The global crisis, whose contagion has spread progressively from finance to sovereign debt, and therefore to states, with a particularly virulent effect on the euro-zone, is obviously not a subject of study and work exclusively for economists.We are, in fact, dealing with of a political crisis – i.e., the capacity of government, and policies to which states in Europe and beyond, along with their respective ruling classes, have dedicated themselves in recent years.
It is a crisis that challenges the role of Europe in the world and its ability to defend the extraordinary results achieved during the decades-long integration process.And yet, if the lack of effective supranational governance capable of immediate response in the face of events is one of the major weaknesses at issue, then equally serious, and thus far less elaborated, is the lack of a plan coming from political families in Western democracies that could contribute to change.Furthermore, a crisis of public confidence has blown. This crisis is evident from all the latest surveys, in the economy, in the future, in the benefits of EU integration, in EU membership, even in the euro and in the free market.
People are very worried about joblessness, inflation and public debt, and their fears are fuelling much of the uncertainty and negativity.In the first place, this crisis should impose (or rather, should have already imposed) an adjustment of recipes that the preponderant ongoing change has rendered obsolete.
The recipes inspired by liberalism, or by pre-globalization liberism, no longer work. The crisis will not be short, nor will its effects disappear soon after a return to normality.In 2008, the “orthodox” wing of the US Republican party strongly opposed a government rescue after the collapse of Lehman Brothers, and reacted negatively when Treasury Secretary Henry Paulson, with the clear support of President Bush – as well as the support of the Democratic opposition – decided to seek an emergency bailout fund to keep the contagion from affecting the liquidity of small and medium – sized businesses and millions of American citizens.
Similarly in Europe, German Chancellor Angela Merkel’s Christian Democratic Party is experiencing a tough debate over the possibility and usefulness of going beyond “the German path” of rigor and accountability “at all costs” and ensuring the survival of the euro-zone, in a context of stronger European governance, with financial measures and stimulus packages aiming at promoting growth.
So today EU democracies are dealing with the problem of not “whether” to save Europe, but “how” to save it – by first reducing the deficit, or by dismantling an ideological barrier, which had marked the red line of “no public spending”, without considering how these days, even given the necessary rigor, the market is no longer able to regulate itself.