The dis­en­chant­ment of Europe

Financial Mirror (Cyprus) - - FRONT PAGE -

The re­cent Euro­pean Par­lia­ment elec­tions were dom­i­nated by dis­il­lu­sion and de­spair. Only 43% of Euro­peans both­ered to vote – and many of them de­serted es­tab­lish­ment par­ties, of­ten for anti-EU ex­trem­ists. In­deed, the of­fi­cial re­sults un­der­state the ex­tent of pop­u­lar dis­sat­is­fac­tion; many who stuck with tra­di­tional par­ties did so reluc­tantly, faute de mieux.

There are many rea­sons for this po­lit­i­cal earthquake, but the big­gest are the en­dur­ing mis­ery of de­pressed liv­ing stan­dards, dou­ble-digit un­em­ploy­ment rates, and di­min­ished hopes for the fu­ture. Europe’s rolling cri­sis has shred­ded trust in the com­pe­tence and mo­tives of pol­i­cy­mak­ers, who failed to pre­vent it, have so far failed to re­solve it, and bailed out banks and their cred­i­tors while in­flict­ing pain on vot­ers (but not on them­selves).

The cri­sis has lasted so long that most gov­ern­ing par­ties (and tech­nocrats) have been found want­ing. In the eu­ro­zone, suc­ces­sive gov­ern­ments of all stripes have been bul­lied into im­ple­ment­ing flawed and un­just poli­cies de­manded by Ger­many’s govern­ment and im­posed by the Euro­pean Com­mis­sion. Though Ger­man Chan­cel­lor An­gela Merkel calls the surge in sup­port for ex­trem­ists “re­gret­table,” her ad­min­is­tra­tion – and EU in­sti­tu­tions more gen­er­ally – is sub­stan­tially re­spon­si­ble for it.

Start with Greece. Merkel, to­gether with the Euro­pean Com­mis­sion and the Euro­pean Cen­tral Bank, threat­ened to de­prive Greeks of the use of their own cur­rency, the euro, un­less their govern­ment ac­cepted puni­tive con­di­tions. Greeks have been forced to ac­cept bru­tal aus­ter­ity mea­sures in or­der to con­tinue to ser­vice an un­bear­able debt bur­den, thereby lim­it­ing losses for French and Ger­man banks and for eu­ro­zone tax­pay­ers whose loans to Greece bailed out those banks.

As a re­sult, Greece has suf­fered a slump worse than Ger­many’s in the 1930’s. Is it re­ally any won­der that pop­u­lar sup­port for the gov­ern­ing par­ties that com­plied with this dik­tat plunged from 69% in the 2009 Euro­pean Par­lia­ment elec­tion to 31% in 2014, that a far-left coali­tion de­mand­ing debt jus­tice topped the poll, or that the neo-Nazi Golden Dawn party fin­ished third?

In Ire­land, Por­tu­gal, and Spain, the bad lend­ing of Ger­man and French banks in the bub­ble years was pri­mar­ily to lo­cal banks rather than to the govern­ment. But here, too, the Berlin-Brussels-Frankfurt axis blackmailed lo­cal tax­pay­ers into pay­ing for for­eign banks’ mis­takes – pre­sent­ing the Ir­ish with a EUR 64 bln ($87 bln) bill, roughly EUR 14,000 per per­son, for banks’ bad debt – while im­pos­ing mas­sive aus­ter­ity.

Sup­port for com­pli­ant es­tab­lish­ment par­ties duly col­lapsed – from 81% in 2009 to 49% in 2014 in Spain. For­tu­nately, mem­o­ries of fas­cist dic­ta­tor­ship may have in­oc­u­lated Spain and Por­tu­gal against the far-right virus, with left-wing anti-aus­ter­ity par­ties and re­gion­al­ists ben­e­fit­ing in­stead. In Ire­land, in­de­pen­dents topped the poll.

The mis­con­cep­tion that north­ern Euro­pean tax­pay­ers are bail­ing out south­ern ones also prompted a back­lash in Fin­land, where the far-right Finns won 13% of the vote, and in Ger­many, where the new anti-euro Al­ter­na­tive für Deutsch­land won 7%.

At Merkel’s be­hest and with the com­plic­ity of the ECB, which waited un­til July 2012 to quell a bond-mar­ket panic sparked by eu­ro­zone pol­i­cy­mak­ers’ mis­takes, the Com­mis­sion also im­posed eu­ro­zone-wide aus­ter­ity, caus­ing a cu­mu­la­tive loss of nearly 10% of GDP in 2011-13, ac­cord­ing to the Com­mis­sion’s own eco­nomic model. By plung­ing Italy into a deep re­ces­sion (from which it has yet to re­cover), aus­ter­ity sank in­terim Prime Min­is­ter Mario Monti’s broad-based coali­tion and boosted Beppe Grillo’s anti­estab­lish­ment, anti-euro Five Star Move­ment, which fin­ished sec­ond in the Euro­pean Par­lia­ment elec­tion.

Merkel also de­manded a sti­fling and un­demo­cratic EU fis­cal straight­jacket, which the Com­mis­sion duly en­forces. So when vot­ers throw out a govern­ment, EU fis­cal en­forcer Olli Rehn im­me­di­ately in­sists that the new ad­min­is­tra­tion stick to its pre­de­ces­sor’s failed poli­cies, alien­at­ing vot­ers from the EU and push­ing them to­ward the ex­tremes.

Con­sider France. Af­ter François Hol­lande be­came Pres­i­dent in 2012 on a pledge to end aus­ter­ity, his So­cial­ist Party won a large ma­jor­ity in par­lia­men­tary elec­tions. But Berlin brow­beat him into fur­ther aus­ter­ity. Now, with both the cen­ter right and the cen­ter left dis­cred­ited – to­gether, they re­ceived only 35% of the pop­u­lar vote – Ma­rine Le Pen’s racist Front Na­tional topped the poll by promis­ing rad­i­cal change.

Along with a chronic eco­nomic cri­sis, Europe now has an acute po­lit­i­cal cri­sis. Yet the EU es­tab­lish­ment seems bent on pur­su­ing busi­ness as usual. In the par­lia­ment, a vo­cal but frag­mented mi­nor­ity of crit­ics, cranks, and big­ots is likely to push the cen­ter-right and cen­ter-left groups, which still have a com­bined ma­jor­ity, to club to­gether even more closely.

The low turnout and weak­en­ing of main­stream par­ties gives the Euro­pean Coun­cil – na­tional lead­ers of the EU’s mem­ber states – a pre­text to con­tinue cut­ting deals in smoke-free rooms. First up will be the choice of the Euro­pean Com­mis­sion’s next pres­i­dent. The out­go­ing pres­i­dent, José Manuel Bar­roso, claims that “the po­lit­i­cal forces that led and sup­ported…the Union’s joint cri­sis re­sponse…have over­all won once again.” Merkel wants to stick to cur­rent poli­cies that have failed to deliver growth and jobs.

Per­haps the man to shake things up is Mat­teo Renzi, Italy’s dy­namic 39-year-old prime min­is­ter. In of­fice since Fe­bru­ary, he won a re­sound­ing 41% of the vote, twice that of his near­est ri­val. Al­ready com­mit­ted to re­form­ing his coun­try’s crony cap­i­tal­ism, he now has a man­date to chal­lenge Merkel’s cri­sis re­sponse. The tim­ing is per­fect: Italy takes over the EU’s ro­tat­ing pres­i­dency in July. Renzi has al­ready called for a EUR 150 bln EU in­vest­ment boost and greater fis­cal flex­i­bil­ity.

In­stead of a eu­ro­zone caged in by Ger­many’s nar­row in­ter­ests as a cred­i­tor, Europe needs a mon­e­tary union that works for all of its cit­i­zens. Zom­bie banks should be re­struc­tured, ex­ces­sive debts (both pri­vate and pub­lic) writ­ten down, and in­creased in­vest­ment com­bined with re­forms to boost pro­duc­tiv­ity (and thus wages). The fis­cal straight­jacket should be scrapped, with gov­ern­ments that bor­row too much al­lowed to de­fault. Ul­ti­mately, the fairer, freer, and richer eu­ro­zone that would emerge is in Ger­many’s in­ter­est, too.

Euro­peans also need a greater say over the EU’s di­rec­tion – and the right to change course. They need a Euro­pean Spring of eco­nomic and po­lit­i­cal re­newal.

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