All the European newspapers at the moment are regaling their readers with the ongoing woes of the euro. Predictions of doom and gloom abound. The only people who do not seem to be overwhelmed by it all are the cool inhabitants of the European Parliament, who have awarded themselves another hefty salary rise.
One comment that I found very interesting, because I truly believe it is a correct assessment, is that in their obsession to create a European federation, the elites in Brussels have closed both eyes to the pitfalls in the way of the full political and economic integration of the continent of Europe, usually referred to as the European ‘dream”, as if no other version is relevant.
This “dream” was always above all a political not an economic project, to be driven through at any cost, which was why all those “Maastricht criteria” laid down to bring it about were repeatedly breached. But as expert voices were warning as long ago as the 1970s, when it was first put on the agenda, there was no way economic and monetary union could work unless it was run by a single all-powerful economic government, with the power to raise taxes.
The headline labels applied to the various stages of that process might have changed over the years, such as building first a “common market”, then a “single market”, finally a “constitution”. But by far the most important project of all was locking the member states into a single currency. That could only work if, following the US model, between 20 and 25 per cent of Europe’s GDP was available to such a government, to enable a huge transfer of wealth from richer countries such as Germany to the poorer, more backward countries of southern Europe – and how ironically that has come about!
When the 10-year-long construction of the euro began in the 1990s, all warnings were ignored and rules were treated as mere window dressing. The member states were locked together willy-nilly in a one-size-fits-all system, with a single low interest rate, enabling countries such as Italy, Spain, Portugal, Greece and others to live on a seemingly limitless sea of borrowed money. The cry of “money no problem” did not apply only to Malta it seems.
And now, entirely predictably, judgment day has come.
The German taxpayer, we are being informed, is averse to bailing out the economies of Greece, Spain and Italy. Hardworking Germans say they did not join the EU to be a milch cow for all and sundry. But, like every other nation, Germany is consistently putting its own interests first. The Germans are obsessed with saving. Anything wrong with that one may ask? No, but if everybody concentrates on saving, then we would all crash together. Germany wants to export, as all countries try to do, but then it denies its markets the wherewithal to grow and expand to be able to buy those same goods. Moreover, Germany modelled the euro on the same lines it used for the deutschmark. The country and its leaders have little room for complaint.
Moreover, although often referred to as the paymaster of the EU, and I myself have used that term, it is by no means only Germany that is contributing to EU funds. If Germany wants to recreate the former Holy Roman Empire according to its own vision, it must be prepared to pay for it. An anguished Angela Merkel pronounced last week that “the current crisis facing the euro is the biggest test Europe has faced for decades, even since the Treaty of Rome was signed in 1957”. If the euro fails, Europe fails, she intoned dramatically, warning that the consequences for the whole of Europe would be “incalculable”. Not so incalculable as to freeze MEPs’ salaries of course.
What is she demanding? Germany wants to inject more of its own budgetary rigour into the rest of the zone by changing the rules so that deficit rules for each country are legally enshrined and that ailing members can restructure their debts. She is demanding that all national budgets are scrutinised by the EU before presentation in their own individual national parliaments. She even called for a “global” tax on financial transactions to raise €321 billion a year Europe-wide.
Up to now, monetary policy, which determines exchange rates and borrowing costs, is in the hands of the European Central Bank, but fiscal policy – control of tax and public spending – remains with national governments. Inevitably, cries went up last week for the EU to be transformed into a proper economic government with control over national budgets and the power to raise taxes.
In all the welter of analysis it is often forgotten that the survival of the euro is as much about hearts as it is about minds, emotions as well as economics. As one political correspondent pointed out, the euro was forged out of the ashes of the Second World War and the dismantling of the Iron Curtain: its genesis in Maastricht in 1991 came a mere two years after the fall of the Berlin Wall. The hope was to rehabilitate post-Nazi Germany once and for all, binding German interests inextricably to those of its neighbours, to help deliver freedom and stability to former Soviet client states and to create a new economic superpower that could rival the US.
The single currency’s two main architects, the then German chancellor Helmut Kohl and French president François Mitterrand were both profoundly affected by the war. Kohl’s brother died as a teenage soldier and Mitterrand served both Vichy and the Resistance. Their vision of a Europe that could offer peace, security and prosperity had urgency as well as a certain nobility.
Today, memories of the war and even the Wall are becoming increasingly distant. The great driving forces that led to the creation of the euro no longer exist. Instead of lasting harmony, parts of Europe are riven by civil unrest and the risk is that even more dangerous forces may be unleashed.
As the eurozone faces the biggest turmoil of its short lifetime, there is a gaping lack of a compelling idea that can capture the imagination of its citizens and unify them behind their battered currency and their dream.