May 1, 2012
This article seeks to add to the growing voice calling for an urgent return to the EU’s core values: democracy, prosperity, progress (e.g. Gabriel, 2011; Mallias, 2012a,b). Intra-EU processes of negotiation today, especially in the sphere of the economy, are going against the Union’s ethos, practice and mission. Seeing the peripheral member states changing governments, parliaments, and policies following external pressures and dictums is, or at least should be a worrying phenomenon for insiders and outsiders alike (Ferguson, 2011). Europe’s leaders must not underestimate its potential ramifications. The rise of the political extremes in crisis-stricken peripheral countries as in Greece and Italy (e.g. Golden Dawn and the Northern League) cannot be taken lightly (e.g. Bounias and Donadio, 2012); nor seen separately from the – for some actual, for others perceived – humiliation of the governments and peoples of the countries receiving financial assistance from the EU and the IMF (see Papahelas, 2012).
It is unsustainable for the EU to continue teetering upon this thin line of internal cooperation and solidarity, as EU solidarity is not (or at least should not be) for sale (see discussion in Bajnai et. al., 2012). The EU’s power has long stemmed from the power of its internal market. In particular, it stems from the prospect of growth and prosperity that membership in, or partnership with it, promises. This runs a serious risk, both because of Eurozone’s and Europe’s declining economic performance, but also due to the unattractive and unfriendly mode of intra-Eurozone negotiation, which works to reassure members and non-members that Europe does not treat all its members equally. This new European reality risks making the European integration project less attractive to existing members, prospective members, neighbourhood states, as well as all other outsiders. Thankfully, as was demonstrated by the Croatian vote, there is still soft power left, but efforts to boost it are desperately needed.
The EU’s transformative, structural and normative powers are inextricably linked to this promise of either a place in the ‘post-modern paradise’ or a steady and solid relationship with a vibrant and successful EU internal market. If the latter malfunctions, there will be a smaller incentive for states to cede sovereignty in return for membership, and, equally, the emulation of the EU project will seem a less attractive path for other nations in other regions of the world.
The ‘Other’ Costs of ‘Austerity’
In one word the crisis in the EU’s attractiveness can be attributed to ‘austerity’ and the politics thereof. The policies of austerity, advocated chiefly by the IMF and the so-called ‘Merkozy’ axis, and implemented mainly by the countries of the European periphery have been so far the cornerstone of the EU’s response to the Euro-Area’s crisis and the quest for ensuring debt-sustainability for Eurozone’s ‘weakest links’. The aims or ‘general direction’ as Pagoulatos (2011) observed, is the appropriate one. Budget deficits need to be tamed, and gradually be turned into surpluses to signal a country’s ability to repay its debt, or at least the interests associated with it. Nonetheless, the remedy of austerity very rarely works, if at all. Arguably, it could work when coupled with Keynesian countermeasures – massive injections in the market, strategic and far-reaching job creation efforts (mostly state-led).
The IMF/German-led quest of higher competitiveness via horizontal cuts is a very tricky one. It could work in theory, but only in theory. In other words, put succinctly, it could only work if states imposing such austerity programmes enjoy simultaneously a highly modern, extensive production infrastructure and produce such goods (e.g. heavy industry), that a reduction in the costs of production could allow for an overwhelming boost of exports (which would in turn bring renewed wealth in the market via surpluses in the balance of trade). In times of global economic adversity, such an experiment would stand even lesser chances. Greece, Portugal and Spain are not the Asian tigers, and will not flourish through exportation of information technology; nor are they to emerge as major financial centres with privileged regimes for the attraction of foreign wealth (not least due to applying EU laws). The usual IMF recipe (which is emulated with few changes in the ‘Memorandum countries’ today) stands no chance of success in Europe if not coupled with solid countermeasures targeting growth, the diminishment of unemployment, major infrastructure developments and the quick implementation of simplifying, growth-generating reforms which pressurize the shadow economy into the actual economy and reduce the space for corruption and tax evasion (see Christodoulakis, 2011).
The Case for Growth
In other words, the EU’s underlying aim must be to keep GDP high, keep the economy growing – or pursue a swift return to growth, and help the economy create new jobs, either with strategic guidance (i.e. a comprehensive plan) or with strategic government injections in the market (i.e. subsidies or infrastructure investments, ideally in tight cooperation with the healthy forces of the private sector). If one allows the economy to slide into recession and then enforces new cuts to reduce deficits, imposing in parallel new taxation to boost government revenue, then the market dries out. As a result, the economy’s weakest firms are pushed out of the market, the stronger ones having to undertake cuts in size and ambitions, while the largest migrate out of the country. Capital – economic, but also human – flees to destinations which promise higher prosperity, better opportunities and allow for one’s capacities, skills and ambitions to flourish.
This multiple drain that ‘Europe under Austerity’ currently suffers from is killing the EU’s internal engine and the motor of EU integration – the common market. This trend must end. The answer is, indeed, ‘growth’. However, its – so far at least – rhetorical pursuit will not suffice. The ECB and the EIB particularly, must dynamically re-examine their approach, demanding a higher commitment from the member states, in order to initiate the (re-)turn to growth-generating policies. It is false to believe (or worse, passively expect) that it will boil down to one political leader, a single government or a single member state. It will require a far-reaching, collective effort of the Euro-Area countries, but also of the European family in its entirety, in order to overcome this taunting phase of European politics. The change of the tide may begin in France next week, but we all have to work together to form a solid counter-proposal to change the current approach. Francois Hollande will need more than vague suggestions and a ‘socialist identity’ in his ‘briefcase’ to sway Germany into a true change of heart, mind and strategy. It must go as far as to include solid country-specific proposals and strategies, costed and tailored to the specificities and irregularities of each country in question (e.g. Majocchi, 2011). Time is of the essence, and we must act upon this now. This must be one of the main aims of the next Greek government too.
The Way Ahead
It is clear that Europe is at yet another critical juncture. The dilemmas are big and tough – but not complicated. The two main options are further integration, or steps back at potentially much higher cost. Steps back, in the form of variable intra-EU speeds, groups, divisions and so forth will open the exit door for member states (small or large, poorer or richer) as these will feel that this new Europe has become less inclusive, unfriendly, or that the post-modern Kantian paradise has been distorted thanks to the (dynamic) return of European power politics. Further integration on the other hand, is not as easy as it sounds. In many countries where euro-scepticism is resurging drastically, enlightened political leaders will need to employ their charisma to soothe first, and subsequently inform and educate confused publics into the distinct value and significance the EU has for members and outsiders alike. It is a colossal political decision that we owe to our people, not only for reasons of identity and history; but more so for the political, economic, and strategic implications a failure of the European integration project now would imply for the gravitas and influence of our Union.
In the context of the multipolar world currently being shaped, a strong European pole is imperative for global stability, economic prosperity, as well as the protection and advancement of human rights and fundamental freedoms. We must never forget that the whole world looks at the EU hoping that they could once emulate our example in their own regions. We must not allow this aspiration to fade. It is crucial for the global common good. Europe is, and must remain, the true beacon of democracy and the most solid evidence of how democracies can maximize their collective strength and authority. We owe it to our people and the world; Europe’s political leadership must not fall short in front of this major challenge.
(This article is also published with ELIAMEP/Politics in Spires – The author wishes to thank George Arvanitidis and Petros Efthymiou for their comments and suggestions on previous editions of this article)
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Arguably, the first notable differentiation of speeds was the non-adoption of the euro by ten member-states. We have already seen how this has complicated intra-EU decision making.Author : Pavlos Efthymiou