National Review Online, April 22, 2020

At the end of last week, the Financial Times published a lengthy interview with French president Emmanuel Macron in which Macron referred no fewer than nine times to humility and may, occasionally, have meant it:

I don’t know if we are at the beginning or the middle of this crisis — no one knows. . . . There is lots of uncertainty and that should make us very humble.

Macron’s humility only goes so far, and will not have been encouraged by his starstruck interviewers, who write that he is “overtly intellectual [and] always brimming with ideas.”

They are right, but unfortunately, Macron’s ideas are old ideas, if sometimes repackaged.

In his view, the interviewers report, COVID-19 represents an opportunity to put an end to the “hyper-financialized world,” a phantom that exists mainly in the fevered imaginations of communitarians, academics who refer to “late capitalism,” and European politicians. (Recall that, shortly after the collapse of Lehman Brothers, an earlier French president, Nicolas Sarkozy — seemingly oblivious to the political and economic developments of the previous hundred years — announced that laissez-faire capitalism was “finished.”)

Macron is also not the first eco-warrior to have noticed that the measures taken to contain COVID-19 might make a useful precedent for the struggle against climate change. People, he reckons, have come to understand “that no one hesitates to make very profound, brutal choices when it’s a matter of saving lives. It’s the same for climate risk.” The parallel is nonsense, but typical of that strand of environmentalism in which coercion is a feature, not a bug.

Under the circumstances, then, it is no surprise that, when it comes to Brussels’s embattled union, Macron, like many EU leaders, has learnt little from the debacles of the last couple of decades:

[He is] especially concerned about the EU and the euro. Banging the desk repeatedly with his hands to emphasize his points, he says both the union and the single currency will be threatened if the richer members, such as Germany and the Netherlands, do not show more solidarity with the pandemic-stricken nations of southern Europe.

If Macron gets his way, those hands will soon be rifling through the wallets of the euro zone’s “Frugal Four” (Austria, Finland, Germany, and the Netherlands), who are currently holding out against the sort of “solidarity” that he has in mind — namely, “financial aid funded by mutualized debt.”

He’s talking about euro bonds, which would be issued using the credit of the euro zone as a whole. This idea has been resisted by the Frugal Four for a variety of reasons. For one thing, they fear being stuck with part of the bill for debts run up by their less responsible “partners.” For another, they object on principle that they’d be acquiescing to something that violated the original spirit of the euro zone itself. And finally, they worry about the precedent that might be set, which could have implications well beyond questions of bond issuance. To the Frugal Four, mutualized debt would be a major step along the path to a fiscal union, something they don’t want unless they can dictate its terms, which they will never be able to do.

Establishing a currency union without the backing of some sort of fiscal union was always asking for trouble. If, say, Tennessee falls on hard times, it will pay less to, and receive more from, the Feds. There is no need to devalue a Tennessee dollar to maintain the state’s ability to compete, because the American currency union is supported by a fiscal union. But trapped in the euro, Italy cannot devalue itself back into competitiveness, and there is no ‘federal’ euro-zone authority presiding over taxing and spending to ease its pain. It is not difficult to understand this absence. Tennesseans, Texans, and even New Yorkers feel a national affinity — and thus have a degree of willingness to help each other out — that Finns, Greeks, and Portuguese do not.

The Frugal Four know that a fiscal union will send a flow of cash from the euro zone’s “north” to some of its poorer nations in perpetuity. The idea that a monetary union would bring about economic convergence between its members is a myth; indeed such a union might well have the opposite effect. Even with the handouts that a fiscal union would deliver, that will not change. Athens will not be Munich in any foreseeable future; Italy has been bound together in political, monetary, and fiscal union for more than a century and a half, yet Naples is not Milan.

None of this appears to worry Macron, possibly because he hopes that France would not fare too badly in any fiscal union, and certainly because of his anxiety over what might lie ahead for the EU:

We are at a moment of truth, which is to decide whether the European Union is a political project or just a market project. I think it’s a political project. . . . We need financial transfers and solidarity, if only so that Europe holds on.

The first part of that passage is characteristically disingenuous. The institutions that evolved into the EU were conceived as part of a grand political project from the very beginning. The economic was always subordinate to the political. It was a motor of integration, a means rather than an end, the cheese on the mousetrap. There are few better examples of that subordination than the creation of the euro, which risked economic disaster for no obvious economic advantage but, politically, looked like a gamble worth taking. Such was the brutality of that perverse logic, it still does: If the only way to save the single currency from the flaws built into its design were even deeper EU integration, the euro zone’s trauma would, to use the entertainingly cynical language of European construction, have constituted a “beneficial” crisis.

Whenever the EU finds itself in a mess, its more excitable leaders like to warn that its implosion would signal a return to some of the worst of the continent’s past. Some conjure up the trenches, others turn to still-darker horrors. Outraged that voters might veto a proposed EU constitution (they did), EU commissioner Margot Wallström took the chance presented by a visit to the former Nazi concentration camp at Theresienstadt (Terezín) in 2005 to observe:

There are those today who want to scrap the supranational idea. They want the European Union to go back to the old purely intergovernmental way of doing things. . . . Those people should come to Terezín and see where that old road leads.

The Euro allegedly has a part to play in keeping the demons of the past at bay. In 2018, Angela Merkel, a symbol, to the easily fooled, of rational politics, told an audience in Lisbon that “Europe” — by which she meant the EU — “is a promise of peace” and that “the euro, which is often discussed in very technical terms, is the best guarantee that we can continue with that.”

By contrast, Macron was relatively restrained when he explained to his FT interviewers that “we need financial transfers and solidarity, if only so that Europe holds on.” Neither he nor Merkel were the first to claim that a euro crisis threatened the existence of the EU itself, but Macron’s words were intended to play on fears within the Frugal Four that the stakes were too high for them not to cave in. They will be unlikely to yield to the pressure to agree to the issuance of euro bonds in the near future, as is evident from the way that the importance of Thursday’s EU leadership teleconference has been downgraded, but there is every reason to think that they will eventually succumb to Macron’s dodgy logic. After all, here is what Merkel, the leader of the most powerful of the quartet, was saying almost exactly ten years ago:

If the euro fails . . . Europe fails too, [and so does] the idea of European unification. We have a common currency, but no common political and economic union. And this is exactly what we must change. To achieve this, therein lies the opportunity of this crisis.

Oh.