Brussels' kamikaze tactics to keep the EU dream alive will end in tears

No, you can’t leave the EU, you can’t quit the euro and you can’t even have a little less Europe. How dare you even ask? You don’t really believe that we would let you have your own way, did you? That has been the establishment’s breathtaking retort to every democratic cris de coeur across Europe these past few years, most recently in Italy.

This is an absurdly risky strategy straight from a kamikaze playbook: the EU is not merely playing with fire but deliberately setting light to the tinderbox. Why provoke electors by conceding nothing to their demands and treating them like children? Why incite a backlash, with potentially devastating consequences?

Yet for those who buy into the EU’s warped logic, this fear-driven double or quits strategy makes some sense. The worldview that motivates many true European believers is based on a simple, yet demonstrably flawed, premise: that “disunity” and the existence of competing nation-states is what caused the First and Second World Wars, and so the creation of a single European state is the only way to save Europe from itself.

The stakes are so immense in a nuclear world that – to these pro-EU ideologues – it’s worth sacrificing everything else, from free speech to democracy, for the ultimate goal. Hence the pro-EU side’s ruthlessness, the increasingly successful attempts at stopping a meaningful Brexit, the support for Madrid’s obscene crushing of the pro-Catalan independence movement, and now the rejection by the Italian president of a Eurosceptic finance minister.

The political and moral cost of defying democracy, of the lies, of the endless obfuscation and hypocrisy: none matter in a world where the means, any means, justify the end. All will be forgiven, even the destruction of Europe’s enlightenment values and its historic institutions, as long as the project survives indefinitely.

Yet the pro-EU side’s understanding of history is hopelessly flawed. It is simply not true, wherever one looks in the world, that modern, democratic self-governing countries have a tendency to go to war with their neighbours. The very opposite holds: almost all are inherently peaceful, and very few seek armed conflict.

In the 1930s, Germany, Italy, Japan and the Soviet Union had never been properly liberal or democratic. It is certainly true that countries can regress spectacularly, as we have seen with Erdogan’s Turkey. It is more than likely that at some point one or other country in the West will embrace an expansionary fascist, communist or other authoritarian ideology, perhaps as the result of a depression.

But the answer is not to pre-emptively abolish all nation-states and subsume them into an unaccountable, technocratic empire: there are such things as internal, civil wars, and there would just be more of those. The better answer is to create multilateral alliances that ensure the world can deal promptly with countries that go rogue, while embracing international economic policies that make extremist lurches less likely.

Caretaker prime minister Carlo Cottarelli leaves parliament for a meeting with the Italian president, aiming to break the impasse in the country's politics Credit: ANDREAS SOLARO/AFP/Getty Images

It’s not just the EU’s understanding of history that is dodgy, leading it to overreach dangerously: its grasp of economics is equally disastrous and is the other, related explanation for the current madness. Ever since Jean Monnet, one of the founding fathers of the EU, economics has been seen as a tool of politics: policy has been designed not to maximise growth or promote free markets but to force political unification. Crises can be a good thing in this dystopian vision, especially with a set of institutions whose answer to every problem is more powers for Brussels.

The euro was always necessary to achieve political unification: all states have their own currency. But the EU took a massive gamble when it launched the euro. It was designed not merely with no possible way back for the Franc, Mark or Lira but also to ensure that the fiscal affairs of member states were interlocked to a far greater extent than almost anybody still realises today.

The euro isn’t really a single currency but a hopelessly complex monetary system, with internal debits and credits reflecting capital flows between the different national central banks as part of the Target2 system. Despite all of that, the euro didn’t come with any explicit fiscal integration: there was no single tax system and Treasury for the EU as this would, rightly, have been anathema to electorates, including in Germany.

The “hope” was that the next economic crisis, when it came, would allow the EU to integrate further, rather than threaten the collapse of the whole edifice. And that is why Brussels is panicking: Euroscepticism is rampant, and almost nobody wants to massively increase the size of the EU budget, which would be the logical next step. Brussels is facing the wrong sort of crisis, one that wasn’t part of Monnet’s playbook, and one that could trigger another 2008-style calamity.

Even if it were managed carefully, a dismantling of the euro would wipe out the Bundesbank’s nearly €1 trillion in Target2 credits, which would finish off the German centre-Right and centre-Left and threaten political stability in Berlin; it also means that the Eurocrats will do anything, including shutting down a dissident country’s banking system, to stop anybody from leaving.

The EU’s last roll of the dice is to portray itself as the only true supporter of bourgeois values and capitalism. The message to the middle classes is simple: if you value your assets, support the status quo. It’s nonsense, of course: the EU’s economic system is a cross between corporatism and social-democracy, with strong protectionist tendencies, and an ultra-distortionary monetary policy rigged against savers. It is not designed to promote economic liberty and prosperity, which is why the EU has underperformed for so long.

But it means that Eurosceptics, in Italy and elsewhere, are using Left-wing rhetoric to oppose the EU, another appalling development. In Italy’s case, they are blaming “speculators” for not getting their own way, rather than a political stitch-up. Down that road lies not Eurosceptic rejuvenation but economic ruin.

That is the problem, ultimately, with the EU’s scorched earth policy, its decision to sacrifice every ideal and every value to keep itself alive: when its bankrupt edifice is finally torn down, be it in a year or in a decade’s time, there will be very little left to save.