Europe and its myopic leaders

Europe’s leaders are reversing their historically generous role in assisting countries out of criminality and fascism. What we are seeing now therefore strikes at the heart of the European project not just the euro.
Eunice Goes
9 May 2011

There was a time when we knew what the European Union was about. Democracy, cosmopolitanism and the European social model were the ideals that most Europeans associated the EU with. Now, thanks to the crisis in the Eurozone it’s not so easy to understand what Europe stands for.

The worst is that no one seems to care. The Franco-German alliance – the engine that drives the EU - is led by a lady who thinks that national economies can be managed like corner-shops and by a graduate from drama school who has not yet decided whether he wants to play serious, historical roles at the Comédie Française or to have a part in the French version of Desperate Housewives. None of them seems to understand the political implications of the European monetary union, none of them seems to have grasped the design problems of the single currency (namely a transnational currency moulded to serve the interests of the German economy and based on questionable monetarist assumptions), and not one of them seems to have a sense of historical responsibility for a political project which their countries pursued with ideological zeal for the past six decades.

With such role-models at the heart of Europe it is no wonder that the remaining member states can’t even pretend to care. Those who have not yet been affected by the vulture movements of the financial speculators claim they have nothing to do with it; and those affected by the sovereign debt crisis are so deeply engulfed in desperate – and at times schizophrenic - battles of national survival that they’ve lost any sense of perspective.

Since the Greek crisis of 2010, major movers and shakers in the EU – Germany, France, the European Commission and the European Central Bank – seem to be determined to save the single currency at the expense of those European citizens who happen to live in the periphery (i.e. Greece, Ireland and now Portugal). The shock doctrine policies forced on those countries by the EU are not just punitive. They are punitive in a Protestant sense: the allegedly feckless are condemned to years in the purgatory before reaching the gates of Hell.

Repeating the recipe they’ve applied in Greece and in Ireland, last week the ‘troika’ from Brussels and the IMF announced rather matter-of-factly that as a result of the 78 million euros bailout deal, Portugal will be in recession for the next two years and unemployment will reach 13%. In order to cut the public deficit by 6% in two years, a tough programme of public spending cuts and job losses was announced. But this is not all. The ‘troika’ also wants to cap the salaries of the lowest income-earners in Portugal (the minimum wage in Portugal was recently set at 500 euros); to increase the cost of living (energy prices will go up as well as taxes on consumption); to cut welfare drastically (namely unemployment benefit for all of those who will lose their jobs in the next two years); and to put forward a programme of ‘rationalisation’ of public expenditure that will de facto lead to the privatization of the education and health-care systems. And to make sure that Portugal will behave, the troika of EU/IMF officers will be visiting every three months to scrutinize how the plan is being implemented.

We are told that this harsh dose of austerity is necessary to reduce the public deficit and that it will lead to economic growth. However, there is no evidence that austerity will work. Indeed, one year of this medicine in Greece had the effect of almost doubling its public debt at a criminal social and human cost.

For the affected countries, these cuts are a single ticket trip to pre-democratic times. In three simple calendar years, the citizens of Greece, Ireland and Portugal will travel back to the 1960s, when most of the population of these countries were poor, illiterate and without (with the exception of Ireland) civil and political rights. Illustrating well how this nostalgia trip works, the forthcoming elections in Portugal will be a pointless exercise in democracy: voters will be electing the managers who will be implementing a detailed programme of government drafted by an EU/IMF ‘troika’ of bureaucrats. It is especially tragic that a project which was generous, inclusive and supported the development and self-government of countries like Ireland, Greece and Portugal should turn on them in this way, something those from the larger European countries may not appreciate.

Not happy with having hammered the last nail of the coffin into what remained of the European social model, and condemning democracy to the realm of luxury goods that only the rich can afford, the European leaders of the bigger countries have also engaged in a shameful game of nationalistic – and dare I say it? – xenophobic dishonesty. Anyone reading the press of the richer European countries will be under the impression that the hard-working Germans, Finns and other Teutonic races imbued with the Protestant work-ethic are yet again paying for those feckless, workshy Southerners. This modern version of Aesop’s fable on ants and grasshoppers sounds convincing because it touches on so many clichés about Europe. Fortunately or unfortunately (depending on your perspective), it is just that. It is a fable.

The current crisis is not a debt crisis. There are other European countries with higher public debts than Ireland and Portugal. And though it is true that these countries face important economic challenges (weak productivity and lack of competitiveness and social mobility in the case of Portugal; a housing bubble in the case of Ireland; corruption, tax evasion and creative accounting – with a little help from Goldman Sachs – in Greece) but they were not suffering from serious economic mismanagement. Moreover, the richer countries are not immune to the crisis. The forever greedy financial speculators are already looking hungrily at Spain, Luxembourg, Italy and France as the next domino pieces that will fall.

Finally, it is important to stress that the richer European countries are not giving any financial assistance to the periphery. They are providing loans at a very high interest rate (Ireland and Greece are paying 5% of interest over their loans to the ECB and it is very likely that Portugal will be presented with a similar deal). Loans are not gifts, otherwise banks would be considered charities and not-for-profit organisations.

This lethal combination of strident rhetoric and dithering (in particular during the Greek crisis) has worsened the sovereign debt of these countries, replicating the infamous spiral of financial and currency speculation, followed by the downgrading of national economies by rating agencies, followed by a rise of the interest rates on public debt, followed yet again by more speculation, and so on. In other words, the populist point-scoring, the lack of leadership and above all a fundamental misunderstanding about the political and supranational nature of the European monetary union is bringing the European project to its knees. The periphery is now bleeding, but the centre won’t be spared unless those myopic and directionless European leaders will accept responsibility for a project that is also theirs.

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