For months and months the eurozone leaders have talked and debated, agreed and declared, delayed and procrastinated. They either have not acted or if they have, they have not implemented. Not a single one of the pressing issues of governance or funding have been definitively resolved. The multiple centres of control and power are far too complex and diverse to cope with what is now unfolding. The shuffling finance ministers have now lost control of events. The first major bank has sent out an SOS. It owes e240 billion and it has run out of cash. Not only can it no longer borrow, but investors want their money. Italy has been further downgraded. Who knows what the day will bring.
What it needs and what it will not bring is decisive leadership and a sense of mission to save the day. Perhaps it cannot be any longer saved. What the cost to everyone of this unfolding disaster will be cannot yet be calculated. Much depends at what point somebody, somewhere, can make a stand. The European dream is among the most worthy in history. In its many headed form it is now over. The current model of Europe, with its uncontrolled and variable economic policy and a currency lacking the institutions to mange it, is now fatally holed. It can be repaired and rebuilt but at great cost. When the job is done, if it is to stand, its institutions, its governance and even its membership will look quite different.
Meanwhile Britain holds fast to defend against contagion. With its unwritten constitution, its limited democracy, its first past the post electoral system and its Royal prerogatives, it is able to offer and enjoy strong decisive government at a time of, in the Prime Minister’s words, great danger. We have a funny way of doing things in these islands, but it is tested over time and it works. Europe has something to learn from us perhaps. Britain, among the most indebted countries in the world, sees more clearly than many, that debt, too much of it, is the soul of the crisis now gripping the western economies. Failure of political leadership is the heart.
Not only have sovereign funds borrowed more than they can repay, but so have too many of the banks. Indeed banks have changed their stripe from institutions in which money was saved and then lent in roughly equal measure, to traders who borrow many, many times the value of their deposits and then spend the money on assets whose value in a crisis collapses. That is why we have, once again, a banking crisis. In the end there will be some busted banks and several sovereign funds in default. It has always been this Blog’s view that a general across the board default may be the only way to make a credible fresh start.