A snapshot of a moment in history:November 10, 2011.
Global stock markets are falling. The yield on Italian bonds continues to rise.
A German newspaper reports that Chancellor Angela Merkel is going to float the idea of re-writing the rules governing the euro zone at her Christian Democratic Union party meeting next week.
At present there is no mechanism for countries inside the euro to leave.
Merkel reportedly wants a new treaty provision that defines the ways in which a nation can leave – or be asked to leave – if it doesn’t meet the basic conditions of euro zone membership.
You want to know the basic conditions?: an annual budget deficit no higher than 3 per cent of GDP and a national debt lower than 60 per cent of GDP. Italy’s debt is currently 120% of GDP. Got the picture?
The German newspaper report leads to intense speculation by normally reliable analysts that Merkel and her French partner Nicolas Sarkozy are planning to break up the euro zone.
And in the countries that sparked the crisis, Greece and Italy, the politicians are still unable to get to grips with themselves in a way that might just calm things down a little.
Greece was expected to name a new Prime Minister on Monday … as I write, we’re still waiting. Italian Prime Minister Silvio Berlusconi has yet to name the date of his departure and is angling to hand pick his own successor.
It must have been like this in August 1914. Seemingly serious people stumbling along a path that they had to know would lead to Armageddon but somehow incapable of thinking outside the box … and, more importantly, acting on their insights.
It is not just European politicians whose intellectual and fortitudinal limitations have been exposed by this crisis.
The limits of blue-ribbon technocracy seem to have been reached as well. People like Merkel and Sarkozy (and President Barack Obama and Prime Minister David Cameron) are all extremely well-educated. They are surrounded by technocrats from their alma maters. But all the big brains from Harvard, Oxford and ENA and Sciences Po can’t get a grip of the situation either.
These highly educated technocrats act as if a nudge on a number will produce as predictable an effect on economic direction as a nudge on the tiller of a two stroke outboard on a small lake in windless conditions.
Their failure to see the euro zone crisis as an unprecedented combination of politics, economics and history is not surprising. For decades the academy and think-tank worlds have been over-specialised. Interdisciplinary study and knowledge is only grudgingly admired. Yet this is precisely the moment for synthesizers not specialists.
The limitations of journalists have been exposed as well. We live in the age of the meme, the concept that takes on meaning simply through the act of repetition.
In mid-September, at the IMF meeting in Washington, euro zone leaders announced they would increase the firepower of the European Financial Stability Fund. It would be leveraged up to 1.5 trillion euros in value or even 2 trillion. The EFSF would be the “big bazooka” that would insulate Italy and Spain, the too big to fail euro zone economies that were most at risk of contagion from the Greek debt crisis.
Journalists repeated this meme over and over again.
I began to ask sources how you leverage the EFSF, started with 440 billion euros, into a fund worth 5 times that amount. No one could explain it to me.
As the weeks went by and Greece became more of a disaster, the meme was repeated. I kept asking the question. I found out that, actually, the EFSF didn’t have 440 billion any more, because a couple of hundred billion had already been pledged to Portugal, Ireland and Spain.
Still journalists repeated the meme. Merkel and Sarkozy and their technocrats repeated it until they thought it had become real.
Then last week at the G-20 summit, the meme bubble was burst. No one wanted to participate in a scheme to boost the EFSF. Not the U.S., not China, not the IMF.
Now there is a new meme combining technocratic thinking and journalistic simplicity: the European Central Bank must step in and print money to help bail-out Italy.
Technically that may be true … but everyone proposing it knows that it can’t happen in time to stave off the markets devouring Italy … especially if Berlusconi stays in office past this week.
Like I say, August 1914. Maybe the simile comes into mind because tomorrow is the 11th day of the 11th month – the day the war sparked in that August long ago was finally ended. The world in which it started no longer existed.
And, I am aware that no armies are going to be deployed if the euro collapses but I am talking about August 1914 as it has evolved into a historical metaphor: an old order is confronted by a crisis. It’s leaders are in-bred and inexperienced and incapable of any fresh thinking. They see their world slipping away and shake their heads, sip a glass of champagne (or in the case of the modern world reserve their favourite suite at Davos) and sigh, as, Britain’s Foreign Secretary Sir Edward Grey did in that August so long ago:
“The Lamps are going out all over Europe. We shall not see them lit again in our time.”
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