Internal Strife and Divisions Blossom in Euro Land.
By Don Quijones, Spain & Mexico, editor at WOLF STREET.
Since the Eurozone’s sovereign debt crisis began, in 2010, Europe’s leaders have faced a Herculean task: keeping the rickety European edifice intact. Now, five years later, there are much more ominous signs of wear and tear. Everyone is focused on the dire threat posed by a vote later this month for British exit from the Union, but Brexit is just one of a dizzying constellation of threats and challenges the EU faces.
The sovereign debt of many nations on the EU periphery has reached wholly unsustainable levels. Some of the continent’s biggest banks look increasingly shaky. And core nations are witnessing an intensifying public backlash against further bailouts and the EU’s mishandling of the immigration crisis.
Things have gotten so bad that even the staunchest of eurocrats are beginning to express doubts. Many people have lost trust in “entire institutions, whether national or European,” lamented European Parliament Chief Martin Schulz. He warned over a possible “implosion of the EU” due to the blossoming Euroskeptic movements in member states.
Now, the eurocrats are not just falling into despondency and despair, they’re beginning to turn on each other.
European Commission President Jean Claude Juncker tried to convince a hall packed with French mayors of the need for austerity à la carte in France. The linchpin of his argument was that France has been allowed by the Commission to repeatedly break Eurozone fiscal rules, not just due to its size and influence over EU policy but also its “reflexes, its internal reactions, its multiple facets” — an oblique reference to the tendency of its workers to bring the national economy to a halt whenever the government introduces measures that are not to their liking, as is happening right now.
The irony is that Juncker — who is famous for saying that when things get tough, “you have to lie” — is right on this point. Since 1999 France has broken the Eurozone’s 3% deficit limit during non-recessionary years 11 out of 16 times. That’s one more time than Greece and Portugal, three more times than Italy, and seven more times than Spain (which has broken the limit eight times but four of which were during years of recession, with the Commission’s blessing).
But that’s beside the point. What matters is that he broke a cardinal EU rule: never criticize the European Commission, even if you are its president.
“If the Commission President says that things apply differently for France, then this really damages the credibility of the Commission as guardian of the pact,” retorted Eurogroup President Jeroen Dijsselbloem in an interview with German daily Süddeutsche Zeitung and six other European newspapers.
“It would be wise for the Commission to pay a little more attention to its credibility,” said Dijsselbloem, adding that member states needed an “objective arbitrator” who upholds the budget rules manifested in the Stability and Growth Pact.
In direct contrast to Dijsselbloem’s words, recent weeks have seen the Commission offer greater budgetary flexibility to Italy, Spain and Portugal, at least until after Spain’s second round of general elections, on June 26, which are no less likely to produce a functional government than the first one.
A couple of weeks ago the European Commissioner for Economic and Financial Affairs (and former French Minister of Finance), Pierre Moscovici, even went so far as to suggest that Europe has more or less put its debt crisis behind it. “The time of high public deficits is over,” he said. “In 2017 I hope that all countries will have come out of their excessive deficit procedures.”
Such blind optimism is not shared by everyone. Donald Tusk, the president of the European Council, this week warned EU leaders that their “utopian” illusions of a completely federated Europe risk tearing the old continent apart, and that any attempt to seize on Brexit to force through yet more integration — as Spain’s foreign minister, José Manuel García-Margallo, urged on Thursday — would be a grave mistake.
Concerned by the revival of nationalist sentiment in his native Poland, Tusk launched a scathing attack on the EU establishment — in particular the Commission — for pushing “a utopia of Europe without nation states” that goes against the grain of European history and has produced a deep cultural backlash that cannot be dismissed as illegitimate far-right populism.
“The specter of a break-up is haunting Europe and a vision of a federation doesn’t seem to me like the best answer,” he said. “We need to understand the necessity of the historical moment.”
The biggest dilemma the eurocrats face is that the only way their cherished Union can actually succeed is if it is taken to its logical conclusion: fiscal and political union. But as the Daily Telegraph points out, that is looking less and less likely, especially amidst mounting signs that “the Dutch, Scandinavians, and many Eastern European states may not be willing to back any push by Brussels for a ‘Plan B’ of deeper political union – with an ‘EU army’, and joint foreign, security, and border policies – once the British are out of the way.”
The main reason for these governments’ dwindling enthusiasm for the European project is that they can no longer sell it to a majority of their voters, who have lost patience with the failure of European institutions to function effectively.
As such, Brexit — if successful — could be the first act in a gathering rejection of multinationalism as a whole. Given this development’s potentially fatal ramifications for institutions like the EU and trade pacts like TPP, TTIP, CETA and TiSA, it’s perhaps no surprise that senior eurocrats are falling into despondency, despair, and internal bickering. By Don Quijones, Raging Bull-Shit
Money for nothing, for everyone: This is supposedly the next treatment for today’s debt-addicted economic system. Milton Friedman’s hypothetical scenario of giving every citizen direct money transfers in a desperate bid to stoke inflation is gaining traction. And the ECB is on to it. Read… Helicopter Money Drops on Europe, But Not for ‘Normal’ Folks and Not for Small Companies either