“If we turn to the financial dimension, even Germany now plans to cut 15,000 civil servants and apply taxes on airlines and energy companies to save €11 billion this year. Britain, among many other measures still to be announced, is cutting free prescriptions for people with long-term health problems to save €430 million”
Last Monday, a few minutes before President Nicolas Sarkozy was about to leave for Berlin for a Franco-German summit, Chancellor Angela Merkel phoned to postpone the meeting. Officially, the cancellation was forced by a schedule problem. Chancellor Merkel was embroiled in her emergency plans to cut €80 billion from the German budget by 2014.
In reality, the Merkel-Sarkozy meeting was supposed to agree a joint position on the deficit crisis threatening the European single currency before a European summit in Brussels next Thursday. Officials in both France and Germany say that the two countries were so deeply divided that a meeting on Monday would have been pointless and failure might have caused a further market backlash against the euro.
The Franco-German disagreement is not the first in the last 50 years but is potentially the most serious. The French press, and some French politicians, accuse the Germans of taking a narrow, national approach, which has, in the end, made the crisis worse. After refusing for many weeks to join a concerted but limited Greek bailout, Chancellor Merkel was forced by market pressure to agree a much larger, €500 billion aid mechanism, they point out. The German press and politicians, no longer think in European terms, the French complain.
Germany in turn accuses France of conspiring with the French head of the European Central Bank, Jean-Claude Trichet, and the French head of the International Monetary Fund, Dominique Strauss-Khan to bully Ms Merkel into conceding ground which suits French interests.
I quote all the above information to show how deep are the divisions that now exist between the two countries that are the raison d’être of the European Union.
The devil take the hindmost
If we turn to the financial dimension, even Germany now plans to cut 15,000 civil servants and apply taxes on airlines and energy companies to save €11 billion this year. Britain, among many other measures still to be announced, is cutting free prescriptions for people with long-term health problems to save €430 million.
The febrile international money markets, increasingly reluctant to lend money to European governments, are cited as the main reason for accelerating cuts in public services. Ratings agencies Fitch, Moody’s and Standard & Poor's agree that Europe has failed sufficiently to cut its debts. The ratings agencies, which get their income from wealthy investment funds, naturally want to reduce the risk of countries defaulting on their debts. It is becoming increasingly obvious that everybody is out to save his own skin and all sense of unity of purpose has vanished.
To cut or not to cut?
Yet the argument over whether to cut immediately or wait until western economies are further down the road to recovery is anything but one-sided. According to one respected economics consultancy, Britain and Germany are preparing to “out-stupid” each other with self-defeating cuts which will induce a renewed recession that will hammer tax revenue and enforce greater relief spending. This scenario is supported by liberal economists such as Paul Krugman and Joseph Stiglitz, both US academics and Nobel prize winners.
This goes to show that the panic and uncertainty among politicians is being echoed by the economists. In reality, nobody seems to know what to do although obviously one side or the other will eventually be proved right.
The EU and Ozymandias
In my contribution of 30 May, I stated that 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. I have gone on record that while I believe in a European Union, what I desire is a union of nations and not a federal state. It now seems that despite the sneers of the federalists I might have been right after all. If that proves to be so, I will see no reason to celebrate.
The raison d’être for the setting up of the EU was a political one. To prevent a recurrence of the last two wars that in the last century devastated Europe, people living in Germany and France had to start seeing themselves as Europeans rather than Germans and Frenchmen. To reach this ambitious goal, German and French political leaders had to construct European political institutions to which the people of Europe would be loyal. European governments would become second bananas to the European one.
The desire behind the goal is noble, and of course political integration has yielded benefits to the European people. But I always believed that the overriding goal of countries giving up their sovereignty while their people abandoned their particular cultural identity in favour of Europeanism would not succeed. It clearly hasn’t.
Unfortunately the EU elites, instead of learning from the rejection of the French and Dutch voters, pressed on with the Lisbon Treaty, which was not only never presented for national approval except in the case of Ireland but, understandably, never gained much support among the peoples of Europe. The much vaunted institutions that were erected in the face of public scepticism have been proved by the present crisis to be hollow shells.
The drivers of the EU understood that irresponsible governance could undermine monetary union and they imposed various rules on the members of the eurozone, limiting for example, budget deficits. But these rules could not be enforced and were ignored. In bailing out the Greeks, Germany was more intent on protecting the Greek bonds in the hands of European banks. There was not much altruism there, but then altruism plays no part in national interest.
The fact remains that each successive EU treaty failed to create the sense of pan-European solidarity that leaders sought. Imbued with a sense of destiny and their own power, EU politicians voted in more institutions, failing to see the writing on the wall that clearly told them that their efforts were creating a backlash. It did not seem to mean anything to them that more and more citizens of the member states were refusing to take part in EU elections.
They failed to take on board the fact that efforts to create a monolithic state will not succeed if they go beyond popular willingness to yield sovereignty to remote institutions predominantly staffed by foreigners. This lesson has already left its mark on Malta where we worry that aspects of our culture will be demolished by the votes of those hundreds of EU parliamentarians and officials who do not even know that Malta exists. The problem that Malta faces from illegal immigration underlies this very clearly.
I stated that while I am not a federalist, I would not celebrate the death of the EU. The reason is that we need European solidarity because we just cannot go back to what we have seen in Bosnia not so long ago. That solidarity can however, and should, take a different form from the one that has been imposed on the citizens of Europe.
What I desire most is to see the EU project being rethought and salvaged. What I desire least is to see the EU ending up as the statue of the Pharaoh Ramses the Great in the Egyptian desert, described thus by the poet Shelley:
My name is Ozymandias, king of kings:
Look on my works, ye mighty, and despair!
Nothing besides remains.