Italian Prime Minister Matteo Renzi gave an interview to the Financial Times shortly before Christmas to criticize the impact that successive waves of austerity are having on political stability in southern Europe. The interview had particular resonance in the aftermath of the Spanish national elections. Spanish Prime Minister Mariano Rajoy was in many ways Europe’s ‘best’ student in terms of economic policymaking. Rajoy not only narrowly escaped the doom loop that tied the fate of the Spanish government to the solvency of its banks, but he also avoided the indignity of falling under official European economic tutelage. He has not always does as told by his European counterparts but his government is often held us as a model of successful macroeconomic adjustment and fiscal consolidation in the face of crisis. His ‘reward’ has been a splintering of the Spanish electorate and a hung parliament. For Renzi, the fate of his ‘friend Mariano’ is an inevitable consequence of Europe’s obsession with austerity.
Author / Erik Jones
Lessons from Greece? Individuals Matter
European integration is a process that derives from broad social movements. We look for its origins in the terrifying experience of the twenty years’ crisis, bookended by two cataclysmic world wars. ‘Europe’ is not necessarily a rejection of the nation state, but it is an attempt to rescue the nation state from its inherent limitations and vices. It is a forum within which France and Germany can reconcile their differences; Britain can adapt to its relative decline; Southern Europe can find a bulwark for democracy; and Eastern Europe can emerge from communism.
But Europe is made by people and sometimes individuals can play a decisive role. The events of the past summer are a good example. There are many prominent scholars who have tried to cast the Greek crisis as some kind of clash of economic cultures or institutional path dependence gone wrong. Those arguments have merit. But they do not capture the essence of what happened; they fail to explain how Europe came so close to disaster; and they make it harder to anticipate what could still go wrong.
Europe’s Banking Union: ‘Failing Forward’?
Between the euro crisis, the refugee crisis, tensions within the single market, and anti-European political extremism, the European Union appears on the surface to be failing. This isn’t quite true though. Every time Europe faces a setback, it tends to make progress in response. This progress is usually only partial (or incomplete), but it is enough to lay the foundations for more comprehensive solutions to emerge in the future. What looks like failure is actually ‘failing forward’, a dynamic that Dan Kelemen, Sophie Meunier and I examined in a recent article in Comparative Political Studies. The latest incarnation of this concept is the recent developments – or lack thereof – at the December 2015 European Council summit, which was supposed to shore up European financial markets by pushing ahead with the construction of common institutions to safeguard European banks.
Europe’s Controversial Single Market
When critics want to explain why the European Union (EU) is in crisis, they usually point to the euro or the Schengen Agreement. These are areas of vital national sovereignty, they argue. A government without a currency cannot preserve its national competitiveness and has no status as a lender of last resort. A government that cannot monitor its borders cannot stem the flow of illegal workers, criminals, and terrorists. There is merit to both of these arguments but they miss the deeper point. Europe’s problems do not originate in money or migrants; they stem from the single market.
The Power of Language
Ideas matter in politics and public policy. Sometimes, however, language matters more. To see this, you only need to think about the distinction between the idea you have in your head and the interpretation it gets when you try to explain it to someone else. Now get them to say it to someone else, and so on. The people who hear you first-hand can repeat what you have said almost verbatim and yet the meaning is distorted, if not immediately then quickly as it passes down the line. The simplest idea – simply expressed – is no match for the telephone game. Hence the goal in political communication is to choose language that has predictable reverberations. The power lies not so much in the words themselves as in the underlying pattern they create through repetition. The message is coded in memes.
Political Risk
In August 2016, SAIS Europe will inaugurate a new Master of Arts degree program in political risk analysis – called the ‘Masters of Arts in Global Risk’. It is a thirteen-month program taught in Bologna, Italy that includes a three-month practicum as a final project. The goal of the program is to help students to develop the analytic skills in economics, political science, history, law, and international relations necessary to work with clients to understand the world around us. It is a practical application of the social sciences. And it is a great potential source of added value for our students. This degree is currently accepting applications. The deadline for applications is 7 January 2016.
The UK Referendum Debate
British Foreign Secretary Philip Hammond was in Rome yesterday, 25 November, outlining his government’s strategy for reforging the relationship between Great Britain and Europe. The event was hosted by the British embassy in cooperation with the Istituto Affari Internazionali (IAI).
Central Banking Divergence Means Market Volatility
There are three divergences in the art of central banking. The most obvious is between the monetary tightening expected in the United States and the loosening expected in Europe. A second divergence is between the prudential oversight of the banking system and the conduct of macro-economic demand stabilization – particularly quantitative easing. A third divergence is between the communication of forward looking policy intentions and the practice of monetary policy decision-making. Each of these divergences acts as a constraint on the conduct of monetary policy; the juxtaposition of all three increases the risk of significant market volatility.
Matteo Renzi’s Liberalism of the Left
Italian Prime Minister Matteo Renzi delivered his ‘Manifesto for 2016’ in a long speech to the parliamentary factions of the Partito Democratico on 3 November 2015. Il Foglio published an editorial on the manifesto some days later alongside a full text version of the speech. The paper also invited a few reactions from outside observers. The English-language version of my comment is below. The Italian-language version was published in Il Foglio this morning (10 November).
Continuing European Economic Vulnerability
The European Commission’s autumn economic forecasts paint a bleak picture. The headline is cautiously optimistic. European growth is moderating but should improve in the forecast period thanks to an accommodating monetary policy, a neutral fiscal stance, and a gradual relaxation of ‘headwinds’ coming from other parts of the globe. The analysis itself is more troubling. European growth relies excessively on external markets; price inflation will recover as commodity prices stabilize at low levels; and monetary policy accommodation in Europe contrasts with a gradual tightening in the United States with uncertain implications for market volatility and global capital flows. The bottom line is that things may get better and yet then again they may not. Although the authors of the forecast would argue otherwise, this is not a message that offers much hope.
