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September 29, 2022

Europe as a prey

A new episode in a veritable modern saga took place last weekend. The episode consisted of Spain requesting assistance in order to put its banking system in order and the EU heavyweights approving the request (approximately EUR 100 bln). The saga, of course, is the unending sovereign debt crisis that started two years ago and that has so far featured the successive bailouts of Greece, Portugal, Ireland and now Spain. Of course, the new episode has its characteristic features compared to previous ones. Spain, which is the fourth-largest economy in the European Union and which stood out until recently through the good results of its banking system, has asked for EU assistance – and the EU “heavyweights” have insisted in Madrid on speeding up this step – on conditions that markedly differ compared to those for previous states. When it comes to conditions, what is interesting is the fact that the offered loan was not accompanied by minatory demands to institute budget austerity or by international control on fulfilling them. Which leads us to believe – a fact evinced in some press accounts – Madrid insisted on maintaining its national sovereignty prerogatives untouched, prerogatives that an international control would have dinted even if it would have come from international institutions (EU, IMF, WB) and not from a certain country. This fact announces a profound change of perspective in what concerns the future episodes of this modern European saga. Nevertheless, another episode took place simultaneously with this new Spanish episode. Germany’s ‘Der Spiegel,’ which generally benefits from precious information from local political and business circles, has presented the main features of a general Euro Area rescue plan which is, given its implication, a European Union rescue plan. Since European leaders could not reach a consensus on imagining a plan to rescue Europe from the crisis, according to Der Spiegel’s information, the top Eurotechnocrats were asked to come up with a coherent road map to break the deadlock. These top representatives of European technocracy are: European Commission President José Manul Barroso, European Council President Herman Van Rompuy, Euro-Group head Jean-Claude Juncker and European Central Bank head Mario Draghi. According to this plan, Euro Area members will have to balance their budgets, new loans being permissible only with the approval of an EU “Finance Minister,” a newly created position in Brussels, who will evaluate the importance and necessity of such loans. Once the approval is obtained the country concerned will be able to borrow by issuing Eurobonds whose value will be equal for all Euro Area member states. The main idea on which this new plan rests, a plan which is still in discussion and will be refined by the time of the European summit scheduled at the end of this month, is to make the Euro monetary union irreversible and in this way to deepen the political union of the European organization. What is already obvious is that implementing such a plan would confer to the EU new directions of evolution, directions substantially different from those existing now. On one hand, the “two-speed” Europe will become a reality once the Euro Area will benefit from a single “Finance Minister” that will have important prerogatives when it comes to supervising the 17 Euro Area member states. The other 10 states outside the Euro Area will have to wait for the moment they will join the privileged group, the conditions of their accession set to be defined from now on and inarguably set to be different than those we have seen until now. On the other hand, the new plan entails wide-ranging transfers of national sovereignty to Brussels, the budget, which is the concerned states’ main instrument of affirming their economic and political sovereignty, set to be subjected to international control and to decisions that are exterior to the countries concerned and their national political establishments. Put this way, the issue is not only the transfer of national sovereignty but also the democratic relevancy of this new European Union, since democratically-elected national political forums will be overruled by technocratic decisions taken in Brussels. A wider political union for the EU at the cost of sacrificing the basics of democracy? Will national representatives be satisfied only with the control and distribution of funds collected at national level, while the funds resulting from loans contracted on external markets – loans on which internal development plans depend at the end of the day – will be the prerogative of an outside decision? However, it is true that an exceptional situation like the Euro Area crisis is today imperatively calls for exceptional solutions. And this plan meets the criteria of an exceptional solution, such as, for example, the fact that it institutionalizes a massive transfer of sovereignty towards Brussels, or, worse, a EU “periphery” that will include those still outside the Euro Area. The exceptional character of the current situation EU finds itself in has powerfully ensued from several events that took place last week. German Chancellor Angela Merkel was asked by American President Barack Obama and British Premier David Cameron (who had a meeting with the German official) to take immediate action, being pointed out that in the absence of a timely decision the entire world economy is at risk of reentering the crisis. Two well-known experts in what concerns the history of the world’s financial system – American-British historian Niall Ferguson and economic expert Nouriel Roubini – stated in an article published by the German press that Berlin’s immediate action could save European democracy. They wrote: “We find it extraordinary that it should be Germany, of all countries, that is failing to learn from history. Fixated on the non-threat of inflation, today’s Germans appear to attach more importance to the year 1923 (the year of hyperinflation) than to the year 1933 (the year democracy died). They would do well to remember how a European banking crisis two years before 1933 contributed directly to the breakdown of democracy not just in their own country but right across the European continent.”The serious and immediate danger looms not only from the point of view of Germany’s lack of action, but also from that of the fact that events that could spiral out of control could soon take place in Europe. Parliamentary elections are scheduled this Sunday in Greece and the virtual winners, belonging to the political fringes, threaten they will reject the austerity plans imposed on this country in order to find a solution to the crisis. On the other hand, the Spanish episode that took place at the end of last week shows, through the financial markets’ reaction, that we continue to be in crisis, that a domino effect in Italy, Cyprus, even France, is not ruled out.Thus, today we find ourselves in a situation in which Germany is subjected to extraordinary pressure to act in order to solve the European crisis. However, some commentators state that this pressure is a dangerous political course. Gideon Rachman wrote on Tuesday in ‘Financial Times’ that “the rise of far-right nationalists in Greece or the Netherlands is deeply regrettable. The rise of the far right in Germany would be a disaster.”Europe is at the crossroads today. Visionary and coherent decisions are necessary in order to avoid the prospect of the continent reverting to a past of confrontation and authoritarianism.

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