Now that August is nearly over, the European giant tries to shake off its lethargy and get down to continue tackling what’s ailing it.
It has not been an easy summer for Europe. First the many terrorist attacks in France and in Germany. Now this earthquake in Italy. And, above anything, Brexit.
The talks around Europe have already begun. There was the largely symbolic meeting between Merkel, Hollande and Renzi (with Italy a poor substitute for Britain, if you ask me) at Ventotene. Next, Merkel took upon herself a punishing round of talks with 13 member states (but not Malta, nor Cyprus). All this is was in preparation for the coming European Council which will be held in Bratislava later on in September.
The cooling off is mutual, it seems. George Vella, not Joseph Muscat, took part in a PES preparatory meeting last week.
Ostensibly, the meetings try to set Europe’s course following Brexit. It is not just a matter of deciding what the EU’s response to Brexit ought to be. Brexit, as we all remember, had multiple levels. On the face of it, it pulled Britain away from EU control but underneath it was about immigration. Basically, however, Brexit undermined and rebelled against the most important principles of the EU – especially solidarity between the peoples of Europe. The Brexiteers just did not want to hear about solidarity when this was translated into thousands from East Europe migrating to Britain and partaking of the British social security system.
The poor European migrants were targeted when Britain, London especially, houses more poor vagrants from all over the world. No Brexit for them. Nor are they allowed in Britain out of solidarity.
But the immediate task facing the EU is quite different from coping with the British exit. We may think that, just because we have not been hearing or reading a lot about it, Europe’s financial crisis is over. It is and it isn’t.
It is because countries like Spain, Ireland, etc. have emerged from the depths of recession and are seeing some kind of growth. It isn’t because countries like France and Italy, etc., are still deep in recession or their growth has been stunted. Italy is now Europe’s basket case with a heavy task to undertake – restructuring the many troubled banks.
And then there is Greece.
A year and a month ago Greece was on the verge of being kicked out of the Eurozone. Then in one long night, it accepted everything that Europe threw at it as a result of which its economy has been kept on life-support.
Since July 2015, Greece has implemented some of the reforms it signed up for but it has delayed others. The rest of Europe has relented in the face of Greek successive non-implementation as if it does not have the heart to kick Greece out.
Still, the Euro-system lurches on. Greece has not had its Grexit; the euro has survived when many thought it was doomed. Each successive meeting of European leaders (and also those of finance ministers) ends with an announcement that a fix has been found, a new structure has been added on, and yet the deep fundamental issues that undermine the euro have not yet been tackled.
I have come to this conclusion after reading a book by the former Greek Finance Minister, Yanis Varoufakis, entitled And the weak suffer what they must? (Bodley Head).
Without reading the book, I would have thought he would be bitter mostly against his antagonist in so many Eurozone meetings – German Finance Minister Wolfgang Schauble. He is, but that’s not all.
What bedevilled the meetings was history – the not so recent history of Nazi occupation and the Geek demands for reparations that were never paid. Nearer our times, German liberals like Willy Brandt (and Austrian Kreisky) supported the democrat Greeks in their rebellion against the colonels.
But that is not the target of the book (although more about this later). The real villain of the book is Richard Nixon and his Treasury Secretary John Connally and Under-Secretary Paul Volcker. On 15 August 1971 they told an unsuspecting Europe that the US would be dismantling the global monetary system it had created and maintained for many years. In effect, it was pulling out the rug from under Europe’s feet.
Europe was in a way to blame for this, for the preceding years had shown many times that Europe was coming to chafe under the US hegemony. So the US pulled the plug from the Bretton Woods agreement which had fixed the US dollar against a fixed amount of gold.
Since then, since this American rejection, the European leaders have been engaged in a series of knee-jerk reactions that – 40 years later – have led the euro to the brink of collapse. We can read about everything that came later – the European Monetary System, the snake, the euro – as so many knee-jerk reactions to the US 1971 decision.
Shorn of the support of the mighty Dollar, Europe tried to go it alone, to create its own federal system, its own central bank, its own dollar (euro). But it left out an important proviso – the unique American system of solidarity. If an American state, say Georgia, were to have the same kind of problems Greece faced in 2008, it would not face the same heartbreak that Greece suffered because the Federal Reserve would have come in and resolved matters. That is missing in Europe and nothing that has been created in these years of crisis has tackled the fact.
Again, the 2008 crisis was crisis year for many countries but it was more a crisis for the European banks, because they had used the freedom provided by the euro to lend to countries that were already stressed. When the crisis broke, the governments saved the banks, using taxpayers’ money to save profligate banks and bankers. And the biggest banks in Europe that had lent to the stressed countries were the ones in – you guessed it – Germany.
I can still hear Schauble rasping when we met him: “Pacta sunt servanda” (Promises must be kept). Those promises plunged Europe into austerity that has meant so many millions out of work, a lost generation, and now a continent plagued by Eurosceptic politicians who are gaining power everywhere.
As I said earlier, the British voted for Brexit for non-financial reasons but the main reason why Britain got so many migrants from Europe was because austerity had pushed many to migrate.
Europe must go back to understand what has caused this crisis and it must also understand that the US of Bretton Woods was also the Europe of the Marshall Plan (of which Germany was the prime receiver). Unless Europe understands that growth must replace austerity, it is doomed to repeat the crises, to create more unemployment and anger and revenge.
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