Monday, September 28, 2015

Trials and tribulations of the EU

Here's a couple of articles offering rather gloomy outlooks for the EU at the moment. One is from Wolfgang Münchau in the Financial Times, Five concurrent crises push Europe into the realm of chaos 09/27/2015:

Europe is juggling five simultaneous crises, all unforeseen shocks in different stages of development: refugees from Syria, eurozone periphery debt, a global economic downturn, Russia’s annexation of Crimea and its aftermath, and Volkswagen’s crimes and misdemeanours. ...

An innocuous crisis trigger in Europe has been Angela Merkel’s principled decision to open up Germany to refugees from Syria. Most Germans greeted her decision with exuberance, but she did not prepare her country, and the rest of Europe, politically and logistically for what was to come. In Berlin and Hamburg the housing situation is so desperate that the authorities are preparing legislation to confiscate empty privately owned apartments and, in Hamburg, commercial properties too. There have been cases where local governments terminated rental contracts of tenants in social housing to give shelter to refugees. When the public sector behaves this way, xenophobia is only nanoseconds away. ...

The combination of an economic slowdown and the refugee crisis will transform the German fiscal surplus into a small deficit, which would be fine under normal circumstances. Germany should be running a modest deficit to support the eurozone economy. But Germany imposed on itself a constitutional law that enforces budgetary balance over the economic cycle. Once the surpluses are gone, the political and legal room for discretionary policy ac­tion will have disappeared. To put it more crudely: the Germans have decided to spend the surplus on the refugees, not on Greece.
Heckuva job, Angie, heckuva job!

And Bob Kuttner weighs in with The European Prospect The American Prospect 09/28/2015:

After the euro became Europe’s common currency in 2002, leadership of the project passed to German conservatives. Their goal, above all, was fiscal balance. Helmut Kohl, chancellor at the time of German reunification, and before the launch of the euro, conditioned Germany’s willingness to give up the deutsche mark on extremely conservative fiscal and monetary rules. Germany is obsessed with price stability because of its experiences with hyper-inflation both in the Weimar period and in the chaos after World War II. More recently, the costs of absorbing the former communist DDR pushed Germany well beyond the fiscal norms that Kohl had imposed on the rest of Europe. All of these provisions, hidden in plain view in the Maastricht Treaty, were mere nuisances until the financial crisis of 2008 hit. The Maastricht rules then gave German Chancellor Angela Merkel and the banks a hammer with which to destroy the sovereignty and social solidarity of lesser nations.

Austerity not only served as perverse macroeconomic policy, but the plans imposed on the debtor states of Greece, Spain, Portugal, and Ireland included neoliberal policies that went far beyond mere budget balance, reminiscent of the IMF in its worst period. According to their EU masters, these countries needed to restore growth to reassure their creditors. How to accomplish that trick at a time of fiscal belt-tightening? Cut wages, undermine collective-bargaining rights, intensify privatizations, reduce taxes on business, and eviscerate social outlays. Basically, the crisis gave a huge political opening for neoliberal policies that are not even effective economics. The resulting stagnation undermines voter confidence in both the nation-state and in the European Union. The European Central Bank, with far less general authority than the U.S. Federal Reserve, serves mainly as the agent of banks. Thus did a project promoted by social democrats in the 1980s and 1990s become an instrument of deep conservatism.
And he notes how the refugee crisis not only reflects the EU's chronic weaknesses and exacerbates them:

If Europe needed one more assault to further undermine the model, it came via the refugee crisis. The crisis laid bare two awful fragilities. The first is the dysfunction of the EU as a confederation with multiple veto points and little capacity for leadership in a crisis. As Henry Kissinger reportedly said, expressing his skepticism about the EU as a diplomatic player, “Who do I call?”

The second frailty is that, despite all of the efforts of Brussels to forge a common identity, the continent is still, in the famous formulation of General de Gaulle, one of the original Euro-skeptics, a Europe “des patries”—a Europe of nations. When a crunch comes, most citizens are French or Danish first, European second. And most social contracts are still forged—or not—at the level of the polity. The EU is woefully incomplete as a polity, much less a democracy. All over Europe, the EU is increasingly a project of elites, losing the trust of citizens. [my emphasis]
And here's a useful illustration from a German Green Member of the European Parliament, Ska Keller, on How Europe is "Helping" 4 Million Syrian Refugees 21.09.2015.

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