Eurocrash Update #3: Radek’s Warning

You didn’t need this morning’s Wall Street Journal headline (“Markets Doubt Europe Deal”) to know that the weekend Eurodeal is not impressing the markets.  Beyond the market reaction, this morning’s papers here in the U.S. are mostly fixed on the drama in London, where Prime Minister Cameron gave a spirited defense of his veto of changes to the EU Treaty, while the misgivings of his coalition partner Nick Clegg portend a possible collapse of the government.  (Doubtful in my judgment: Clegg and the Lib-Dems won’t want to give up their rare and probably only share of power in their lifetime to this dispute.  But that could change quickly.)

Foreign Minister Radek Sikorski

While the London story unfolds, the American media have largely overlooked the remarkable intervention of Poland’s foreign minister Radek Sikorski, who made front page news in Europe a couple days ago with a speech in Berlin calling for closer European integration and for Germany to step up and lead the whole thing with a firm hand.  He also had some hard words for Britain (as does his wife, Washington Post columnist Anne Applebaum, in today’s paper; looks like a spousal pincer movement to me).

What is so startling about Radek’s speech is not simply its directness and depth—both rare for modern European political figures—or the suggestion that this crisis is so serious it could lead to decades of political regression in Europe.  It represents a change of mind on his part.  I’ve known Radek for almost 20 years, going back to his days as a foreign correspondent, and then when he worked down the hall from me at AEI before resuming his political career in Poland.  He’s twice fixed up conference invitations and lecture tours for me at Polish universities.  (He has said, by the way, that one of his goals is to have a street, square, or monument named for Ronald Reagan in every city in Poland.)  More than once he said to me, with a mischievous twinkle in his eye, that the chief aim of his diplomacy was to keep Poland from being “Brussified,” that is, keep it from coming under the maw of the soulless and unaccountable administrative tyranny of the Eurocrats.  Yet now he’s calling for the European Commission and Parliament to be stronger.  Above all, one single passage is raising hackles in Poland and other eastern capitals: “I will probably be first Polish foreign minister in history to say so, but here it is: I fear German power less than I am beginning to fear German inactivity.

The Economist has a good summary and analysis of the speech, and a report on the aftermath, in which Radek is facing a no confidence vote in Poland’s parliament for his speech.  You should read the whole thing, but here are a few key excerpts:

The inevitable conclusion is that this crisis is not only about debt, but primarily about confidence and, more precisely, credibility. About investor perception where their funds are safe.

Let us be honest with ourselves and admit that markets have every right to doubt the credibility of the Euro zone. After all, the Stability and Growth Pact has been broken 60 times! And not just by smaller countries in difficulty, but by its founders in the very core of the Euro zone.

If credibility is the problem, then restoring credibility is the answer.

Institutions, procedures, sanctions that will convince investors that countries will be capable of living within their means. Hence, that the bonds they buy will be repaid, preferably with honest interest. . .

The Euro zone crisis is a more dramatic manifestation of the European malaise because its founders created a system in which each of its members has the capacity to bring it down, with appalling costs to themselves and the entire neighborhood.

The break up would be a crisis of apocalyptic proportions beyond our financial system. Once the logic of ‘each man for himself’ takes hold, can we really trust everyone to act communitarian and resist the temptation to settle scores in other areas, such as trade? Would you really bet the house on the proposition that if the Euro zone breaks up, the single market, the cornerstone of the European Union, will definitely survive?

If we are not willing to risk a partial dismantling of the EU, then the choice becomes as stark as can be in the lives of federations: deeper integration, or collapse. . .

The European Commission needs to be stronger. If it is to play the role of an economic supervisor we need commissioners to be genuine leaders, with authority, personality – dare I say charisma – to be true representatives of common European interests. . .

Which brings me to the issue of whether an important member, Britain, can support reform. You have given the Union its common language. The Single Market was largely your brilliant idea. A British commissioner runs our diplomacy. You could lead Europe on defence. You are an indispensable link across the Atlantic. On the other hand, Euro zone’s collapse would hugely harm your economy. Also, your total sovereign, corporate and household debt exceeds 400% of GDP. Are you sure markets will always favour you? We would prefer you in, but if you can’t join, please allow us to forge ahead. And please start explaining to your people that European decisions are not Brussels’ diktats but results of agreements in which you freely participate. . .

And I demand of Germany that, for your own sake and for ours, you help it survive and prosper. You know full well that nobody else can do it. I will probably be first Polish foreign minister in history to say so, but here it is: I fear German power less than I am beginning to fear German inactivity.

You have become Europe’s indispensable nation.

(Hat tip: Power Line reader CAB in Warsaw.)

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