OCTOBER 9 2008 18:42h
Gennady Gerassimov once said: `We now follow the Frank Sinatra doctrine: I`ll do it my way.`
"The days of the Brezhnev doctrine are over," Gennady Gerassimov said, referring to former leader Leonid Brezhnev's iron rule that no communist state could leave the fold. "We now follow the Frank Sinatra doctrine: I'll do it my way."
The European Union has struggled to overcome an outbreak of the "Sinatra doctrine" since the global financial crisis swept into Europe from the United States last month, felling giant banks, rattling markets and panicking savers.
Each country began by acting for itself, some taking measures with negative consequences for neighbours or partners.
The Irish enacted an unlimited guarantee for deposits in Irish-owned banks, sucking cash away from British rivals. National regulators and governments in various countries banned some or all short-selling of shares.
The Dutch and Italians called for a U.S.-style bank rescue fund for Europe. France canvassed the idea privately, then disowned it when Germany objected loudly.
French President Nicolas Sarkozy, holder of the 27-nation bloc's revolving presidency, tried to assert leadership, convening a summit of leaders of the major European economies and EU institutions who pledged to coordinate their response.
That irked smaller EU states which felt excluded without immediately instilling much more discipline.
The very next day, German Chancellor Angela Merkel issued a blanket guarantee of savers' deposits apparently without having informed EU partners or the European Commission in advance.
By this week, European Commission President Jose Manuel Barroso was warning: "A succession of national responses may cause the renationalisation of the European financial system, which would be a setback for European integration."
He rejected accusations that the Commission, seen by some critics as a slave to free-market dogma, had failed to press for greater European regulation of banks and markets.
"We all know that before this crisis there was no chance to introduce more European regulation. Some of the most relevant member states in economic and financial dimension would not ever have accepted it," he told the Friends of Europe think-tank.
Behind the finger-pointing is fear in Brussels of a rise of protectionism and disregard for EU competition rules that could wreak economic damage and lead to big gains for Eurosceptics in next year's European Parliament elections.
Another casualty could be governments' willingness to adopt ambitious but initially costly measures to fight climate change and promote renewable energy, due to be enacted this year.
Public anger at bankers' excesses and fear for savings, jobs and pensions may fuel support for the anti-globalisation left and the nationalist right, while disenchanted mainstream voters stay home.
"No" votes in 2005 to the EU constitution in France and the Netherlands, and Ireland's rejection this year of the Lisbon treaty containing the same reforms were warning signs.
"We will have a very, very tough election campaign because the Eurosceptics ... are coming together. From Ireland to Denmark, Austria and other countries," said European Parliament President Hans-Gert Poettering.
None of this means the EU is about to fall apart. Divergent national reactions to a crisis are sometimes a prelude to a major advance in European integration.
The fall of the Berlin Wall in 1989 and the unification of Germany led to the Maastricht treaty on European economic and monetary union in 1991 creating the single European currency, an idea that had seemed utopian in the 1980s.
The Sept. 11, 2001 attacks on the United States led to the adoption of a European arrest warrant, replacing centuries of slow and cumbersome extradition proceedings with a swift and automatic handover of serious crime suspects within the EU.
That might point to a leap forward in European banking supervision and financial regulation, as the European Parliament demanded again in a resolution on Thursday.
"So far, it is fair to say the EU response has been inadequate, and it is always through crisis that the EU becomes a bit less inadequate further down the road," former European Competition Commissioner Mario Monti said.
A greater role for the European Central Bank in cross-border banking supervision is one widely-canvassed option, although the ECB cannot be a lender of last resort.
Barroso said some EU governments, which he did not name, were still resisting even the idea of colleges of national supervisors to invigilate insurance companies.
It remains to be seen whether the crisis will soften British resistance to a stronger EU regulatory hand on the City of London financial centre, or German opposition to any common European guarantee fund or regulator.