Banking on the system

Bancos

Portuguese banks have been on the news a lot lately. From the parliamentary inquiry hearings on the sale of Banif to Spain’s Santander, to the complications in the BPI deal between the also Spanish Caixabank and the company owned by Isabel dos Santos, daughter of the Angolan dictator José Eduardo dos Santos, it’s impossible to read a newspaper or watch TV without stumbling on some piece about the Portuguese banking system. A few years ago, as the American subprime crisis began to spread across the Atlantic, I remember hearing many commentators praising Portuguese banques for their lack of exposure to those toxic assets in particular. But as it turned out, the Portuguese banking system was exposed to the bursting of two other correlated bubbles: the portuguese sovereign debt and the politically-incentivised internal credit bubbles that blew up as the subprime crisis turned into a global financial one.

Banks had to be either bailed out or receive governmnetal (via “troika” loans) financial assistance, and Banco Espírito Santo’s (BES) less than clear (to put it mildly) practices moved under the eyes of the law, and the fragility of the system as a whole has become obvious to even the most casual of observers. A few months ago, after the in-effect-bankrupt Banif was bought by Santander, many in the country expressed their fears of a Spanish takeover of the system. Those concerns, although understandable from their point of view, are themselves a concerning sympton of the disease that ails the Portuguese economic and political systems: as shrewd commentators like Luciano Amaral and Luis Aguiar Conraria noted, the country’s economic and political establishments are less than enthusiastic about foreign investors from countries like Spain stepping into Portugal’s banks because that might break up the cronyism in which they have operated for decades. As Amaral wrote, even though Portuguese banks – all of them – are badly in need of capital and new investors due to their dire financial situation, the establishment seems reluctant to accept the “Spanish invasion”, in a way it doesn’t seem to be about the Angolan or Chinese ones either in the banking system or other áreas of economic activity – maybe because this countries and their business establishments seem more accepting of our crony ways (it is true that the current government kind of forced the Caixabank takeover of BPI, but only after the ECB demanded – “raised concerns”, in oficial parlance – the bank to reduce its exposure to Angola, and after the deal it brokered between Caixabank and Isabel dos Santos fell apart, no one really knows why or how, exactly).

The case of Caixa Geral de Depósitos (CGD), the government-owned bank and the country’s largest, is illustrative of the establishment’s attitude towards the Portuguese banking system.Much like its competitors, CGD got a hefty loan to climb out of its capital predicament when the “troika” arrived in 2011 – which it hasn’t yet repaid – and is in desperate need of another capital injection, which the government doesn’t have the means to perform. And yet, whenever anyone in the establishment speaks about CGD, their concern lies in stressing the “importance”of CGD keeping its “public role”.

The last one to do so was the newly-elected President, Marcelo Rebelo de Sousa. Marcelo – as he is commonly referred to – was at the bank’s anniversary ceremony, and stated that “CGD as a public financial institution, under government control, is a fundamental piece of the portuguese financial system puzzle”. In a sense, he was absolutely  right. Apart from being an excelent instrument with which government politicians can offer comfortable and well-paid employment to at least a few of their political friends, CGD is also a powerful tool with which governments of all parties can interfere in the country’s economic life, at the service of their whims or obscure interests. That was what happened a few years ago, when the government led by the Socialist party’s José Sócrates used CGD to loan a lot of Money to businessman Joe Berardo and a few others so they could tae control of BCP and place someone more in tune with the government at the helm of that particular bank. It was also what happened whenever governments used CGD’s role as a shareholder of several private (or privatised) enterprises in order to circumvent the european restrictions on governamental intervention in such companies, and thus impose their political will in deals in which the free market would have been inclined to pursue another direction. The case of Sonae’s attempt to buy Portugal Telecom (PT), blocked by CGD also under the government of José Sócrates, is just another one, easier in hindsight to remember since  PT’s criminally suspect dealings with – among others – BES became public knowledge.

Furthermore, as Miguel Botelho Moniz, Carlos Guimarães Pinto and Ricardo Gonçalves Francisco wrote in their book, CGD is also a fundamental instrumental for their private-owned competitors to ensure that their competition will always be limited and that at least a quarter of the market share will be “complacent” with their own interests: if by some miracle CGD ended up being privatised, European competition rules would compel the government to sell it to someone “without a strong presence in Portugal”, which in turn and by virtue of their position would practically be forced to “develop a more aggressive commercial policy” that would create “further difficulties to the rest of the banks” and end the “existent oligopoly”. Altough a theoretical competitor of those private banques, CGD is, due to the crony nature of Portuguese business, an integral part of the network of interests’ protection that characterises the country’s banking system.

And that is why the President, although right in claiming that a government-owned Caixa is “fundamental” to Portugal’s banking system, is not right in considering that to be a good thing. That financial system  as a whole and the role CGD plays in it are a definitive exemple of the nefarious effects of the simbiotic relationship between the State and economic “interests”. Claiming to act on the behalf of “public interest” in detriment of “private egotisms”, the government, by way of the bank it owns, ends up substituting the market of free initiative and competition between the individuals and groups they form with the “market” of political influence, in which what triumphs are the “egotisms” of the private parts who happen to have privileged access to the corridors of political power, whether because they are a member of the political party in power or because they own or belong to a business interest that has something to offer to the government, under the “I’ll scratch your back, you’ll scratch my back” principle of political-business reciprocity.

That’s why, with a financial system on the verge of collapse, the Portuguese political and economic establishment is worried, not about the consequences of the way in which it has been operating, but about ensuring that no disruption to that way of operating has any chance to do so. The establishment is banking on keeping the financial system with all its pernicious characteristics intact, because it’s own power depends on them remaining intact.  The country as whole, on the other hand, would clearly benefit from a shake up of things. Unfortunately, if one does indeed end up coming, I fear it will only happen due to a catastrophic collapse of the current system and all that would entail, and not through awilling reform of the old ways.

Bruno 2014Bruno Alves lives in Caxias, Portugal, but sometimes wishes he didn’t. He writes about politics, film and TV for O Insurgente, is an op-ed contributor to the Lisbon daily Diário Económico and a weekly commentator for its cable TV channel ETV, and has written for the American online film magazine Bright Wall/Dark Room, for These Footbal Times and for the British website CapX. Bruno welcomes both writing job offers and insults at alves.bm@netcabo.pt, and you can also find him on Twitter @ba_lifeofbruno.

Advertisements

Keeping Up With the Candidates

What happens when politics turns into “reality” TV

keeping up with the candidates

Somewhat belatedly, I’ve been reading Julia Azari’s article on Bernie Sanders’ and Ted Cruz’s “electability” (or lack thereof) in this year’s American Presidential election. More than whether they are “electable” or not, I was interested in the article because this concern with “electability” – the idea that some candidates are inherently better or worse general election candidates than others – is something that I find deeply worrying about modern politics, not just in the United States but also here in Portugal: whenever a political party, be it in the United States, in Britain or the United States, selects a political candidate for any political office, their first concern – if not their only concern – seems to be whether said candidate can beat their opponents. Although understandable – parties naturally aim to win elections –  the current excessive focus on “electability” in selecting a political candidate changes the nature of the political process, and not for the better.

Take the American presidential election:  given the candidate’s troubled relationship with words and both their meaning and veracity, when Donald Trump scheduled a press conference on the day after a major Republican debate with Super Tuesday just around the corner, promising a “big announcement”, one couldn’t be blamed for being skeptical of how worthy of attention such an event would be. But in a campaign in which the unexpected has become the rule, Trump surprisingly delivered on his promise: as he stood behind a lectern and in front of the cameras in the Forth Worth Convention Center, Trump had Chris Christie by his side, the former Presidential candidate and current Governor of the State of New Jersey ready to formally – and shockingly – declare his endorsement of Trump’s candidacy to be the Republican Party’s nominee in this year’s race to the White House.

“I am proud to be here and endorse Donald Trump”, he began, before praising the New Yorker for his friendship. “Donald Trump is a person who when he makes a promise, he keeps it”, Christie proceeded, before going for what a football color commentator might describe as his “shot play”: “the single most important thing for the Republican party”, Christie claimed, “is to nominate the person with the best chance to beat Hillary Clinton”, and “the one person Hillary and Bill Clinton do not want to see on that stage, come next September, is Donald Trump”. “Undoubtedly”, the Governor said in a forced tone betraying his need to convince himself even more than the audience, “the best person to beat Hillary Clinton in November is Donald Trump”.

Almost immediately, the media jumped on Christie for his hypocrisy and careerist opportunism. After all, he had once claimed Trump “has not the first idea of how to run a government”, and he was now telling the American people they should vote for him; he had once stated that it was essential for the United States to reform Social Security, and he was now supporting a candidate who claims that America is going to be so rich that Social Security won’t be a problem anymore (a statement Christie himself mocked every chance he got); he had once nominated a Muslim judge to a New Jersey court, and he was now standing beside a man who thinks every Muslim should be prohibited from entering the country. But even those criticisms failed to pinpoint the true significance of Christie’s statement: he claimed, very clearly, that the single most important thing for his party was to nominate the person who would be better positioned to beat the Democratic candidate; it didn’t matter to Christie if that person promises to do the exact opposite of what he repeatedly said was necessary for America – all it matters to Christie is that he wins. In the Forth Worth Convention Center, Christie had said, without room for any misunderstanding, that one should vote not for who would be the best President if elected, but for who is the best at running for President during the campaign.

In that, Christie’s endorsement of Donald Trump was one of the most symbolic moments of campaign as a whole. Perhaps more than ever before, the 2016 primaries show the transformation of the electoral process from a competition for who will be a better office holder into a competition for who is the best campaigner.

In a recent interview, former British Prime Minister Tony Blair admitted his bafflement with the popularity of both the Vermont Senator and Democratic candidate Bernie Sanders and Blair’s successor as leader of his country’s Labour Party, Jeremy Corbyn, because of “the question of electability”: one person may approve of what candidates like Sanders say, but not everyone will agree, and any political candidate needs to “get the support to win in order that you can do things for the people that desperately need help”. Blair, in a sense, is obviously right: if a politician does not ascend to a position of power, he won’t be able to do what he believes in, and so a voter needs to consider his or hers prospects of convincing the greatest number of people that he or she will be the best office holder. But Blair is wrong in insinuating that it is somehow odd for such a great number of people to support an “unelectable” candidate like Sanders, for what should it matter to a Sanders supporter who believes – for example – Clinton’s ties to Wall Street would make her a bad President if she is likelier to get to the White House? What should it matter to a Rubio supporter if Trump is more effective in attacking Clinton, if that same Rubio supporter disagrees with Trump on every subject? If it is true that a politician needs to “get there” first in order to do some good afterwards, it is also true that no good will come of a politician “getting there” if the policies he or she will enact turn out to be detrimental to the country’s “best interests”. People who believe in Sanders don’t care (or care less) about is “unelectability” because they believe Clinton’s “electability” won’t translate into positive policies for the country’s future.

Blair may find “one of the strangest things in politics at the moment” that “when you put the question of electability as a factor in your decision to nominate a leader, it’s how small the numbers are that this is the decisive factor”. But if one follows the politicians, their debates and the media coverage of them, their “electability” and their respective abilities to manipulate it (their “campaigning skills”) are all that matters.

Marco Rubio, for one, was personally introduced to this reality during the New Hampshire primary. Christie – him again – was unfavorably comparing Rubio to President Barack Obama, probably the last thing the Florida Senator wants to see incepted into people’s minds. On the defensive, Rubio felt the need to distance himself from the man he wishes to replace, and proceeded to say “let’s dispel with this fiction that Barack Obama doesn’t know what he’s doing. He knows exactly what he’s doing”. Christie, as he is wont to do, jumped on it, mocking Rubio for repeating a line he constantly uses on his stump speeches. Somewhat ineptly, Rubio responded to this by once again repeating his line. Christie once again mocked him for it, and Rubio once more responded by repeating the line. “It looked like that sequence form the 1970’s thriller the Stepford Wives”, wrote Jonathan Freedland for The Guardian US, “when a software glitch reveals that a human-like character is in fact a robot”. Astonishingly, he actually managed to makes matters worse just a few days later, when in a campaign event in Manchester, he flubbed a line about raising his children in the 21st century, repeating it over and over, until the sentence made no sense at all. Ever since, Rubio was never able to establish himself as a leading Republican candidate, nor as the clear alternative to Trump.

Jeb Bush too fell victim to poor campaigning. After he dropped out of the race, The Guardian US ran a story on – an obituary of, really – his presidential hopes, claiming “the cracks in Jeb Bush’s candidacy for President surfaced before he formally entered the race”, when, in an interview with Fox News’s Megyn Kelly he failed to convincingly answer a question about what he would have done about Iraq “knowing what we know now”. Throughout his unsuccessful bid, Bush was bullied by Trump for his last name, his ties to the establishment and to big donors, and for generally looking “weak”. The moment in New Hampshire when he followed a few of his lines with asking his audience to “please clap” reinforced his perceived haplessness.

Chris Christie too was no stranger to being looked over as a prospective President simply for underperforming as a presidential candidate. Trump also called him “weak” (there’s probably not a single human alive who “the Donald” does not consider “weak”), and “a little child” (for hugging President Obama after Hurricane Sandy, a picture that still hurts him with Republican voters), and last December he was discouraging people from voting for Christie on the basis that “he can’t win because of his past” and the weight of the “baggage” he carries around.

This phenomenon is not an exclusive of the Republican campaign. Hillary Clinton, despite seeming to be on the verge of getting the Democratic nomination, is still dealing with concerns about her “electability”. An Annie Parnes story in The Hill quoted “people in Clinton’s orbit” who were “worried she doesn’t pass the would-you-like-to-have-a-beer-with-her test”; in The Atlantic, Ronald Brownstein argued that her trouble in “connecting with young voters” would “pose a greater challenge if she wins the Democratic nomination”, considering this would be the first election in which “the Millennial generation will nearly equal baby boomers as a share of eligible voters, and Democrats need big margins from those young people”. As Christie seemed to insinuate in his endorsement of Trump, Clinton’s last name and closeness to “the establishment” would also make her an imperilled prey of Trumps populist rhetorical assaults. So it’s no surprise that Bernie Sanders has stressed that “electability matters”, and declared himself – no surprise there – as the more “electable” one, given his “substantial advantage over Republicans in the general election versus Secretary Clinton”.

Clinton, on the other hand, says it is the Vermont senator who wouldn’t be able to beat a Republican in a general election, and who would also hurt “the party’s prospects to win back the Senate and make inroads on Republicans’ wide House Majority”.

This extraordinary focus on electability and the campaigning skills of each candidate is a by-product of the political process’s much-mentioned-yet-little-understood growing resemblance of to “reality” TV: just like “celebs” nowadays are “famous for being famous”, political candidates run for office on a platform of being good at running for office.

There has always been a component of theatricality and performance in the pursuit and exercise of political power, as anyone with even the vaguest notions of Ancient Roman history or of the societal mores of the Versailles court will understand. As democracy slowly substituted other systems of selecting those who should hold the responsibility of public office, the need for performative talents became even more paramount. Whether it was the skilled oratory displayed in a parliament or in the bully pulpit, or the incantatory radio voice of a Roosevelt or a Baldwin, the human race did not have to wait for television to arrive for a politician with any aspirations to have to be a showman in one way or another.

What television did, however, was to bring the hitherto distant politicians into our homes, and more importantly, to our level. Radio had already made possible for the political leader to communicate directly with the anonymous voters in their own domestic comforts, but still did so in a way that reinforced at every moment the superiority and authority of the speaking pastor over the listening flock. Television, on the other hand, shows us the would-be leaders as “people like us”, who the more – or less – they appear to be like us, the better – or worse. On the one hand, television affords political candidates an immense power, that of communicating directly with huge numbers of people. On the other hand, it makes them wholly dependent on the latter’s perception of them, and on the narratives construed by the media around their personas. Just like “reality” TV stars are dependent on the audience’s perception of them and the narrative the producers of the show they’re in concoct around them. And the more political campaigns have become 24/7 television news-cycle and social media events, the more they adopt the grammar of “reality” TV.

A few years ago, the Kentucky essayist John Jeremiah Sullivan was assigned by GQ to spend a few days with some former Real World cast members on their “appearances” circuit. In the resulting piece he wrote for the magazine, Sullivan noted how “reality TV has successfully appropriated reality”: “you’re watching people caught in the act of being in a reality show”, which is “now the plot of all reality shows”. It’s the same with campaigning politicians: there must have been a time, way back when, when politicians campaigned in order to be elected to the office they were running for, but the act of campaigning was only a necessary effort to showcase the candidate as a prospective office holder; as years and years of modern, TV-and-internet-covered campaigns have established their own vocabulary as a variant of a “reality” show, the candidate no longer presents himself – nor is he evaluated – as an office holder to be; he is seen as a candidate, covered and evaluated for the way he performs the choreography we have come to expect of someone in his position, just like we have come to expect new Real World cast members to fall into one of the categories established in previous seasons of the show, as writer Chuck Klosterman observed many years ago in his book Sex, Drugs and Cocoa Puffs. Supposed “reality” competitions like American Idol are in fact competitions to find out which contestant better replicates – that is, better fakes – our preconceived ideas of what a “star” is, of what an American Idol winner should look, sound and behave like. They might be lauded for their authenticity, but only inasmuch as it resembles the “authentic” ways in which previous winners presented themselves and managed to capture the voters’ sympathies. Likewise, campaigns are no longer devised to make us see what a candidate will be like if and when he gets elected – what his policies and choices are likely to be – but are instead meant to showcase how well does he overcome hecklers’ challenges, how craftily he manages to give an endless amount of speeches without ever saying anything with even the slightest vestige of meaning.

Klosterman once described Survivor, probably the most influential of all “reality” TV shows, as “a popularity contest based on lying”. Anyone who watched and remembers the season won by Richard Hatch will understand why: he approached the game with a strategy built on betraying people, and managed to beat the athletically superior rival by convincing the people he had betrayed that he deserved to win for betraying them: Sue, another contestant, compared Hatch to a “snake” that had treated the other participants – including herself – as “rats”, and then proceeded to announce she would vote for him to win precisely because he had acted like a “snake”. As elections and the campaigns that precede them have grown more and more like “reality” TV, we have come to think and behave more and more like Sue from Survivor: as the TV critic for The New York Times James Poniewozik recently wrote on Twitter, one of the keys to understand Trump’s popularity lies in his willingness to say and do things just “to win”, just because “it’s part of the game”, and in the voters’ “acceptance” – not to say embrace – of his attitude. In the political-campaigns-as-Survivor era, we too tend to admire the manipulator, the “Richard Hatchs”, the “Parvatis” and the “Todds” and “Courtneys” of the political world. Campaigns are now meant to show us men and women competing for who is better at deceiving us; we know that they are deceiving us; but because the mediated grammar of modern political campaigns has appropriated political life as much as the language of the Real World has appropriated the actual real world, we end up falling for the very deceit we are fully aware of being playing on us; we become as “complicit in the falseness of it all” as Sullivan noticed we had become about “reality” shows.

Klosterman argued that there was a paradox inherent to any “reality” show: “they have a nonfiction situation that is supposed to have no relationship to other nonfictions” – Real World cast members act as if their behaviour is not a replica of the behaviour of previous Real World cast members. Political campaigns have the opposite problem: they are a nonfiction – the day-to-day tasks of someone running for office – that is supposed to have a relationship with other nonfictions – the reality of daily life in a political community and the problems affecting it which the candidate purports to ameliorate if he wins the race – but said relationship is consciously faked: the candidate’s seeming nonfiction – his campaign – only pretends to be addressing anything that has something to do with the nonfictions of voters’ lives, thus turning political campaigns into fictions with an artificial relationship to other nonfictions.

Even people who are not familiar with the concept of postmodernity or its meaning are fluent in its vocabulary: because we live in a world that is inundated with “narrative” – a neatly organized simplification of the complexity of the world before us, a “story” presented to us in order to make some sense out of the multiple and random events of everyday life – we are aware that we are judging a product – a fiction – when evaluating a political candidate. We as voters have a cynical detachment from politics, because politics presents itself to us in a manner – a format – that invites cynicism and detachment.

Immediately after Rubio’s New Hampshire debate nightmare, @RubioGlitch already had its own twitter account, and Rubio had turned into a meme himself, likely dooming a campaign that probably never had enough chances of succeeding. But in mocking – and judging – Rubio for making a mess of his lines, with no consideration – either positive or critical – of his proposed policies, we made sure that the true – and more troubling – “glitch” is not Rubio’s, but that of democracy: in judging candidates not on the merits – or lack thereof – of their views, but instead on the quality of their performance, we judge them not as the future Presidents a democratic system presupposes us to evaluate them as, but as characters; we judged them based not on how good they would be for the country, but on how good they are at advertising themselves as product; we think like casting directors, not like voters; we turn real democracy into “reality” democracy, an approximation of the actually real thing that, while mimicking it, fails to be it.

In an essay in defence of reality TV, the great Heather Havrilesky mentioned Joe Schmo, a reality show that aired a few years ago, whose second season consisted of having two contestants fooled into thinking they were participating in a Bachelor-type dating show – Last Chance for Love – by a cast of actors pretending to be their potential romantic matches. One of them wised up to the ruse, and was then hired by the producers as an actress for the rest of season, so that the remaining contestant was kept unaware of the deceitful situation he was in. In political campaigns, the voters are the ones being fooled, except that we are fully aware of it, and we keep being a part of the hoax not to dupe someone else, but because we feel the show must go on (thus resembling I Wanna Marry Harry, in which every cast member obviously was aware that the show’s titular character was not actually Prince Harry, and yet kept pretending they did just so they could be on TV). Havrilesky noted how “the process of getting to know the characters, of discovering the qualities and flaws that define them, and then discussing these discoveries with other viewers creates a simulation of community that most people don’t find in their everyday lives”. Maybe it’s the same with our modern political campaigns of the Keeping Up With the Candidates-variety: maybe “real” democracy is just a way for us to convince ourselves that we have more power over our collective destinies then what we – both us voters with our limited influence in the political decision-making process, and the politicians with the various constraints on their ability to affect and improve people’s lives – do actually have. And maybe in that people can find some consolation in the case of a Trump victory in the upcoming election (or that of another “reality” candidate in any election anywhere): even if he does get elected, there are limits to the damage he can inflict.

 

Bruno 2014Bruno Alves lives in Caxias, Portugal, but sometimes wishes he didn’t. He writes about politics, film and TV for O Insurgente, is an op-ed contributor to the Lisbon daily Diário Económico and a weekly commentator for its cable TV channel ETV, and has written for the American online film magazine Bright Wall/Dark Room, for These Footbal Times and for the British website CapX. Bruno welcomes both writing job offers and insults at alves.bm@netcabo.pt, and you can also find him on Twitter @ba_lifeofbruno.

Why The Economist is wrong about sovereignty and the EU

european_union_21768 Even before Boris Johnson had officially declared he would campaign for the “Leave” camp in June 23’s referendum on the United Kingdom’s possible cutting of ties with the European Union, a media circus was already well up and running. But once the Great Blonde Mop of Hair made his case in the print and online pages of The Daily Telegraph, there was no shortage of words of both praise and scorn for the man and the argument he had put forward.

Boris began his article by trying to make clear that “there is nothing necessarily anti-European or xenophobic in wanting to vote Leave on June 23”. Such a course of action, he claimed, would only be an indictment of the “slow and invisible process of legal colonization” of the British (and other EU member-states, I would add) polity “as the EU infiltrates just about every area of public policy”. Ever since “the panicked efforts of Delors, Kohl and Mitterrand to ‘lock’ Germany into Europe with the euro”, Boris notes, “we have seen a hurried expansion in the areas for Qualified Majority Voting”, making it “so that Britain” – and, I would again add, other EU member states – “can be overruled more and more often”. The legislation that comes out of the EU’s machine is, Boris warns, “unstoppable” and “irreversible”, for “it can only be repealed by the EU itself”. And “the more the EU does”, he says, “the less room there is for national decision-making”. “There is only one way”, Boris concludes, “to get the change we need”, “extricating ourselves from most of the supranational elements” of the EU: “that is to vote to go, because all EU history shows that they only really listen to a population when it says no”.

The Economist’s Bagehot blog found Boris’s reasoning to be “shamelessly self-interested and probably contrary to his real views on the EU”. But one line in particular seemed to irritate Bagehot’s anonymous author: that in which Boris claimed the EU’s legislative encroachment led to the “impotence” of the UK’s “elected politicians” and “a loss of sovereignty”, by which he meant “the inability of people to kick out, at elections, the men and women who control their lives”. To The Economist, this idea is the by-product of a conviction “that power should rest only in the hands of leaders elected by and answerable to a nation constituting a demos”, born of an “idealistic definition of sovereignty”.

At first glance, its argument seems persuasive. After all, the Bagehot post author is right in claiming that no country, by its own, can have any “control over the pollution drifting over its borders”, much less over “the security crises propelling shock waves – migration, terrorism, market volatility – deep into domestic life”. Globalization, it is true, makes it so that states have become so interdependent of one another that no single one can be self-sufficient and avoid being affected by others, in turn meaning that without other states no one country can do anything serious about many of the issues that concern their citizens. But to then claim that “if sovereignty is the absence of mutual interference, the most sovereign country in the world is North Korea” and that “in today’s post-Westephalian world real sovereignty is relative”, denotes a much more egregiously flawed “definition of sovereignty” than the one The Economist attributes to Boris Johnson and those who happen to agree with him.

The problem with The Economist’s argument lies in that it confuses sovereignty with power. Globalization, by itself, does not reduce a country’s sovereignty. A country is not any less sovereign by not being able – by being powerless – to put an end to globalized terror. But it is less sovereign if it hands significant powers to enact anti-terror legislation to foreign bodies, and if its citizens find themselves subjected to such laws that run against what their elected representatives believe to be the best for their own country. And that loss of sovereignty matters, for it encompasses a loss of accountability.

As Michael Gove (criticized alongside Boris in the Bagehot post) argued in his own statement on why we he’s backing the “Out” campaign, the loss of sovereignty and therefore accountability necessarily implies the loss of “the ability to choose who governs us, and the freedom to change laws we do not like”. In other words, it means that policymaking becomes less representative and democratic, thus making legislators less concerned with the will and needs of the people who will be subjected to the laws they produce and enact, needing only to focus (more than they already excessively do) on the will and needs of the interest groups that have privileged access to them.

And contrary to what The Economist claims, the fact that in “today’s post-Westephalian world” every country needs to negotiate and compromise with other countries in order to achieve any solution to some of the major problems each of them face, does not make sovereignty and the accountability it allows for any less important. For if it is true that governments and representatives of different countries must agree and therefore compromise on a number of matters with one another, accepting some things they disagree with in order to get other things they do wish to see enacted, that compromise is a sovereign decision, for which the governments and representatives that reached it are accountable to their own people. The latter are then free to reward them if they are happy with the result or, if the content of said compromise is somehow noxious to them, they can punish them and perhaps vote them out in a future election. But if, however, those same governments and representatives are legally unable to reject a piece of legislation which has been presented to them by their foreign peers, and that they consider to be against their country’s best interests, the voters have no way to make their voices heard and their opinion weighed.

That’s the problem with the increasing number of issues now under Qualified Majority Voting in the EU. If and when a country has a “veto power” on a given subject, nothing impedes their political representatives from reaching any sort of compromise with their counterparts; they may very well reach the conclusion that some policies they disagree with should nevertheless be introduced, thus satisfying the wishes of other countries and their representatives, because it will allow them to reach another agreement on another issue that they find even more important. But if and when that ability to veto legislation is taken away from them, that enactment of a piece of legislation that they consider negative is not a choice, but something forced upon them and – more importantly – the voters, who have no choice but to put up and shut up, without any power to punish or reward those responsible for that policy, since those who are accountable to them had no say in its enactment.

This continuous erosion of national sovereignty within the EU has  been detrimental not just to the health of democracy in each of its various member states. It has, in fact, been detrimental to the EU itself: the euro crisis has shown how the democratic will of each of its members can enter into conflict with one another; each of them is equally legitimate, and in all likelihood, each of them is left unhappy: depending on whether they are – for instance – Greek or German, they either protest the lack of solidarity of the other member states, or complain about paying for the “lack of industriousness” of those who complain about their “selfishness”; either way, they blame the EU for forcing them to accept policies they do not agree with. The EU was a stabilizing element in the European continent for decades because it served the interests of those who’d joined it. By taking too many steps too far towards “an ever closer union”, the EU member states – every one of them, not just the UK – lost their ability to protect those interests. And by making itself unable to serve its members’ interests, the EU is making it ever more likely that one day, those countries and their people will no longer be interested in being a part of it.

One may find Boris’s argument that by voting to leave the EU, the UK would get a better deal in a second negotiation ludicrous and deserving of the mockery the Prime Minister threw at it in the House of Commons on Monday. One may think leaving the EU and the uncertainty that would imply, or the international isolation it might produce, would be an even less desirable outcome than the loss of sovereignty and accountability that have come with the “European project” (if my native Portugal held a referendum on leaving the EU or not, I honestly do not know how why would end up voting). One may think that Boris is only taking this position in order to destroy Cameron and replace him as Prime Minister. One may even believe that Boris himself is nothing but a clown. However, his case for the importance of sovereignty and democratic accountability in the legislative process should be taken seriously.

 

Bruno 2014Bruno Alves lives in Caxias, Portugal, but sometimes wishes he didn’t. He writes about politics, film and TV for O Insurgente, is an op-ed contributor to the Lisbon daily Diário Económico and a weekly commentator for its cable TV channel ETV, and has written for the American online film magazine Bright Wall/Dark Room, for These Footbal Times and for the British website CapX. Bruno welcomes both writing job offers and insults at alves.bm@netcabo.pt, and you can also find him on Twitter @ba_lifeofbruno.

Eurosceptics do it better

euroscepticism On December 28th, there was an article in the Opinion pages of The Daily Telegraph that must have filled the hearts of most British eurosceptics with hope. In it, Leo McKinstry argued that “the EU is in desperate trouble”, for its “edifice of federalism is crumbling, broken by its own ruinous contradictions and spectacular failures”: the single currency and the economic policies it implies have, McKinstry writes, created a “political fallout” in countries like Italy, Greece, Portugal and Spain, where extremist parties have earned an ever greater support from the electorate; and the migrant crisis, he warns, is “threatening to tear apart the social fabric of Europe”, as “fiercely anti-immigration, anti-EU movements like the Front National in France, the Dutch Party for Free and the Swedish Democrats” also attract more and more voters.

Optimists and Europhiles might read these words and take them to be nothing more than gloomy wishful thinking to be expected from the reactionary Telegraph. But the same could hardly be said of The New York Times and its Sunday Magazine, which – in its December 20th issue – wondered whether the EU has “reached its breaking point”: Jim Yardley, the publication’s Rome bureau chief, noted how Europe is facing the simultaneous threats of terrorism in its cities, of an aggressive autocratic Russia in its periphery, of the migrant crisis in its borders, while a stagnant economy and a rising political extremism in countries like France and Belgium are rotting their democracies from within. And to complicate things further, Yardley argued, the EU is particularly ill-suited to deal with such issues: “European Union institutions have vast regulatory powers over everything from data roaming to environmental standards to trade deals to antitrust rules”, but “often lack the structural power, political decisiveness and bureaucratic efficiency to act collectively when faced with big, unforeseen problems like the Greek crisis, the surge of migrants or the standoff with Putin over Ukraine. National leaders are often forced to decide these issues in marathon emergency meetings in Brussels at the European Council, and even then, only incremental progress is made”, producing “a perfect recipe for public cynicism: a system of intrusive regulators whose tentacles can spread into your personal life, even as leaders appear indecisive in the face of genuine crises”.

And yet, in Brussels, no one either is aware of these problems or seems to care. On the last December 11th, The Guardian reported that the EU Commission was devising plans to “to strip national governments of authority over their borders in an emergency and to create a border guards force to police the EU’s frontiers, supervise asylum claims, and detain and deport failed asylum seekers”, in response to the refugee crisis. As Ian Traynor, the report’s author, explained, while “in theory, the new regime and the powers ceded to Brussels over its operation apply to all 26 countries in Europe’s free-travel Schengen area”, it would, “in practice”, only “apply to the external borders of the Schengen area, so would not greatly affect countries such as Germany that are surrounded by other Schengen nations”.

In other words, some countries – Italy, Greece, Spain – would be subjected to policy decisions taken by other countries – Germany, Poland, Austria – that would not bear the brunt of their consequences. Perhaps these plans won’t ever be put into effect, once the lawmaking process in Brussels stalls and indecision takes over. But the mere fact that people with responsibilities within the EU came up with such an idea is a sign that “euroenthusiasts” have failed to grasp what the events of the last decade or so should have made clear to them: that the EU has gone too far in the political “integration” of its member states.

Since its conception, the “European project” was meant to bind the countries that joined it in such a manner that going to war with one another would never again be in their interest. It began by pooling together the energy resources of France, Germany, Italy, Luxembourg, the Netherlands and Belgium within the European Coal and Steel Community. And it grew, not only geographically (with the multiple enlargements taking in new members) but in scope, with consecutive advances in transferring powers and (in “Eurocrat” parlance) “competences” from national states to Brussels. After all, the “project” was always meant to achieve an “ever closer union”.

“Europe’s” founders, however, understood how that process should only be carried out by way of “small steps”, to ensure that none of those ever jeopardized the fundamental interests of the club’s membership. But from the 1980’s onwards, with the European Single Act and the road towards the 1992 Maastricht Treaty – and later culminating in the Lisbon-Treaty-Formerly-Known-as-The-European-Constitution, that prudent outlook was discarded.

And so it was that, for the last 30 years, the “steps” taken by “Europe” have been too great, both in quantity and in length. The increasing number of policies subject to qualified majority voting and of powers transferred from national parliaments to the “Community’s”’ sphere meant that in a growing number of issues the various countries of the EU have lost the power to defend what their electorates believe – rightly or wrongly – to be their own national interest. The result, aside from weakening the health of each nation’s democracies, was to change “Europe” into a conflict-generating machine between the various European countries, instead of the peace-building institution it was meant to be.

Back in 2003, just as the “Union” became far from united on whether to side with the Americans on their intervention in Iraq or not, Valery Giscard d’Estaing and the other proponents of the “Constitution” kept pushing for a Common Foreign Policy and a Common European Army. At the time, the Portuguese columnist José Pacheco Pereira wrote an op-ed piece warning that if such plans were brought into effect and a situation like the dispute over the Iraq war would arise, what in 2003 was a simple difference of opinion between sovereign countries with diverging interests, would by that point turn into an institutional conflict within the EU, leading to its disintegration and possibly worse.

Looking back, it’s easier to see that Pereira didn’t need to imagine such a scenario. There already was – and still is – one not-merely-hypothetical-but-very-much-real factor bringing discord into the “Union” and threatening to pull it apart: the Euro.

What happened with the EU’s single currency was exemplary (albeit in the worst sense the word can have) of the problem. It was born, as most things in “Europe” are, out of a bargain between France and Germany, in which the former supported the latter’s unification, and Germany gave up its old currency and at least some control over its traditionally tight monetary policy. It allowed for a gigantic leap, symbolically and practically, towards a true “European Union”, a political entity with powers previously intrinsically linked with national sovereignty. What it created, however, was far from the harmonious and free-from-nationalist-and-self-interested-feelings space from Monchique to Cape Greco and Limassol to Nuorgam in which everyone would join in singing the “Ode to Joy” in multiple languages but in tune and in unison.

By joining within the same monetary area economic realities so distinct as to make them have incompatible economic policy needs, the Euro meant, on the one hand, a currency undervaluation in Germany with the corresponding loss in value of its citizens’ income, and on the other hand, a currency overvaluation on countries with less competitive and attractive economies (like Greece or my native Portugal), posing significant obstacles to those who, unfortunate enough to live in them, wished to export goods or services that could otherwise have benefited from a weaker currency that would make them more appealing to holders of stronger currencies.

At the same time, and to make matters worse, the euro created a bubble in those countries’ sovereign debt bonds: comfortably seated under the same monetary umbrella that sheltered Germany; theoretically obliged to meet certain budgetary criteria aiming to protect the euro’s stability; and with the implied promise that, should things unravel, the simple fact that they shared a currency would make countries like Germany pay for the solvency of countries like Portugal, Greece or Italy; these countries were able to borrow money for German-level interest rates, while following Greek-style budgetary policies. Once the subprime crisis in American crossed the Atlantic, it didn’t take long for the monetary umbrella to become powerless to shelter them from the fears of their creditors.

Once Greece or Portugal were on the brink of bankruptcy and had to be bailed out, the need to do so without jeopardizing the euro’s credibility as a stable currency created the terrible combination that has brought us to our current predicament: paying for the “bailout packages” by the richest countries angered their voters due to their perception that they are paying for the “sloth” and “profligacy” of the other countries; in Greece or Portugal, the “harsh” measures and the loss of budgetary autonomy inherent to those packages and the EU’s Budget Treaty made their electorates despise the “lack of solidarity” of the “austeritarian” rich; and the solutions that might help overcome the worst economic and financial consequences of this arrangement – a deeper economic and political integration, with Eurobonds, euro-wide welfare benefits, and new and wider “competences” over national budgets given to the (undemocratic) EU institutions – would end up worsening not just the problem of the lack of democratic control of political decision-making, but also – especially – that increasingly serious “war of electorates” created by the way the euro and the EU were designed.

One thing “euroenthusiasts” are not able to say is that they hadn’t been warned. For exemple, in 1997, the Nobel laureate in Economics Milton Friedman famously wrote an article in which he argued that the Euro would be a huge mistake: The EU, Friedman argued, lacked the prerequisite attributes that would allow for a sensible adoption of a common currency between its member states:

“Europe’s common market is composed of separate nations, whose residents speak different languages, have different customs, and have far greater loyalty and attachment to their own country than to the common market or to the idea of “Europe.” Despite being a free trade area, goods move less freely than in the United States, and so does capital. The European Commission based in Brussels, indeed, spends a small fraction of the total spent by governments in the member countries. They, not the European Union’s bureaucracies, are the important political entities. Moreover, regulation of industrial and employment practices is more extensive than in the United States, and differs far more from country to country than from American state to American state. As a result, wages and prices in Europe are more rigid, and labor less mobile. In those circumstances, flexible exchange rates provide an extremely useful adjustment mechanism.”

Adopting the Euro, then, Friedman warned, “would have the opposite effect” of what its advocates intended:

“It would exacerbate political tensions by converting divergent shocks that could have been readily accommodated by exchange rate changes into divisive political issues. Political unity can pave the way for monetary unity. Monetary unity imposed under unfavorable conditions will prove a barrier to the achievement of political unity.”

And Friedman was far from a lonely voice. Today, as the EU and its various member states face the refugee crisis and its political consequences, it would be wise of them to mind the lesson of the euro cautionary tale: sometimes, Eurosceptics do it better; sometimes, a healthy dose of Euroscepticism is exactly what “Europe” needs if it wants to be healthy. The EU was a stabilizing element in the European continent for decades because it served the interests of those who’d joined it. By taking too many steps too far towards “an ever closer union”, those countries lost their ability to protect those interests. And by making itself unable to serve its members’ interests, the EU is making it ever more likely that one day, those countries will no longer be interested in being a part of it.

 

Bruno 2014Bruno Alves lives in Caxias, Portugal, but sometimes wishes he didn’t. He writes about politics, film and TV for O Insurgente, is an op-ed contributor to the Lisbon daily Diário Económico and a weekly commentator for its cable TV channel ETV, and has written for the American online film magazine Bright Wall/Dark Room and for the British website CapX. Bruno welcomes both writing job offers and insults at alves.bm@netcabo.pt, and you can also find him on Twitter @ba_lifeofbruno.

What the hell is going on in Portugal?

AP120322132487-750x400A couple of weeks after the October 4th parliamentary elections in Portugal, I met a friend of mine who was visiting the country, and it didn’t take long for the subject to take over the conversation. My friend, whose face Plato must have envisioned when he imagined the Form of adorableness even though she was born only a few decades ago, left Portugal to take advantage of a job opportunity abroad, and living far away from the country she naturally doesn’t follow the day-to-day details of Portuguese politics as closely as someone who persists in trying to survive here. After all that had come to pass since Election Day, the only thing that occurred to her was to ask “what the hell is going on in this country?” She hasn’t been the only one asking this question.

On November 24th, President Aníbal Cavaco Silva, a former Prime-Minister from the center-right party PSD, nominated António Costa, leader of the center-left Socialist Party (PS), as the new Prime-Minister. On October 4th, no one would have foreseen such an outcome. After four years of implementing severe austerity measures, the governing center-right coalition between PSD and CDS emerged from the proceedings with the largest share of the vote (36,8%) and MPs (107 out of 230), while PS and Costa wasn’t able to get more than 32,4% and 86 MPs; the extreme-left party Bloco de Esquerda (BE) managed to obtain 10,2% of the votes and 19 MPs, while the Communist Party (PCP) and their satellite party Os Verdes – ‘The Greens’ – got 8,3% and 17 MPs (the animal rights party PAN elected the remaining one, with 1,4% of the votes). The next morning, the London’s Daily Telegraph reported Portugal had “made political history” for having the first government “in the euro’s five-year lurch from debt crisis to debt crisis” to get re-elected after ‘overseeing a bail-out programme’; The American Interest hailed the result as a “victory of ‘un-populism’”, in which – in contrast to what had happened in Greece – ‘the anti-establishment parties have not been able to present themselves as real contenders for power’. Even the understandably-less-enthusiastic (left-lwaning) The Guardian said “the result shows that Portugal is not Greece” and provided “an opportunity for the two main parties to cooperate”. Yet just a few days later, things changed so dramatically that one could be led to erroneously believe that another election had taken place in the interim.

Even as President Cavaco Silva approached Pedro Passos Coelho (the incumbent Prime Minister and leader of PSD) and asked him to try to form a new government, António Costa announced he was to engage in meetings with both the Communists and BE to form a government with the support of a parliamentary majority. On the right, Costa’s initiative was seen as a coup d’etat, an attempt to climb into power even after losing the election; on the left, the coup d’etat accusations were directed at Cavaco Silva for nominating Passos Coelho even though he was sure to lose a parliamentary vote of confidence. To make matters even more confusing, the (conservative) Telegraph’s Ambrose Evans-Pritchard sided with the latter, claiming the President had “refused to appoint a Left-wing coalition government even though it secured an absolute majority in the Portuguese parliament and won a mandate to smash the austerity regime bequeathed by the EU-IMF Troika”. In fact, PS, BE and PCP were yet to reach an agreement by October 25th, the day Cavaco Silva nominated Coelho to try to form a “stable government”, so there still was no absolute majority that would justify bypassing the party with the largest share of the vote.

On November 6th, just three days before the parliamentary vote of confidence the PSD/CDS coalition would have to face if it were to remain in power, the agreement was closer but still hadn’t been finalized. The Telegraph reported: “Communists ready to assume power in Portugal and topple conservative government”, which wasn’t totally true: the deal in store would not contemplate an actual participation of neither BE nor PCP in the government; they would merely support a Socialist government in exchange for a few policy measures they deemed fundamental for the country’s well-being (public sector and minimum wage raises, tax cuts, cancelling public transport’s privatization).  Communists wouldn’t “assume power”; they are propping up PS into power in order to secure benefits they regarded as crucial to the country and the interest groups that support them.

Back on October 4th, the chattering classes hurried to interpret the coalition’s then-still-regarded-as-such victory, and many believed that, faced with a still looming uncertainty and far from being safe from financial difficulties, the Portuguese electorate put aside their poor opinion of the coalition and voted for the devil they knew:  they might decry the austerity that had been imposed on them, but they were reluctant to empower the Socialists (who had been responsible for the near-bankruptcy that brought austerity on) for that would carry with it a degree of uncertainty that looked frightening to them, considering the country’s yet-to-be-overcome predicament. I might be mistaken, but it seems to me that Costa was one of the people who held this interpretation of the election results. It seems to me that Costa believes that the reason why PS failed to take advantage of all the anger against the incumbent government (two days before the election, a poll revealed that only 19,7% of the people thought PSD/CDS had improved the country’s condition) was that people were gripped by a conservative fear of the unknown, and that if PS managed to get into government and had the opportunity to introduce a few popular measures easing austerity, that same impulse to go with “the devil you know” would hurt PSD/CDS instead of the Socialists in a future – probably early – election.

Costa, like the Telegraph, The Guardian, The American Interest or my friend, didn’t understand “what the hell is going on” in Portugal. The result of the election showed two things: first, a huge dissatisfaction with the job the coalition had done; and second, an even more significant lack of trust in PS as a credible alternative. Going into government after it failed to look like a preferable choice than a failed government, PS would likely also fail to overcome that pre-existing distrust: Costa’s every decision would be confronted with the same lack of credit he and his party merited in the election; even the “popular” measures he plans to introduce would in all likelihood be regarded as shameless attempts to buy votes, policies “too good to be true” that would end up costing much more in the near future with another bail-out programme than they would pay in the short-term, and instead of propelling into the electoral victory that escaped him this time around, it would cause him to suffer an even more resounding defeat whenever his government were to face the voters’ judgement.

Costa has seriously misjudged the nature of the crisis afflicting Portugal’s political system: far from resulting from a simple – and circumstantial – lack of a parliamentary majority, it consists of a structural lack of trust in every available political alternative by a huge chunk of the electorate, that even after rescinding their support from one party neglects to transfer it to the main opposition party, instead choosing either to vote for a protest party with no chance to win or to stay at home (the turnout in this election was the lowest ever in a parliamentary election in Portugal). As with many of the problems the country faces, it is a situation caused by the inability of every government of any party to tame the Leviathan that is the Portuguese State.

Passos Coelho’s government inherited and –despite its rhetoric – kept a statist monster that suffocates Portuguese society: the State keeps spending half of the wealth created in the country; the services it aims to provide are largely ineffective; the supposed egalitarianism of a “Welfare State” that aims to provide everything to everyone – to those who need the helping hand of the State and to those who don’t – turns into an unfair system that – precisely because it wants to provide for those who need it and those who don’t – ends up giving too much to don’t who don’t need it and not enough to those who do; and to make matters worse, the State needs to extract more and more wealth from the pockets and bank accounts of its taxpayers in order to feed this Behemoth.

People naturally dislike this situation and what it means for their daily lives. And yet, about 60% of them are (according to estimates by Henrique Medina Carreira, a former-Finance-Minister-turned-commentator) directly or indirectly dependent on State money to conduct them. That, in turn, results in a seemingly unsolvable puzzle: people are simultaneously dissatisfied with the status quo and opposed to its reform; every government, whether it chooses to keep things as they are or to fight the interest groups opposed to reforms, is then doomed to be punished with the electorate’s wrath. And the lesser the electorate at large supports any political alternative, the more every main party becomes dependent on those interest groups that are dependent on the status quo, thus making reforms even less likely, the consequences of this ever more grave, further marginalizing a large part of the electorate and consequently deteriorating the country’s condition.

Come to think of it, maybe my friend is the one who fully understood the mess Portugal is in, and was wise enough to go live somewhere else.

 

Bruno 2014Bruno Alves lives in Caxias, Portugal, but sometimes wishes he didn’t. He writes about politics, film and TV for O Insurgente, is an op-ed contributor to the Lisbon daily Diário Económico and a weekly commentator for its cable TV channel ETV, and has written for the American online film magazine Bright Wall/Dark Room and for the British website CapX. Bruno welcomes both writing job offers and insults at alves.bm@netcabo.pt, and you can also find him on Twitter @ba_lifeofbruno.

Silence is golden

Today’s general election in Portugal has not earned that much international media attention. Considering the reason why elections in Greece, for exemple, do attract international attention, that’s not a bad thing.

EUpocalypse Now?

Europe’s Greek crisis shows how it has been growing apart from the moment its members united themselves too closely

EuropeThe worst thing about the European Union’s Greek crisis is the fact that seemingly no one can write an article or air a story on the whole ordeal and refrain from using the expression “Greek tragedy”. But, to be honest, the recourse to this trope is as annoying as it is understandable: much like in the Ancient tragedies to which journalists and pundits refer to in their analysis, the Greek crisis leaves the EU facing a dilemma between several uninviting choices, and no happy ending in sight.

After months of negotiations and consecutive fruitless efforts to reach an agreement for a new (third) bailout of the Greek government that would allow it to pay back what it owes to the International Monetary Fund, Alexis Tsipras, the radical-left party Syriza Prime Minister, announced last week a national referendum to be held next Sunday, to decide whether Greece should accept the terms offered by the other “Eurozone” governments together with the EU’s institutions. The move surprised everyone, and angered many. Once again, people inside the Brussels eurocracy thought, the Greek government was just trying to stall the process to buy some time and gain leverage to blame their counterparts for an ever more likely break with the Euro and even – perhaps – the EU itself.

Jean-Claude Juncker, the former Luxembourg Prime-Minister currently presiding over the EU, made sure that every Greek voter was aware that those were the stakes. Sigmar Gabriel, the leader of the German Social Democratic Party and the country’s Vice-Chancellor, reinforced the point, stating that “at its core”, a vote in the referendum would be “a yes or no to remaining in the Eurozone”. Beside him, Angela Merkel, even while agreeing those words were true, appeared to be less than comfortable with them.

A week before, German newspaper Der Spiegel ran an article detailing the brewing conflict between the German Chancellor and her Finance Minister, Wolfgang Schäuble, over Greece and how to deal with a possible “Grexit” – the only buzzword more often repeated, and more annoying, than “Greek tragedy” – with Schäuble arguing for letting Greece default and to its own, and Merkel insisting on the need to find a solution to the crisis. Many in Brussels and across the continent agree with her, believing that a Greek withdrawal from the “Eurozone” would represent a failure of the “European project”.

Such a feeling is understandable. But it is also wrong. When it comes to the Euro, the “project” has already failed. Europe began to grow apart from the moment its members united themselves too closely.

Since its foundation and before it even had the name, the EU was inscribed with the principle of “ever closer union” between its member states: its purpose was to bring into effect an ever increasing surrender of powers from the national to the supranational sphere. The founders set the goal; the builders put it in practice: in 1986, the “Single European Act” was signed between the then twelve member states. With the benefit of hindsight, it was a momentous occasion, a decisive moment. For it would lead to all the steps the “European Project” has taken since, and specially, to all the mistakes it has not avoided. It extended the number of issues under Qualified Majority Voting and established the “cooperation procedure” that gave the European Parliament more power in the legislative process. In the name of “European democracy”, powers started to be pulled away from the national parliaments (and therefore, national citizens) towards Brussels. The Maastricht Treaty of 1992 was just another step in that direction. The EEC became the EU. The European Parliament was granted new powers in the selection of the President of the Commission. An “European citizenship” was created. The goal of establishing a “Common Foreign and Security Policy” (CFSP) was set. And more importantly, decisive steps towards a common currency were taken.

The Euro was born out of a bargain between Germany and France. France would lend its support to German reunification, and in turn Germany would agree to give up its old currency the Deutschmark, and lose at least some control over its traditionally tight monetary policy. A few years after the Maastricht Treaty the criteria for which each country would be able to join the European Monetary Union and adopt the Euro were set. For instance, inflation had to be kept under control, public deficits had to be under 3% of GDP, and public debts under 60% of GDP.

Many believed that adopting the euro and the budgetary straightjacket it implied would force countries like Greece to enact a series of much needed reforms and abandon the kind of profligate state spending policies it insisted on pursuing. Unfortunately, once the single currency began to circulate, it ended up having the opposite result: in the 1980’s and 1990’s, Greece had to pay an interest more than 10% higher than Germany, but with the Euro it enjoyed similar rates, allowing its banks and governments to borrow increasingly more money that they then proceeded to waste with abandon. By virtue of sharing a currency with countries with much sounder budgetary policies, Greece was able to enjoy German-like interest rates on their government debts bonds while adopting Greek-style budgetary policies. For a while, it seemed like the best of both worlds. Without having their own central bank with the power to debase their own currency, and being committed to relatively narrow budgetary targets (while manipulating the accounts to make it look like those targets were being hit, with the helpful hand of Goldman Sachs and the willingly and knowingly indifferent “vigilance” of the EU), Greece was able to provide potential lenders with greater assurances that they would get their money back then they ever had been before.

But one day, their debt was so high that lenders began to wonder if that was actually true. To make matters worse, the EU responded to the subprime bubble burst in America by encouraging its member states to spend (after borrowing) more money to “stimulate” the economy. Instead, it stimulated nothing but fears of government defaults in those countries that were already heavily indebted.

By 2010, Greece had to be bailed out. And by 2012, it had to be bailed out again. In return, the IMF, the European Central Bank and the EU – the infamous “troika” – demands a series of reforms to the way the Greek economy operated. According to the IMF, the “adjustment” was made through “recessive channels” like reduced spending and real salaries”, instead of “productivity gains”: an ineffectual and corrupt tax collecting machine in Greece made it so that the compliance with the budgetary targets set by the troika had to be achieve through means that would end up hurting the economy and the people’s standards of living (firing public workers, cutting pensions, etc.), and the fact that some rent-seeking clienteles were entrenched within the Greek government edifice meant that governments (not only Syriza’s but also its more centrist predecessors) were reluctant to proceed with any reforms that might make the economy healthier.

The continent’s chattering classes have spent the last few months entertaining themselves by arguing over who is to blame: some argue that Germany’s “austeritarian fundamentalism” is destroying Greece, while others argue that Greece is just trying to live off other people’s money; in Greece, a radical power rose to power by protesting against austerity, while in Germany or Finland, nationalist parties get more and more electoral support because people are fed up with “paying for Greece’s sloth”. It doesn’t really matter who’s right, and the more likely event is that neither of the parties above are. What matters is that both sides exist and that their existence poses a huge problem to the EU, deriving from the way its economic and political arrangements were designed: the Greek “anti-austeritarianism” and the “anti-dependency” German or Finnish nationalists’ anger against Greece have, despite their many differences, a common source in the Euro: the adoption of a single currency by countries with such disparate characteristics as Germany and Greece meant that by the end of the previous decade, the need of countries in budgetary hell – like Greece – to devaluate their currency to even out the imbalances created by a financial crisis were incompatible with the Euro’s need to remain credible in the eyes of foreign investors; the Greek need of a working economy was incompatible with the Euro remaining a strong currency, the Greek need for a balanced budget became incompatible with a healthy economy, and the need of some form of financial transfer from the richer EU countries to bailed-out countries like Greece became incompatible with the electoral support for the governments in those rich countries.

By adopting the Euro, or at the very least by letting countries like Greece join it from the outset, the EU made it inevitable that at some point the democratic will of each of its members would enter into conflict with that of its counterparts; both would be equally legitimate, and both would be left unhappy: depending on their provenance, they either protest the lack of solidarity of the others, or complain about paying for the “lack of industriousness” of those who complain about their “selfishness”.

This is probably why the likes of Schäuble would prefer that Greece would leave the Eurozone and possibly the EU. By cutting off the single currency gangrenous leg, they would hope to restore the balance and the Euro’s full credibility with investors. Greece itself, they argue, might even benefit by this “conscious uncoupling”: by returning to the drachma and thus devaluating its currency sharply, Greece would then be able to export goods and services at a significantly lower cost to its prospective clients, thereby making those exports much more attractive than they are now and thus improving their economic outlook, perhaps compensating the drop in the value of their income that a currency devaluation would imply.

This reasoning severely underestimates several risks a “Grexit” would pose. Above all, as people like the FT’s Wolfgang Munchau and Gideon Rachman have warned, having Greece leave the Eurozone would signal to investors that at any given time, any other country might choose to do the same, thereby weakening the assumption that countries like Portugal, Spain or Italy (or worse, France) are relatively stable because they have the euro, thus weakening the confidence in their sovereign debt bonds, possibly triggering some form of crisis or possible default in them. And even if the costs of a Greek default might be as manageable as EU officials now say that would be, the same cannot be said of either the costs of defaults in those countries nor those of their theoretical bailouts.

That is why, one would suppose, Merkel and those who side with her hope for a resolution to the Greek standoff without an actual divorce. Unfortunately, that would come with risks of its own.

For example, if an agreement is reached by the EU acquiescing to some of Greece’s demands, governments like the Portuguese, Spanish or Irish ones might ask for a similar treatment, as will any government of any country that might have similar troubles in the future. Again, finding the money to save Greece might be manageable, but finding the money to bailout France or Italy (not to mention the necessary political will) will be much as harder. On the other hand, if by some miraculous occurrence the Greek government gives up and accepts their creditors’ demands, many would still harbor serious doubts about the willingness and ability of the Greek government – any Greek government – to comply with what it would have agreed, given what has happened in the last few years. Harsh measures would have to be introduced to make sure that budgetary targets would be hit, and would have disastrous economic consequences that would likely mean that, a few months from now, everyone would be having this conversation again.

Either way, the more fundamental problem of the mechanism and arrangements behind the single currency will remain. In 1997, the Nobel laureate in Economics Milton Friedman wrote an article in which he argued that the Euro would be a huge mistake: “The United States”, Friedman wrote,

“is an example of a situation that is favorable to a common currency. Though composed of fifty states, its residents overwhelmingly speak the same language, listen to the same television programs, see the same movies, can and do move freely from one part of the country to another; goods and capital move freely from state to state; wages and prices are moderately flexible; and the national government raises in taxes and spends roughly twice as much as state and local governments. Fiscal policies differ from state to state, but the differences are minor compared to the common national policy. Unexpected shocks may well affect one part of the United States more than others — as, for example, the Middle East embargo on oil did in the 1970s, creating an increased demand for labor and boom conditions in some states, such as Texas, and unemployment and depressed conditions in others, such as the oil-importing states of the industrial Midwest. The different short-run effects were soon mediated by movements of people and goods, by offsetting financial flows from the national to the state and local governments, and by adjustments in prices and wages.”

The EU, Friedman argued, lacked precisely those favorable conditions that made sense for the US to share a common currency:

“Europe’s common market is composed of separate nations, whose residents speak different languages, have different customs, and have far greater loyalty and attachment to their own country than to the common market or to the idea of “Europe.” Despite being a free trade area, goods move less freely than in the United States, and so does capital. The European Commission based in Brussels, indeed, spends a small fraction of the total spent by governments in the member countries. They, not the European Union’s bureaucracies, are the important political entities. Moreover, regulation of industrial and employment practices is more extensive than in the United States, and differs far more from country to country than from American state to American state. As a result, wages and prices in Europe are more rigid, and labor less mobile. In those circumstances, flexible exchange rates provide an extremely useful adjustment mechanism.”

Adopting the Euro, then, Friedman warned, “would have the opposite effect” of what its advocates intended:

“It would exacerbate political tensions by converting divergent shocks that could have been readily accommodated by exchange rate changes into divisive political issues. Political unity can pave the way for monetary unity. Monetary unity imposed under unfavorable conditions will prove a barrier to the achievement of political unity.”

Today, there are many who look at the difficulties the EU is facing and sigh in desperation for politicians like those of old who, once upon a time, were able to drive the “European project” forward – founders like Jean Monnet, and builders like Jacques Delors, François Mitterrand and Helmut Kohl. What they fail to understand is that it was precisely what these men achieved that created the problems today’s generation is unable but forced to deal with.

One way to solve this structural problem would be to create in the EU the set of political arrangements that make the monetary union in the US effective: if the EU functions more like a country, instead of a collective of nations, mechanisms that would compensate the imbalance arising from the different consequences of the same monetary policy in states with different characteristics – for example, by introducing euro-wide debt bonds, a European unemployment benefit system, and other such arrangements – might lessen some of the hardships that members of the Eurozone might find themselves in once they enter a Greek-style crisis scenario.

The powers that be within the EU seem to believe this to be the best course of action. Recently, just as conversations with Greece were about to unravel, the EU Commission presented the so-called “Five Presidents’ Report”, on “Completing Europe’s Economic and Monetary Union”, advocating the introduction a series of mechanism such as a “European Deposit Insurance Scheme” and a shared Eurozone treasury, as well as further steps in shared sovereignty between Euro-adopting countries, namely giving more power to Brussels’s authorities over national budgetary policies.

As usual, EU-enthusiasts believe that any problem within the EU will be solved by further transfers of power from the national sphere to the corridors of Strasbourg and Brussels. They fail to understand that – as Greece and the Euro crisis has demonstrated – by driving forward in their path of “ever closer union”, the more apart the members of the EU will grow from one another.

If, as things stand, German or Finnish voters are already restless with the prospect of subsidizing what they regard as “lazy” and “irresponsible” Southern countries, and voters in Greece, Portugal or Spain resent being forced to adopt “austeritarian” policies by the “selfish” Germans, imagine how the former would feel – and vote – once “Eurozone transfer mechanisms” were in place, or how the latter react to being governed even more directly by foreign institutions. Things cannot keep going like they are now. But trying to solve a problem with another step in the direction that created that very problem, the EU would only come closer to its destruction.

A few weeks after last year’s European parliament election, I was talking to a friend and, having happened such a short time before, the subject came up. I asked her how she felt about the EU. “I don’t know”, she initially replied. “I used to really believe in it, you know?”, she then began to say, “but now, to be honest, I don’t have as much hope in it as I once did.”

One can relate. There was a time when the “European ideal” meant a promise of peace and cooperation to a continent that, up until a few decades, entertained itself not with heads-of-government-all-nighters to discuss the finer points of the Common Agricultural Policy, but with constant warfare. Today, if it promises anything, no believes it.

I tried to make my case to her, arguing that the problem was not the EU itself, whose existence I welcomed and wished not to come to an end, but it having gone too far in pulling powers away from national parliaments. Afterwards, she told me I was not as much of an Eurosceptic as she thought I was.

“Really? How much of an Eurosceptic did you think I was?”, I replied. “I mean, I am an Eurosceptic, sure, but I’m not ‘anti-Europe’. I’m an Eurosceptic it the sense that I am a sceptic about politics: the more it tries to do, the less it will accomplish. From where I sit, watching everything that has happened with Greece, the Euro, and the “European project”, a healthy dose of Euroscepticism is just what the EU needs if it wants to survive.

Bruno 2014Bruno Alves lives in Caxias, Portugal, but sometimes wishes he didn’t. He writes about politics, film and TV for O Insurgente, is an op-ed contributor to the Lisbon daily Diário Económico and a weekly commentator for its cable TV channel ETV, and has written for the American online film magazine Bright Wall/Dark Room. Bruno welcomes both writing job offers and insults at alves.bm@netcabo.pt, and you can also find him on Twitter @ba_lifeofbruno.