Indulge Your Fantasy (If You Dare)

Straight from his Coulisses de Bruxelles blog, this is how French journalist Jean Quatremer imagines Europe's future following the latest series of meetings of EU leaders. Here we offer a translation of the most thought-provoking points - the full versions of both scenarios are available here and here.

The tongue in cheek 'predictions' should be treated with caution. Indeed, Monsieur Quatremer is a staunch euro-federalist (he recently won the EU-funded Altiero Spinelli prize for journalism - no further comments needed), and here he's quite clearly trying to convey the "it's either a federal Europe or war" image. But it's worth a read nonetheless.

Scenario 1: The euro is buried, the former EU descends into chaos

"General Charilaos Pangalos looks with satisfactions at Syntagma Square from one of the windows of the Vouli, the ancient Greek parliament which has now become the headquarters of the military junta he leads. Two US Abram tanks watch over both sides of the building. Just opposite, excavators finish demolishing the old Finance Ministry set on fire by protesters during the 2012 riots which devastated the centre of Athens."

This is how it happened:

"Everything started at the end of 2011, when the eurozone decided to impose a 60% write-down on Greek debt hold by private investors. As expected, it was the 'bank run', as the economists call it…The EFSF comes to the rescue [of Greek banks] by recapitalising them, but Greece’s small shareholders who had unwisely entrusted their savings to them lose everything. Overnight, Greece’s financial system ends up in the hands of Brussels. Meanwhile, pension funds which had bought government bonds with taxpayers' money are on the brink of the abyss: pensions must be cut, again. The streets explode."

"In November 2011, [Greek Prime Minister George Papandreou] is forced to call early elections. Antonis Samaras, the leader of [centre-right] New Democracy party, wins, but is forced to enter a coalition with the LAOS, the orthodox populist right party…Samaras decides to leave the eurozone…As eurozone and EU membership are linked, Greece denounces the EU treaties altogether."

"The new drachma is devalued by 50% against the euro. Greece’s trade deficit explodes, as the cost of imports increases…The increase in Greek exports due to devaluation goes unnoticed in this chaos. Greek GDP shrinks by 40%...Greek citizens’ revolt against dishonest politicians continues to expand…Little by little, the country slips into civil war. In 2013, it’s the tragedy: a demonstration in Syntagma Square degenerates, the army opens fire, 90 people die…Terrified, Greece’s big families ask the army to take over power."

Crikey!

And what happens in the rest of Europe then?

"The EU has bigger things on its plate than to deal with Greece. Athens’ exit has triggered panic on the markets, which now stay clear of the eurozone: if Greece has done it, other countries can follow…Not even France can finance itself on the markets…At the end of 2012, the fat lady has sung: eurozone countries throw in the towel and return to national currencies, hoping to get some respite. But the opposite happens. The new D-mark takes a 50% appreciation, while all the new currencies in Southern Europe are devalued. The entire eurozone is in default."

"In 2013, customs barriers are re-introduced as a safeguard against ‘competitive devaluations’. In one year’s time, nothing remains of the European single market…Populist parties win the elections in several European countries. Geopolitical tensions re-emerge on the continent. Berlin is blamed for the collapse of the euro, and looks with concern at its neighbours concluding defence agreements with each other. Germany feels isolated and unloved. Therefore, it starts increasing its defence budget."

Scenario 2: The federal Union watches President Copé closely

"In the spring 2022, Eurozone President Jens Weidmann is quite annoyed. He thought that the French had settled down and had eventually incorporated the ‘culture of stability’ after the two mandates of Socialist President François Hollande. But not quite: the newly elected French President, the Conservative Jean-François Copé, has conducted an electoral campaign based on the need to return to growth...Weidmann has therefore invited [Copé] to Brussels, for a meeting in his office in the Berlaymont building, the seat of the European government, to make him understand that there is no question of France going back to deficit and interrupting its virtuous cycle: the 60% of GDP target for public debt remains."

(Okay, some points of explanation are in place: Jens Weidmann is currently the President of the German Bundesbank. François Hollande is the Socialist candidate for next year’s French presidential elections. Jean-François Copé is the leader of French President Nicolas Sarkozy’s UMP party group in the lower house of the French parliament.)

And how did all of this happen?

"It was at the end of 2011, two years after the start of the [eurozone] crisis, that the governments realised that the financial markets were at war with the euro, because they didn’t believe in the future of a currency without a State or without a government…At the 26 October 2011 summit [French President Nicolas Sarkozy and German Chancellor Angela Merkel] announce their plans for further integration, something which contributes to reassure the markets."

"The Britons, Swedes and Czechs make clear that they are opposed to this leap towards federalism. An agreement at 27 is therefore impossible, because unanimity is needed to change the [EU] treaties. In January 2012, Berlin and Paris…unveil their plan for a federal eurozone: an ad hoc treaty at 17, with a specially-elected European constituent assembly in charge of drafting it."

"In September 2012, the constituent assembly proposes a text very quickly. The EU remains in place in its current form, and all the countries fulfilling the necessary criteria will be allowed to join the eurozone. The eurozone will be governed by a directly elected president, a proposal made by Wolfgang Schäuble, the German Finance Minister, who will lead the government. The Parliament, also directly elected…will be in charge of controlling [the government] and adopting, along with the eurozone Council of Ministers, the economic and budgetary guidelines which will be imposed on all member states…If a country doesn’t play by the rules, a whole range of coercive measures will be activated – from the ECJ annulling a deviant national budget to national budgets being unilaterally amended by the Parliament and the Council of Ministers."

"The treaty will have to be ratified by a majority of three-quarters of countries. If a country rejects it, it will be given a second chance, knowing that a second rejection would mean leaving the eurozone. In 2014, the new text enters into force. The first elected Eurozone President is Jens Weidmann, the former President of the Bundesbank…In 2019, he’s re-elected without any problems. Europe finally has a telephone number. In 2022, the eurozone has 22 members."

And the story ends here. Again, all you've just read is pure fantasy. However, if you have a moment to spare over the weekend, we would be curious to know whether you think that any of these events will take place in the foreseeable future...?