If you go out in the markets today, you are sure to meet a bear. And all the bears will be pondering the same philosophical question: if a bank fails, can it do so silently, or will the whole forest burst into flames?
All of the articles one reads offer the same handwringing condemnation of pusillanimous politicians and inevitable calamity. Yet, historians examining the same papers will come to radically different conclusions. What realistic choices do Eurozone participants have? They do not have control of the money supply. This belongs to the European Central Bank. They are unable to exercise full sovereignty. That was given away. All policy decisions require the unwieldy and unanimous commitment of all Eurozone members. Leadership and action are not words that could be associated, even remotely, with this set-up.
A radical response would be political suicide, entailing a dilution of fiscal responsibility and a further surrender of democratic sovereignty. The latter has been argued for by the bureaucrats and central bankers, pushing for even less accountability over budget and taxes from elected representatives. Such a move would usher in an illiberal confederation. None of the political classes have the courage to break with this structure, yet.
Since muddling through by consensus is the realistic policy response, criticism should flow from the ground chosen. Even on this narrower platform, the Eurozone members have proved to be a hapless bunch. Their play book is predictable and whatever firebreaks are built, only postpone the contagion.
This does raise the important question: was the run on the € inevitable from a certain date? Would we have entered contagion without the pavane of promise from politicians, who feel dutybound to undertake the dance of the dead with their zombie banks? Could a proper accounting of sovereign debt after 2008 have averted this endgame? We will never know.
It is the teasing out of structure versus action that raises an historian's game. Talk of economic determinism and a dysfunctional currency union ignores the ability of states to place politics over economics, even at great cost. Such arguments also dilute the responsibility of a political elite for the consequences of their mistakes (which we are all paying).
Now we are just awaiting triggers and that depends upon a butterfly, whose wings have already flapped.
