In such a situation, the only relevant political question is: whose taxpayers should pay, either explicitly, or implicitly via some sort of Eurobond arrangement? This is an inherently divisive question, and it is hardly surprising that Europe’s finance ministers are finding it difficult to achieve consensus in such circumstances. The prospect of the major cleavage in European politics in the years ahead being one between furious core taxpayers, and equally furious periphery taxpayers, is a good reason to be pessimistic about the future survival of the Eurozone.The conflict provides good reason to be pessimistic about elements of European integration that extend well beyond the survival of monetary union. Indeed, the conflict suggests that EU members have not traveled far down the path toward a common polity.
One sees elite consensus that losses must be socialized in order to protect bond holders. Irish politicians socialized the losses of the Irish banking system. ECB policymakers apparently insisted that the Irish government live up to this promise as a condition for EU support. We see much less consensus about how to define the society across which these losses should be distributed. No one in the EU, it seems, begins from the proposition that a crisis in any EU country is a crisis for all EU countries. No one begins from the proposition, therefore, that the relevant population across which to distribute the costs of socialized losses is the 500 million inhabitants of the EU. (This matters; the 85 billion euros Ireland just borrowed amounts to 170 euro per EU resident but 18,500 euros per Irlandais.) Thus, although everyone recognizes that the EU is a single market with a single currency, no one conceptualizes the EU as a single society.
The contrast to the American political debate about bailouts during the fall of 2008 is revealing. When the shadow banking system collapsed, we debated whether the government should socialize the losses. And when the auto industry appeared to be on the brink of collapse, we debated whether the government should assume ownership of a major corporation. No one ever suggested that the cost of bank bailouts should be imposed solely on the taxpayers of New York State. No one suggested that the cost of the auto industry bailout should be imposed solely on the taxpayers of Michigan. Instead, we did what societies do--we recognized that whatever we do, we would do together. E Pluribus Unum. Collective responsibility for common decisions. And then we fought hard about what we should do.
The EU seems to have this backwards. The elite agree on what to do. And then they fight about who should pay. This makes voters in all countries resentful of governments and it makes the losing governments resentful of the winning governments. I can't imagine the Irish government remaining one of the strongest proponents of European integration. Nor can I imagine the German government feeling favorable toward EU projects that include the PIIGS. So, amidst all the discussion about whether the euro can survive, perhaps the more important question is whether the EU can survive in the absence of any meaningful EU conception of a European society.