Report European Council
The ratification of the Treaty of Münster, one of the treaties of Westphalia, by Gerard ter Borch (1648)

Monti and Rajoy sign away the sovereignty principle

The agreement reached in Brussels on the initiative of Spain and Italy means one thing: three and a half centuries after its birth by the treaties of Westphalia, the nation-state can only survive by delegating sovereignty.

Published on 2 July 2012 at 16:32
The ratification of the Treaty of Münster, one of the treaties of Westphalia, by Gerard ter Borch (1648)

The magnificent episode of the Battle of Waterloo in The Charterhouse of Parma, the second great novel by Stendhal, last week helped us understand an increasingly common sensation in this dizzying spiral of crisis: we all recognise that we’re in a huge muddle, and despite all the expert articles that we devour, we are still finding it hard to grasp the meaning and scale of the movements taking place around us.

We lack direct lines of communication with the general staff, and we suspect that they don’t have a overall view of events either. Digitised chaos. We are all Fabrizio del Dongo, the young Italian who took part in the battle of Waterloo without knowing why it was being fought.

This week has shed a little more light. The news from Brussels on Friday has given a sense of the confusion that has prevailed since the dramatic elections in Greece, which we no longer remember, since the memory of the media is like that of a reptile.

Forming a new front

Italy and Spain formed a front against Germany, forcing through three measures that, in principle, have put some space between them and the worst of their ordeals. Spain and Italy have strengthened an alliance put together at the last minute – not previously seen on the European Union stage – to avoid a humiliation with serious political consequences for them at home. The two countries have discovered that, in concert, they carry some weight in Europe.

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A worsening picture of public debt has been a bitter failure for the Mario Monti government – some accounts say that the Italian prime minister even threatened to resign at the Brussels summit – and has led to the calling of early elections in the autumn.

At the moment the situation in Italy is terribly delicate, despite the elegant and efficient stage management displayed by Monti and his technocrat ministers.

The political system is in a phase of disintegration: following the Berlusconi debacle, the centre-right needs rebuilding; the centre-left (Democratic Party) is leading in the polls but lacks coherence and staying-power; and the comedian Beppe Grillo, founder of an anti-political movement called Cinque Stelle, is nearing 20 percent in some polls.

Even Berlusconi – highly intrigued by the Grillo phenomenon – has sallied out from the mausoleum waving a "back-to-the-lira" banner, while the Vatican is not having the best of times in figuring out alliances inside that Baroque storm that has left only the venerable figure of the president, Giorgio Napolitano, standing.

Off the rails

The Bundesnachrichtendienst, or Germany’s Federal Intelligence Service, under the direct control of the Chancellor’s office, will have briefed Angela Merkel in detail about the potential risks of Italy going off the rails politically.

If we add to that the relevant reports on the actual costs of a possible disintegration of the euro, we can understand the look of disgust on the German leader’s face on Friday morning in Brussels. Merkel had been tightening the screws, but had to let up when she too glimpsed the edge of the abyss.

“The crater has grown bigger and Italy is again close to the edge.” This phrase, uttered by the Italian prime minister three weeks ago, shortly before the election drama in Greece, offers a clue to what happened in Brussels. What enlarged the crater? The problems of capitalising the Spanish bank Bankia. The widespread suspicion, still lingering, is that the Spanish problem is much bigger than the two Spanish governments of the past seven months have admitted – and it’s a suspicion taken very seriously in some circles in the City of London.

Unlike in Italy, parliamentary stability reigns in Spain. The government has an absolute majority of 186 MPs and nearly four years to run. That is Mariano Rajoy’s main asset.

Rajoy does not suffer from Monti’s weakness, but any formal intervention into the economy could leave him severely weakened. In Brussels, Monti was fighting for his survival; Rajoy, for his future. The alliance between them was inevitable. In the 48 hours leading up to the Brussels summit, the two leaders held three meetings.

Fine print

All that’s left now is the fine print. Of the three measures agreed in Brussels, the most tangible is the cancellation of the preferential status for those who put up the loans to recapitalise the banks, which would have meant punishing those investors who bought Spanish public debt; theoretically, the cancellation has severed the fuse that connected the ticking time-bomb of the loan to the explosive payload of the risk premium.

The other two measures need more time. Recapitalising the banking system without adding those costs to the states’ balance sheets depends on the speed with which the European Central Bank assumes supervisory powers and control over the entire banking system of the Union. But those are large words: supervision and control from Frankfurt across the entire European banking system (excluding Britain, of course). A monumental transfer of sovereignty that London regards with dread.

The third measure – the purchase of debt by the two European bailout funds – should be governed by a few memoranda. No Men in Black calling on the ministries of Madrid and Rome, but control clauses that Germany and its allies will try to toughen up as far as they can to recover from the theatrical blow they took in Brussels. Elections are coming up in Germany within the year.

This week’s movements are slightly less confusing than Stendhal’s Waterloo. And that superior theatrical clarity leads us to a previous historical event, no less important than the battle that sealed the downfall of Napoleon.

Westphalia, 1648. The succession of treaties that gave name to the Peace of Westphalia slowly wound down the old European imperial space pivoting off Rome: the Germanic mosaic of the Holy Roman Empire, the Papacy, and the indebted Spanish Empire, so powerful overseas. Westphalia opened the doors to the new national sovereignty, embodied by the France of Cardinal Mazarin. The Europe of the nation states was born, and was later given greater impetus by the French Revolution.

Return to Westphalia

Perhaps we have gone back to Westphalia without knowing that we are in a new Westphalia. The windmill blades of national sovereignty have begun to swing the other way.

To prop up the euro means ceding powers to the imperial centre. Westphalia II. The Spaniards and Italians will have no choice but to accept it. The big question is France, the quintessence of the nation state.

The ghost of Cardinal Mazarin won’t waste time in starting to shift the furniture in the Elysee. (And Westphalia was a process that went on for more than thirty years).

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