When in 1941 Altiero Spinelli, along with Eugenio Colorni and Ernesto Rossi, signed the famous Ventotene Manifesto, they were fighting “for a free and united Europe”. The Milan declaration that followed in 1943, establishing the European Federalist Movement, reaffirmed the commitment to a united democratic Europe. This was a natural extension of Europe’s quest for democracy led by the European Enlightenment, which in turn inspired the whole world. It is, therefore, particularly distressing that the danger to democratic governance in Europe today, coming through the back door of financial priority, is not receiving anything like the concern that it should generate. The tradition of democratic public discussion is being undermined by the unregulated power of rating agencies to command, in effect, what democratic governments should do, often supported by further commands by international financial institutions.

Two distinct issues need to be separated out. The first concerns what Walter Bagehot and John Stuart Mill saw as the need for “government by discussion”. If the financial guardians have a realistic understanding of what needs to be done, their voices should get serious attention in democratic public dialogue. But this is not the same thing as allowing them the ultimate effective power to command democratically elected governments, without any general resistance from democratic Europe. The power of rating agencies can be restrained and moderated only by the power of coordinated political voices in Europe, which is missing.

Second, it is, in fact, quite hard to see that the sacrifices that the financial commanders have been demanding from precarious countries would deliver the ultimate viability of these economies and guarantee the continuation of the Euro within an unreformed pattern of financial amalgamation and an unchanged membership of the Euro club. The diagnosis of economic problems by rating agencies is not quite the voice of verity that these agencies pretend. It is worth remembering that the record of the rating agencies in certifying financial and business institutions preceding the 2008 economic crisis was so abysmal that the US Congress seriously debated whether they should not be prosecuted.

Since much of Europe is now engaged in achieving quick reduction of public deficits through drastic public expenditure reduction, it is crucial to scrutinize realistically what the likely impact of the chosen policies may be, both on the lives of the people and on the generating of public revenue through economic growth. In addition to a bigger political vision, there is also the need for clearer economic thinking on the effects and effectiveness of the “blood, sweat and tears” strategy of maximal deficit reduction.

The high morals of “sacrifice” do, of course, have an intoxicating effect. This is the philosophy of the “right” corset: “if madam is at all comfortable in it, then madam certainly needs a smaller size”. But if the demands of financial appropriateness are linked too mechanically to immediate and drastic cuts, the result could not only be more than necessary hardship, but also the killing of the goose that lays the golden egg of economic growth. The tendency to ignore the importance of economic growth in generating public revenue should be a major item for critical scrutiny – from Britain to Greece. In Britain the questions to ask concern only the wisdom of the policies freely chosen by the government (without much encouragement to public discussion), rather than what is being imposed from outside, as it is in Greece, which has little option to defy the commands of the financial bosses.

Maximal cuts may reduce public expenditure as well as private spending, but if that leads also to reduced incentives for growth, this can make public revenue go down sharply. The strong connection of growth and public revenue has been widely observed in many countries, from China and India to the United States and Brazil. There are lessons from history here, too. The big public debts of many countries when the second world war ended caused huge anxieties, but the burden dwindled rapidly thanks to fast economic growth. Similarly, the huge deficits that President Clinton faced when he came to office in 1992 melted away during his presidency, greatly aided by speedy economic growth.

How did some of the Euro countries get into this mess? The oddity of going for a united currency, the Euro, without more political and economic integration has certainly played a part in causing this crisis, even after taking note of financial transgressions that have undoubtedly been committed by a country like Greece or Portugal (and even after noting Mario Monti’s important point that a culture of “excessive deference” in the European Union has allowed these transgressions to go unchecked). It is to the huge credit of the present Greek government – Prime Minister George Papandreou in particular – that they are doing what they can, despite political resistance, and it is also a good cause for the Greek government to try to get Greece out of the culture of corruption that overwhelms Greek business and economic relations.

However, neither the long-run benefits of far-reaching Greek reforms, nor the pained willingness of Athens to comply with the demands of international financial commanders, eliminates the European need to examine critically the wisdom of the requirements – and of the timing – that are being imposed on Greece. Austerity has an immediate appeal to the financial guardians today, but it is not at all obvious that these guardians have anything like a clear understanding of how economic growth would re-emerge in Greece, which is currently shrinking quite rapidly. Aside from the dampening economic effects of maximal cuts in the cause of saving Greek’s membership of the Euro zone, the restrictions of Euro itself make the international prices of Greek goods and services high and often uncompetitive.

It is no consolation for me to recollect that I was firmly opposed to the Euro, despite being very strongly in favour of European unity, for reasons that Altiero Spinelli had outlined so powerfully. My worry about the Euro was partly connected with each country’s giving up the freedom of monetary policy and of exchange rate adjustments, which have greatly helped countries in difficulty in the past, and prevented the need for massive destabilization of human lives in frantic efforts to stabilize the financial markets. That monetary freedom could be given up when there is also political and fiscal integration, as the states in the U.S. have.

The wonderful political idea of a united democratic Europe has been transformed over the years to make democratic politics seem subsidiary to complete fidelity to a programme of incoherent financial amalgamation. Rearranging the Euro zone now would have many problems, but difficult issues have to be intelligently discussed – with a European democratic commitment to do so – taking realistic empirical note of the different circumstances that apply to different countries. The last thing that Europe needs today is to drift in financial winds fed by narrow-minded and severely incomplete economic thinking, often coming from agencies with a terrible track record of anticipation and assessment. Stopping the marginalization of the democratic tradition of Europe has an importance that is hard to exaggerate.