Andreas Whittam Smith: I don't believe the eurozone can be made to work

Poland's alarm is a true measure of the crisis. It is more vivid than the warning by the Chancellor


When Poland's Foreign Minister refers to German tanks and Russian missiles, as Radoslaw Sikorski did on Monday, one sits up. Poland suffered repeated invasions by Germany and Russia from the late 18th century until the last Soviet troops withdrew in 1993. Poland was truly independent only between 1918 and 1939. However, in a remarkable speech, by turns passionate and frank, Mr Sikorski was not breathing defiance of traditional enemies. Quite the reverse. He was talking about the eurozone. And he was pleading with Germany.

Mr Sikorski asked himself what did he regard as the biggest threat to the security and prosperity of Poland in the last week of November 2011? Not German tanks nor even Russian missiles, which "President Dmitry Medvedev has just threatened to deploy on the EU's border". Instead, he made this demand of Germany. "That, for its own sake and for ours, it helps the eurozone survive and prosper. Nobody else can do it. I will probably be the first Polish Foreign Minister in history to say this, but here it is: I fear German power less than I begin to fear its inactivity. You have become Europe's indispensable nation. You may not fail to lead: not dominate, but to lead in reform."

That statement is the true measure of the eurozone crisis. It was more vivid than the warning by the Chancellor of the Exchequer, Mr Osborne, in his Autumn Statement and it strikes home harder than the comments of the Organisation for Economic Co-operation and Developmen (OECD) when it said that events could plunge the euro area into a deep recession.

Very interestingly, Mr Sikorski in his speech tackled Germany's sense of victimhood. This feeling goes right back to the devastating Thirty Years War in the 17th century that was waged across German-speaking lands by foreign powers, to Napoleon's invasion 150 years later that redrew the map of the German states, to the "stab-in-the-back" explanation of defeat in the First World War, and to the division into two states following the Second World War. Mr Sikorski understands all that and told Germany such suspicion is inappropriate today.

"We ask Berlin to admit that it is the biggest beneficiary of current arrangements and that it therefore has the biggest obligation to make them sustainable. As Germany knows best, she is not an innocent victim of others' profligacy." He was referring to the low value of the euro, which has substantially helped German's export business and the safe-haven strength of German bonds that means that German companies can borrow cheaply. In other words, by doing what is needed to resolve the eurozone crisis, Germany would not be the dupe of lazy, tax-dodging Greeks and Italians.

Mr Sikorski also had a go at German self-righteousness. He reminded his neighbour that it should have known better when it broke the stability and growth pact that eurozone countries signed so as to avoid the very problems they now face. And neither have their banks been models of virtue. The banking crisis actually began in Germany. The very first bank in trouble over US subprime loans was IKB Deutsche Industriebank in August 2007.

Poland is not yet a member of the eurozone, but it intends to be. It is willing to accept very tight integration between states. It envisages that when drawing up national budgets, for instance, finance ministers would first have to show their books to their fellow members. Eurozone countries which broke the stability and growth pact would face sanctions that would be almost impossible to block. Rules would be introduced, not as directives, but as regulations. And, finally, and this is what Germany is currently blocking, the European Central Bank would become a proper central bank, a lender of last resort underpinning the credibility of the entire eurozone.

If all this came about, it would undoubtedly "solve" the eurozone crisis, and progress towards such arrangements would substantially soothe financial markets. Except that I don't believe it. Imagine this scenario. The finance minister of a eurozone state comes before his national parliament to present the annual budget. The minister says that Brussels has approved it. But suppose that the national parliament doesn't approve it or perhaps doesn't approve certain parts. What happens then? Does the minister engage in shuttle diplomacy between his national parliament and Brussels until an accord is reached? And, if not, would democratically elected members be prepared to accept a Brussels veto?

It is because of problems like this that I don't believe the eurozone can be made to work. The loss of sovereignty for member states is likely to be more than their citizens would tolerate. We would move from a financial crisis to a democratic crisis. It may be significant that in his fascinating speech, the Polish Foreign Minister made no mention of the European Parliament and how its powers might be enhanced in the new circumstances. It was a surprising omission.

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