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<nettime> Dr SchÃubleâs Plan for Europe: Do Europ
accidental loves on Fri, 17 Jul 2015 19:21:17 +0200 (CEST)

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<nettime> Dr SchÃubleâs Plan for Europe: Do Europ

   {and I thought it clarifies the distinction between references to
   national sovereignty and nationalistic sentiments.}


   Posted on July 17th, 2015 by Yanis Varoufakis

   Dr Schäuble's Plan for Europe: Do Europeans approve? - English version
   of my article in Die Zeit

   On 15th July 2015 Die Zeit published this piece. Here is the
   original English language version.

   The reason five months of negotiations between Greece and Europe led to
   impasse is that Dr Schäuble was determined that they would.

   By the time I attended my first Brussels meetings in early February, a
   powerful majority within the Eurogroup had already formed. Revolving
   around the earnest figure of Germany's Minister of Finance, its mission
   was to block any deal building on the common ground between our freshly
   elected government and the rest of the Eurozone.

   Thus five months of intense negotiations never had a chance. Condemned
   to lead to impasse, their purpose was to pave the ground for what Dr
   Schäuble had decided was `optimal' well before our government was even
   elected: That Greece should be eased out of the Eurozone in order to
   discipline member-states resisting his very specific plan for
   re-structuring the Eurozone. This is no theory of mine. How do I know
   Grexit is an important part of Dr Schäuble's plan for Europe? Because
   he told me so!

   I am writing this not as a Greek politician critical of the German
   press' denigration of our sensible proposals, of Berlin's refusal
   seriously to consider our moderate debt re-profiling plan, of the
   European Central Bank's highly political decision to asphyxiate our
   government, of the Eurogroup's decision to give the ECB the green light
   to shut down our banks. I am writing this as a European observing the
   unfolding of a particular Plan for Europe - Dr Schäuble's Plan. And I
   am asking a simple question of Die Zeit's informed readers:

   Is this a Plan that you approve of? Is this Plan good for Europe?

Dr Schäuble's Plan for the Eurozone

   The avalanche of toxic bailouts that followed the Eurozone's first
   financial crisis offers ample proof that the non-credible `no bailout
   clause' was a terrible substitute for political union. Wolfgang
   Schäuble knows this and has made clear his plan to forge a closer
   union. "Ideally, Europe would be a political union", he wrote in a
   joint article with Karl Lamers, the CDU's former foreign affairs chief
   (Financial Times, 1st September 2014).

   Dr Schäuble is right to advocate institutional changes that might
   provide the Eurozone with its missing political mechanisms. Not only
   because it is impossible otherwise to address the Eurozone's current
   crisis but also for the purpose of preparing our monetary union for the
   next crisis. The question is: Is his specific plan a good one? Is it
   one that Europeans should want? How do its authors propose that it be

   The Schäuble-Lamers Plan rests on two ideas: "Why not have a European
   budget commissioner" asked Schäuble and Lamers "with powers to reject
   national budgets if they do not correspond to the rules we jointly
   agreed?" "We also favour", they added "a `Eurozone parliament'
   comprising the MEPs of Eurozone countries to strengthen the democratic
   legitimacy of decisions affecting the single currency bloc."

   The first point to raise about the Schäuble-Lamers Plan is that it is
   at odds with any notion of democratic federalism. A federal democracy,
   like Germany, the United States or Australia, is founded on the
   sovereignty of its citizens as reflected in the positive power of their
   representatives to legislate what must be done on the sovereign
   people's behalf.

   In sharp contrast, the Schäuble-Lamers Plan envisages only negative
   powers: A Eurozonal budget overlord (possibly a glorified version of
   the Eurogroup's President) equipped solely with negative, or veto,
   powers over national Parliaments. The problem with this is twofold.
   First, it would not help sufficiently to safeguard the Eurozone's
   macro-economy. Secondly, it would violate basic principles of Western
   liberal democracy.

   Consider events both prior to the eruption of the euro crisis, in 2010,
   and afterwards. Before the crisis, had Dr Schäuble's fiscal overlord
   existed, she or he might have been able to veto the Greek government's
   profligacy but would be in no position to do anything regarding the
   tsunami of loans flowing from the private banks of Frankfurt and Paris
   to the Periphery's private banks. Those capital outflows
   underpinned unsustainable debt that, unavoidably, got transferred back
   onto the public's shoulders the moment financial markets imploded.
   Post-crisis, Dr Schäuble's budget Leviathan would also be powerless, in
   the face of potential insolvency of several states caused by their
   bailing out (directly or indirectly) the private banks.

   In short, the new high office envisioned by the Schäuble-Lamers Plan
   would have been impotent to prevent the causes of the crisis and to
   deal with its repercussions. Moreover, every time it did act, by
   vetoing a national budget, the new high office would be annulling the
   sovereignty of a European people without having replaced it by a
   higher-order sovereignty at a federal or supra-national level.

   Dr Schäuble has been impressively consistent in his espousal of a
   political union that runs contrary to the basic principles of a
   democratic federation. In an article in Die Weltpublished on 15th June
   1995, he dismissed the "academic debate" over whether Europe should be
   "...a federation or an alliance of states". Was he right that there is
   no difference between a federation and an `alliance of states'? I
   submit that a failure to distinguish between the two constitutes a
   major threat to European democracy.

Forgotten prerequisites for a liberal democratic, multinational political

   One often forgotten fact about liberal democracies is that the
   legitimacy of its laws and constitution is determined not by its legal
   content but by politics. To claim, as Dr Schäuble did in 1995, and
   implied again in 2014, that it makes no difference whether the Eurozone
   is an alliance of sovereign states or a federal state is purposely to
   ignore that the latter can create political authority whereas the
   former cannot.

   An `alliance of states' can, of course, come to mutually beneficial
   arrangements against a common aggressor (e.g. in the context of a
   defensive military alliance), or in agreeing to common industry
   standards, or even effect a free trade zone. But, such an alliance of
   sovereign states can never legitimately create an overlord with the
   right to strike down a states' sovereignty, since there is no
   collective, alliance-wide sovereignty from which to draw the necessary
   political authority to do so.

   This is why the difference between a federation and an `alliance of
   states' matters hugely. For while a federation replaces the sovereignty
   forfeited at the national or state level with a new-fangled sovereignty
   at the unitary, federal level, centralising power within an `alliance
   of states' is, by definition, illegitimate, and lacks any sovereign
   body politic that can anoint it. Nor can any Euro Chamber of the
   European Parliament, itself lacking the power to legislate at will,
   legitimise the Budget Commissioner's veto power over national

   To put it slightly differently, small sovereign nations, e.g. Iceland,
   have choices to make within the broader constraints created for them by
   nature and by the rest of humanity. However limited these choices,
   Iceland's body politic retains absolute authority to hold their elected
   officials accountable for the decisions they have reached within the
   nation's exogenous constraints and to strike down every piece of
   legislation that it has decided upon in the past. In juxtaposition, the
   Eurozone's finance ministers often return from Eurogroup meetings
   decrying the decisions that they have just signed up to, using the
   standard excuse that "it was the best we could negotiate within the

   The euro crisis has expanded this lacuna at the centre of Europe
   hideously. An informal body, the Eurogroup, that keeps no minutes,
   abides by no written rules, and is answerable to precisely no one, is
   running the world's largest macro-economy, with a Central Bank
   struggling to stay within vague rules that it creates as it goes along,
   and no body politic to provide the necessary bedrock of political
   legitimacy on which fiscal and monetary decisions may rest.

   Will Dr Schäuble's Plan remedy this indefensible system of governance?
   If anything, it would dress up the Eurogroup's present ineffective
   macro-governance and political authoritarianism in a cloak of
   pseudo-legitimacy. The malignancies of the present `Alliance of States'
   would be cast in stone and the dream of a democratic European
   federation would be pushed further into an uncertain future.

Dr Schäuble's perilous strategy for implementing the Schäuble-Lamers Plan

   Back in May, in the sidelines of yet another Eurogroup meeting, I had
   had the privilege of a fascinating conversation with Dr Schäuble. We
   talked extensively both about Greece and regarding the future of the
   Eurozone. Later on that day, the Eurogroup meeting's agenda included an
   item on future institutional changes to bolster the Eurozone. In that
   conversation, it was abundantly clear that Dr Schäuble's Plan was the
   axis around which the majority of finance ministers were revolving.

   Though Grexit was not referred to directly in that Eurogroup meeting of
   nineteen ministers, plus the institutions' leaders, veiled references
   were most certainly made to it. I heard a colleague say that
   member-states that cannot meet their commitments should not count on
   the Eurozone's indivisibility, since reinforced discipline was of the
   essence. Some mentioned the importance of bestowing upon a permanent
   Eurogroup President the power to veto national budgets. Others
   discussed the need to convene a Euro Chamber of Parliamentarians to
   legitimise her or his authority. Echoes of Dr Schäuble's Plan
   reverberated throughout the room.

   Judging from that Eurogroup conversation, and from my discussions with
   Germany's Finance Minister, Grexit features in Dr Schäuble's Plan as a
   crucial move that would kickstart the process of its implementation. A
   controlled escalation of the long suffering Greeks' pains, intensified
   by shut banks while ameliorated by some humanitarian aid, was
   foreshadowed as the harbinger of the New Eurozone. On the one hand, the
   fate of the prodigal Greeks would act as a morality tale for
   governments toying with the idea of challenging the existing `rules'
   (e.g. Italy), or of resisting the transfer of national sovereignty over
   budgets to the Eurogroup (e.g. France). On the other hand, the prospect
   of (limited) fiscal transfers (e.g. a closer banking union and a common
   unemployment benefit pool) would offer the requisite carrot (that
   smaller nations craved).

   Setting aside any moral or philosophical objections to the idea of
   forging a better union through controlled boosts in the suffering of a
   constituent member-state, several broader questions pose themselves
     * Are the means fit for the ends?
     * Is the abrogation of the Eurozone's constitutional indivisibility a
       safe means of securing its future as a realm of shared prosperity?
     * Will the ritual sacrifice of a member-state help bring Europeans
       closer together?
     * Does the argument that elections cannot change anything in indebted
       member-states inspire trust in Europe's institutions?
     * Or might it have the precise opposite effect, as fear and loathing
       become established parts of Europe's intercourse?

Conclusion: Europe at a crossroads

   The Eurozone's faulty foundations revealed themselves first in Greece,
   before the crisis spread elsewhere. Five years later, Greece is again
   in the limelight as Germany's sole surviving statesman from the era
   that forged the euro, Dr Wolfgang Schäuble, has a plan to refurbish
   Europe's monetary union that involves jettisoning Greece on the excuse
   that the Greek government has no `credible' reforms on offer.

   The reality is that a Eurogroup sold to Dr Schäuble's Plan, and
   strategy, never had any serious intention to strike a New Deal with
   Greece reflecting the common interests of creditors and of a nation
   whose income had been crushed, and whose society was fragmented, as a
   result of a terribly designed `Program'. Official Europe's insistence
   that this failed `Program' be adopted by our new government `or else'
   was nothing but the trigger for the implementation of Dr Schäuble's

   It is quite telling that, the moment negotiations collapsed, our
   government's argument that Greece's debt had to be restructured as part
   of any viable agreement was, belatedly, acknowledged. The International
   Monetary Fund was the first institution to do so. Remarkably Dr
   Schäuble himself also acknowledged that debt relief was needed but
   hastened to add that it was politically "impossible". What I am sure he
   really meant was that it was undesirable, to him, because his aim is to
   justify a Grexit that triggers the implementation of his Plan for

   Perhaps it is true that, as a Greek and a protagonist in the past five
   months of negotiations, my assessment of the Schäuble-Lamers Plan, and
   of their chosen means, is too biased to matter in Germany.

   Germany has been a loyal European `citizen' and the German people, to
   their credit, have always yearned to embed their nation-state, to lose
   themselves in an important sense, within a united Europe. So, setting
   aside my views on the matter, the question is this:

   What do you, dear reader, think of it? Is Dr Schäuble's Plan consistent
   with your dream of a democratic Europe? Or will its implementation,
   beginning with the treatment of Greece as something between a pariah
   state and a sacrificial lamb, spark off a never-ending feedback between
   economic instability and the authoritarianism that feeds off it?

    "Elections can change nothing" and "It is the MoU or nothing",
   were typical of the utterances that he greeted my first intervention at
   the Eurogroup with.

    Moreover, if the Greek state had been barred from borrowing by
   Dr Schäuble's budget commissioner, Greek debt would still have piled up
   via the private banks - as it did in Ireland and Spain.

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