Alistair Darling: What Europe must do, now, to avert calamity

A leadership vacuum lies at the heart of the eurozone crisis. If ministers aren't scared, they should be

Related Topics

Europe's growth has stalled and its leaders continue to wring their hands ineffectually. The longer the delay in doing what is needed the greater the financial cost will be. Worse, the longer nothing is done the greater the risk that markets will doubt not only the political will of eurozone leaders, but their financial ability to do what is needed. Now we hear of plans yet to be disclosed to break up the euro in the midst of the raging firestorm. Talk about careless talk costing lives.

A leadership vacuum lies at the heart of the global crisis. Last week's meeting of the G20 leaders was an abject failure just at a time when the world needs strong leadership and a clear sense of direction. Europe still fiddles as Rome threatens to burn and ignite a fire far beyond its borders .

Understandably people are frightened of what the future holds. They are worried about their jobs and why no one seems to be getting a grip. They are confronted with austerity yet they see their leaders offering little more than weary resignation to perhaps years of stagnation. The cry goes up, there is nothing to be done. It is not surprising that the nascent protests in London and New York, despite their inchoate and disparate demands, attract so much attention. There is not much else on offer.

Globalisation, we know, can bring immense benefits. But at times like this the downsides are all too felt. National governments struggle to impose order in this new world where there is no overarching global governance. How frustrating then that where there is some semblance of structure, in Europe for example, it is not being used. Or in the case of the G20 last week, it is reduced to apparent impotence.

The G20 had apparently three objectives. An action plan for growth, the removal of key obstacles to growth. And of course sorting out the eurozone. They failed spectacularly on all three.

The G20 is far from perfect. But it can work. In 2009 when it met in London its decisive statement to do whatever it took to avoid recession sliding into depression gave markets confidence that governments were not powerless in the face of global events. And it worked because ministers were scared stiff of what failure would mean.

Today the situation is far more serious. If ministers are not yet scared they should be. We are now told that G20 finance ministers may meet again before Christmas. Another failure will reinforce the sense of hopelessness and engender further scepticism if not cynicism about what governments can do. Leaders should order their finance ministers to start work immediately to see what countries can do together to get growth going. Governments can make a difference.

For the 30 years before this crisis struck there was a consensus that the role of government was limited. The crisis in 2008 changed all that. If ever there was a case of where governments can make a difference that was it. Without growth, deficits will go up, not down, as we are seeing here at home. Across Europe, imposing austerity is killing off growth. Borrowing is likely to rise, threatening recovery.

Governments acting together are far more effective in a globalised world, as we saw clearly two years ago. The G20 urgently needs to come up with a plan to get growth going again. Even Asian governments are now fearful that what is happening in Europe will slow their economies right down again. The bigger questions of imbalances between countries like China and the US can only be resolved at a global level. A repeat of the grand bargain struck in 1944 at Bretton Woods would be a useful starting point.

Surely the G20 with all the political firepower it has could have persuaded the eurozone that it cannot allow this crisis to fester on and threaten the entire global economy? Here is the irony: the European Union and the eurozone do have structures that could be made to work. The European Central Bank can buy government bonds. Existing treaties offer decision-making powers.

A single currency means the richer countries must help the poorer ones. Of course countries must help themselves. There have to be reforms in Greece especially. But we cannot afford to let this crisis carry on any longer.

A break-up of the euro now would harm not just the eurozone but us too. It is the last thing we need. The eurozone will have to decide if it wants closer union and whether its membership remains intact. If there is closer union then that clearly raises issues around the relationship between it and the rest of the EU. That, however, is not today's problem. There are three things Europe's leaders need to do right now. First, even with a new Greek government there is no one who seriously believes that the present Greek fix will work. A plan that leaves Greece with debt at 120 per cent of its GDP in 2020 – more than it had when it went into this crisis – is doomed to fail. We know that. So why not fix it now?

Second, bank recapitalisation cannot wait until next summer. If Greek, Italian or Spanish banks begin to falter, what happened in 2008 will seem like a squall compared to the hurricane that would be unleashed in Europe, and soon.

Third, the rescue fund does not exist. Nor does it look like existing any time soon. The European Central Bank does exist and should be allowed to buy bonds from distressed countries. In a crisis you have to use what tools you have to hand. We are now in a worse position than we were in 2008. It is compounded by a lack of vision and leadership at every level. Time is running out. To avoid this foreseeable calamity we must act now.

Alistair Darling was Chancellor of the Exchequer from 2007 to 2010

React Now

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

Recruitment Genius: Senior Digital Marketing Consultant

£28000 - £45000 per annum: Recruitment Genius: A Senior Digital Marketing Cons...

Recruitment Genius: Assistant Stores Keeper

£16640 - £18500 per annum: Recruitment Genius: An Assistant Stores Keeper is r...

Recruitment Genius: Claims Administrator

£16000 - £18500 per annum: Recruitment Genius: This is an excellent opportunit...

Recruitment Genius: Software Developer - C# / ASP.NET / SQL

£17000 - £30000 per annum: Recruitment Genius: Developer required to join a bu...

Day In a Page

Read Next
Thousands of Russian troops marched on Red Square in the annual Victory Day parade in a proud display of the nation's military might amid escalating tensions over Ukraine  

Once again, the West fails to understand Russia

Mary Dejevsky
Jamie Oliver joins children as they celebrate Food Revolution Day 2014 by cooking bread, making smoothies and creating salads at St Paul's Whitechapel CE Primary School in London  

Teaching children to cook at school is a recipe for self-respect

Grace Dent
Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

Fishing is on Nigel Farage's mind

Ukip leader casts a line to the disaffected
Who is bombing whom in the Middle East? It's amazing they don't all hit each other

Who is bombing whom in the Middle East?

Robert Fisk untangles the countries and factions
China's influence on fashion: At the top of the game both creatively and commercially

China's influence on fashion

At the top of the game both creatively and commercially
Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

The man known as GOD has a reputation for getting the job done

Lord O'Donnell's three principles of rule
Rainbow shades: It's all bright on the night

Rainbow shades

It's all bright on the night
'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power
Rare and exclusive video shows the horrific price paid by activists for challenging the rule of jihadist extremists in Syria

The price to be paid for challenging the rule of extremists

A revolution now 'consuming its own children'
Welcome to the world of Megagames

Welcome to the world of Megagames

300 players take part in Watch the Skies! board game in London
'Nymphomaniac' actress reveals what it was really like to star in one of the most explicit films ever

Charlotte Gainsbourg on 'Nymphomaniac'

Starring in one of the most explicit films ever
Robert Fisk in Abu Dhabi: The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers

Robert Fisk in Abu Dhabi

The Emirates' out-of-sight migrant workers helping to build the dream projects of its rulers
Vince Cable interview: Charging fees for employment tribunals was 'a very bad move'

Vince Cable exclusive interview

Charging fees for employment tribunals was 'a very bad move'
Iwan Rheon interview: Game of Thrones star returns to his Welsh roots to record debut album

Iwan Rheon is returning to his Welsh roots

Rheon is best known for his role as the Bastard of Bolton. It's gruelling playing a sadistic torturer, he tells Craig McLean, but it hasn't stopped him recording an album of Welsh psychedelia
Morne Hardenberg interview: Cameraman for BBC's upcoming show Shark on filming the ocean's most dangerous predator

It's time for my close-up

Meet the man who films great whites for a living
Increasing numbers of homeless people in America keep their mobile phones on the streets

Homeless people keep mobile phones

A homeless person with a smartphone is a common sight in the US. And that's creating a network where the 'hobo' community can share information - and fight stigma - like never before