LAST night Herman Van Rompuy, President of the European Council, addressed a packed audience in New York. In person, he is surprisingly winsome and self-deprecating—"I am charismatic. I am just the only person aware of it."—but it’s hard to escape the conclusion that Europe’s leaders simply do not grasp the enormity of the euro crisis.
Incredibly, Mr Van Rompuy didn’t even talk about the euro until after forty minutes, and even then it was only to repeat the same old EU mantras: Greece will not default because it cannot be allowed to default (ruling out a basic step that this paper and many others see as necessary); more integration and monitoring will solve the crisis; Eurobonds are not necessary or useful. At no point did Mr Van Rompuy acknowledge the severity of the crisis—record CDS spreads, collapsing confidence in European banks, over 5% rates on 5-year Italian bonds and so forth—or suggest that Europe would be taking quick, effective action.
Instead, he waxed poetically—describing himself, in fact, as a "poet lost in politics"—about how this crisis would lead to greater European integration. He claimed that European states will act in "solidarity" by continuing to support the periphery, even if some northern European citizens object due to peculiar "sensitivities about responsibility". After all, as northern Europe lends more and more to the periphery, it has more to lose from the disintegration of the euro zone. And, over time, Mr Van Rompuy predicted that ever-tighter fiscal and monitoring rules (some of which he will be proposing in October) will lead to greater euro-zone financial mutualisation and shared economic governance.
Once you’ve been listening to him for long enough, it all starts to seem vaguely plausible. Mr Van Rompuy simply expects more of the same: Gradual Franco-German-led integration combined with indifference to public opinion and a bit of bureaucratic subterfuge. (And, of course, he blithely ignored Germany’s constitutional court, which recently ruled out subordinating the country to a "supra-national" fiscal agent, but presumably there are ways around such legal niceties.)
The problem, however, is that what worked over the past 50 years won’t work during an acute economic crisis. The "fudge forward" approach depends on time—time to amend European treaties, appease public opposition, gradually introduce new fiscal rules, repeatedly increase bail-out funds, and so forth—and bond markets have a way of moving faster than politicians.
With the IMF upgrading its estimate of European bank losses, major insurers openly pulling their deposits from euro-periphery banks, and a EU double-dip becoming increasingly likely, it’s fast becoming clear that Europe’s can-kicking exercise has run out road. The continent’s leaders, however, still seem to be in deep denial about the urgency and gravity of the situation, blinded, perhaps, by teleological expectations of an ever-closer union.
Talk of opportunities to use this crisis to create a EU Finance Minister "with much more power and influence" may warm euro-federalist hearts, but it doesn’t offer a realistic solution to the euro’s near-term problems. Let’s hope Mr Van Rompuy’s UN speech today offers something different.