Leadership-Starved EU Heads for Oblivion

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Lurking behind the calamitous state of the euro is a profound political crisis confronting the European Union. The slide of the euro on the money market signals the possibility that the EU may not survive its sovereign debt contagion in its present form. However, European policy-makers refuse to acknowledge their own responsibility for this problem and are reluctant to adopt any decisive action to contain it.

Policy-makers are often drawn towards the cultivation of responsibility avoidance. However, EU functionaries have perfected the practice of responsibility avoidance and transformed it into an art form.

In previous years when I talked to insiders in the Brussels belt-way they often went to great lengths to lecture me about their disappointment with British euro-sceptics. During the months following the first stage of the euro-crisis, their disappointment shifted its focus to Germany. All of a sudden German unilateralism became the spectre haunting the EU political class. At times one even heard the suggestion that the Germans were deliberately attempting to transform Europe's little economic difficulty into a major crisis in order to extend and consolidate their influence over the entire continent.

That was then. In recent weeks, after the downgrading of Portugal's sovereign debt to junk status, EU group-speak mutated into a frenzy of invective against the big three American credit rating agencies, Moody's, Standard & Poor's and Fitch. All of a sudden these three American credit agencies were accused of malevolently conspiring to destroy Europe. The president of the European Commission, Jose Manuel Durrao Barroso, swiftly assumed leadership of this depressing blame game and condemned Moody's for being responsible for Portugal's economic predicament. He denounced the company's analysis of Portugal's financial crisis as biased and speculative.

Barroso's refusal to confront Europe's financial crisis is shared by a significant section of the EU political establishment. But this analysis is rarely put forward with conviction by its advocates. Indeed in recent weeks the impression I gained when talking to people in Brussels is that they sense that Greece is only the beginning and that what is at stake is not only the euro but the whole EU project. I have visited Brussels regularly during the past five years, but this was the first time that my interlocutors appeared to signal their fear that the euro crisis was more than a financial one. It represented the end of an era.

Since visiting Brussels last week, the euro slid further on the money markets and Italy shows every sign of becoming the new Portugal, if not the new Greece. However, what's really fascinating about developments is not the financial crisis but the political paralysis of EU policy-making. Typically politicians are pointing the finger at each other. Italian President Silvio Berlusconi has openly clashed with his Finance Minister, Giulio Tremonti, though no doubt they agree that an American credit rating agency is to blame for exposing the mess that the Italian economy is in.

The rhetoric of responsibility aversion among policy-makers in the EU is underpinned by the realisation that their institution lacks the authority and the political resources to deal with the current crisis. It is important to remember that the EU is a technocratic institution that has always responded to new challenges through cobbling together behind-the-door deals. From its inception, the EU was an elitist managerial project that was able to construct and promote its agenda without having to directly respond to popular pressure. Decisions are never arrived at through public debate, and the majority of EU laws are formulated by the hundreds of secret working groups set up by the Council of the EU. Most of the sessions of the Council of Ministers are held behind closed doors and the EU's unelected European Commission has the sole right to put forward legislation.

The most distinct feature of the EU's governance is that it is systematically pursued through the principle of insulated decision-making. For decades the EU political establishment has self-consciously constructed institutions that could insulate them from the necessity of having to respond directly to the type of public pressure faced by a democratic parliament. The EU's invisible decision-making allowed a variety of political actors in Brussels and in the national capitals to avoid taking responsibility for unpopular decisions. In effect, policy-makers were insulated from having to account for the consequences of their decisions.



While insulated decision-making served as an excellent administrative convenience for avoiding responsibility, it also eroded the EU's capacity to respond to unfolding events. The slowness with which EU ministers responded to the crisis caused by the eruption of a volcano in Iceland last year exposed a failure of responsible decision-making. The unnecessary shutting down of European airspace was an act of a political establishment estranged from the ethos of leadership.

But this all pales into insignificance in comparison to the present financial crisis. The pre-requisite for dealing with the decline of the euro is crisis management exercised through political leadership. It requires that political leaders actually tell it like it is and go out and win support for the painful measures required to restore economic stability.

Political leadership is not simply a desirable option. Without winning over a significant section of the European electorate it will prove extremely difficult to restore financial order in Europe. Regrettably, the EU establishment lacks the capacity to offer such leadership. Policy-makers who are used to behind-the-scenes manoeuvring are rarely able to re-invent themselves as persuasive leaders.

It is ironic that even today there are many EU apologists who refuse to acknowledge the negative consequences of this institution's democratic deficit. Amartya Sen, the Harvard University professor and a Nobel prize-winning economist, recently accused the credit rating agencies of undermining legitimate governments and for the marginalisation of the democratic tradition of Europe. He takes strong exception to the unopposed power of rating agencies and their power to issue unilateral commands. Typically, he is oblivious to the unilateral commands of Brussels. No doubt the rating agencies have their own agenda and are no more democratic than the European Commission.

But good on them for forcing the EU to face the real world.

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