Tuesday, July 12, 2011

Europe need not slide into disintegration - By George Soros

As integration has turned into disintegration, Europe’s political establishment has also switched from spearheading further unification to defending the status quo. Now, anyone who finds the status quo undesirable, unacceptable or unsustainable must take an anti-European stance. As heavily indebted countries are pushed towards insolvency, the number of the disaffected grows, together with support for anti-European parties such as True Finns in Finland.

Yet Europe’s establishment still argues there is no alternative. Financial authorities resort to ever more desperate measures to buy time. But time is working against them. Greece is heading towards disorderly default and/or devaluation, with incalculable consequences.

If this seemingly inexorable process is to be reversed, both Greece and the eurozone must urgently adopt a plan B. A Greek default may be inevitable, but it need not be disorderly. And, while some contagion – to Portugal and perhaps also Ireland – will be unavoidable, the rest of the eurozone needs to be ringfenced. That means strengthening the eurozone, probably by wider use of Eurobonds and a eurozone deposit insurance scheme.

Winning political support for this requires a plan B for the EU itself. Europe’s elite must revert to the principles that guided the union’s creation. An open society does not treat prevailing arrangements as sacrosanct; it allows for alternatives when those arrangements fail.

The status quo is now untenable, but it should be possible to mobilise a pro-European silent majority outnumbering True Finns and other anti-Europeans – to back a European solution rather than national ones.