No Stopping Technocrats Rule as Debt Crisis Brings Down Europe Governments
The European debt crisis has toppled four elected governments with the last two, in Greece and Italy, falling last week without a shove from voters.
The appointment of prime ministers in Athens and Rome to push through unpopular austerity measures echoes efforts in the past five decades by European leaders to control policy-making when democratic means fall short.
“The euro zone would never have been created if voters had been given a say,” Fredrik Erixon, head of the European Centre for International Political Economy in Brussels, said in a telephone interview. “It’s an elite project but that doesn’t mean it’s a bad project.”
Greek Prime Minister Lucas Papademos, a former central banker, and Italian Prime Minister-designate Mario Monti, an academic and former European commissioner, were chosen by each nation’s president after their elected predecessors were abandoned by political allies, making them unable to pass legislation demanded by the other members of the euro region.
“They’re there not just because they’re technocrats, but because it was easier to ask independent personalities to construct political consensus,” European Commission President Jose Barroso said Nov. 14 in Paris. “The level of hostility between different political forces is enormous.”
Progress toward building -- and now saving -- the 27-nation union has rested largely with the ruling elites. Decisions are taken at meetings of ministers from national governments, and the commission, its executive arm, is appointed by those governments.
The bloc, the brainchild of French bureaucrat Jean Monnet, started in 1951 as a grouping of six nations bringing their coal and steel industries under common management. In 1957, the six signed the Treaty of Rome, extending cooperation to other economic areas.
When the prototype European Parliament came into being in 1952, it had no legislative powers. Members weren’t elected until 1979 and the assembly shuttled between Brussels and Strasbourg, France. It was only able to amass rights to influence decisions as new treaties were signed over the years. In 1999, the parliament exercised its power by forcing the removal of the commission.
European shares are pushing higher, the Euro is on the upswing, and S&P 500 stock index futures have erased overnight losses to stand in positive territory, hinting crude oil prices are poised to advance as Wall Street comes online. The surge in optimism came as the average yield on benchmark 10-year bonds of the so-called “PIIGS” – the Eurozone countries most vulnerable to the sovereign debt crisis – droppedto the lowest level in six days, withnewswires attributing the move to intervention from the European Central Bank, which is reportedly intervening into bond markets to prop up troubled countries’ debt.
While the move offers a temporary respite from sovereign stress, the improvement is unlikely to prove lasting unless the ECB gives a firm commitment to act as a lender of last resort and backstop the likes of Italy and Spain, a move that has been aggressively opposed from within the central bank up to now. Still, a short-term corrective recovery in sentiment after recent selling would be reasonable at this point, taking the WTI contract along for the ride. On the data front, US CPI and Industrial Production figuresare in the spotlight.
Turning to the chart setup, prices put in a bearish Dark Cloud Cover candlestick pattern below resistance at $99.86, the 61.8% Fibonacci retracement, hinting a move lower is ahead. Negative RSI divergence bolsters the case for a downside scenario. A break below rising channel support at $96.53 exposes the 50% Fib at $95.25. Alternatively, a push above immediate resistance exposes the channel top, now at $105.26.