Euro de­stroy­ing Euro­pean move­ment

Financial Mirror (Cyprus) - - FRONT PAGE -

“Ter­ror­ists”, “black­mail”, “lack of trust” are just some of the terms voiced dur­ing the re­cent ne­go­ti­a­tions be­tween Greece and its Eurogroup part­ners. There were even sug­ges­tions that Greece should leave the com­mon cur­rency al­to­gether. Such ill will is a far cry from the spirit which char­ac­terised the early days of the Euro­pean move­ment.

The move­ment to­ward a united Europe be­gan in the af­ter­math of World War II. Build­ing on the com­mon her­itage and in­ter­ests of Europe’s peo­ple, five coun­tries united into a Com­mon Mar­ket whose aim was to bring to­gether the na­tions of Europe for pur­poses of peace and trade. Na­tional in­ter­ests were pro­tected by a pro­vi­sion re­quir­ing unan­i­mous ap­proval of ma­jor de­ci­sions.

The most fun­da­men­tal change in the move­ment to­wards a united Europe has un­doubt­edly been the for­ma­tion within the broader Euro­pean Union of a group of coun­tries which set out to cre­ate a com­mon cur­rency. The Eurogroup of 19 coun­tries rapidly be­came the dom­i­nant force of the Euro­pean move­ment, over­shad­ow­ing the broader Euro­pean Union of 28 na­tions.

Not ev­ery­one thought the group formed about a com­mon cur­rency would suc­ceed. Some of the cur­rent prob­lems were an­tic­i­pated, some were not. It was never an­tic­i­pated that a mem­ber coun­try would emerge and come to dom­i­nate the de­ci­sion mak­ing of the en­tire group, as is the case to­day with Ger­many.

Nor was it an­tic­i­pated that this dom­i­nant mem­ber coun­try would also be so strongly com­mit­ted to a par­tic­u­lar eco­nomic phi­los­o­phy, us­ing its dom­i­nance to in­flu­ence the en­tire group to­ward its pre­ferred eco­nomic poli­cies. Ger­many’s strong com­mit­ment to­ward what has been termed “aus­ter­ity eco­nom­ics” has, against in­creas­ing op­po­si­tion, shaped the eco­nomic poli­cies and de­ci­sions of the Eurogroup.

The aim of the re­cent Greek ne­go­ti­a­tions was to ar­rive at a win/win so­lu­tion to Greece’s eco­nomic prob­lems. The re­sult, as in­cor­po­rated in the MOU, might more ac­cu­rately be de­scribed as lose/lose.

Firstly, there is the dam­age to Greece it­self. Based on aus­ter­ity eco­nom­ics, the new MOU calls for new taxes, more debt and re­duced spend­ing, and is the medicine pre­scribed for a coun­try with de­fi­cient de­mand, un­em­ploy­ment, empty shops and crowds of pen­sion­ers out­side banks try­ing to get money to feed them­selves. Much the same for­mula was ap­plied pre­vi­ously. Why should the out­come be dif­fer­ent? There is ev­ery like­li­hood that it will not.

The IMF, it­self a mem­ber of the Eurogroup, is­sued a state­ment which sub­stan­tially comes to the same con­clu­sion, declar­ing the Greek debt un­sus­tain­able and the mea­sures re­quired of the Greek econ­omy to be un­re­al­is­tic and in­ad­e­quate.

Greece must share a good part of the blame. The in­com­pe­tence and cor­rup­tion which has been en­demic in Greece for many years, even be­fore the es­tab­lish­ment of the Eurogroup, must bear ma­jor re­spon­si­bil­ity. PM Alexis Tsipras, although a brave ne­go­tia­tor, ex­ac­er­bated what was al­ready a des­per­ately mis­man­aged Greek econ­omy.

The Euro­pean move­ment it­self is al­ready a ma­jor loser. Once as­so­ci­ated with pros­per­ity and unity, it has now be­come as­so­ci­ated with the Eurogroup’s ac­ri­mo­nious meet­ings. Where there was at one time grow­ing com­mon­al­ity across much of Europe, there are now di­vi­sions, dis­tinc­tions as be­tween and lenders and bor­row­ers, rich and poor, North and South. For those coun­tries un­for­tu­nate enough to re­quire aid from the Eurogroup, the re­sult has been record un­em­ploy­ment which per­sists (Span­ish un­em­ploy­ment still at 24%) even when there is an im­prove­ment in GDP.

Po­ten­tially the great­est dam­age to the Euro­pean move­ment will re­sult from the in­creas­ing dom­i­nance of Ger­many over its Euro­pean part­ners. This is not helped by the grow­ing dis­crep­ancy be­tween Ger­man eco­nomic pros­per­ity and the much poorer eco­nomic con­di­tions in coun­tries such as Greece and Cyprus. “Ger­man pro­tec­torate” is the term some have used to de­scribe the cur­rent Greek sit­u­a­tion. The bad feel­ing goes both ways. To quote a lead ar­ti­cle in the “the euro is al­ready poi­son­ing Ger­many’s at­ti­tude to­ward Europe and Europe’s at­ti­tude to­ward Ger­many” (14.07.2015).

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