up for dream meeting with world No 1
Wimbledon 2015: Nick Bollettieri - It's time for big John Isner to produce the goods to go with his thumping serve

Nick Bollettieri's Wimbledon Files

It's time for big John Isner to produce the goods to go with his thumping serve
Dustin Brown: Who is the tennis player who knocked Rafael Nadal out of Wimbeldon 2015?

Dustin Brown

Who is the German player that knocked Nadal out of Wimbeldon 2015?
Ashes 2015: Damien Martyn - 'England are fired up again, just like in 2005...'

Damien Martyn: 'England are fired up again, just like in 2005...'

Australian veteran of that Ashes series, believes the hosts' may become unstoppable if they win the first Test