Kyran Fitzgerald


Greek crisis may be beginning of the end for the euro dream

With Greece teetering on the brink of a eurozone exit there has never been a more pressing time to reform the EU, writes Kyran Fitzgerald

Greek crisis may be beginning of the end for the euro dream

The sudden collapse of the talks between the Greek government and its creditors comes at the end of a lengthy period of recrimination. A heated argument has ended with the sudden departure of one of the main protagonists.

Will the door finally be slammed next weekend by the voters of Greece.

Who knows?

Whatever is the case, a turbulent week lies ahead, with European Central Bank support for the Greek banking system in doubt.

As crisis threatens, can Europe’s leaders begin to show some leadership and start by telling some home truths to their voters?

Can pigs fly?

The financial crisis, and its after effects, has exposed the sharp rifts between the various countries that make up the European Union.

What, one wonders, would the founding fathers of the European Community make of it all?

In 1943, a leading French official, Jean Monnet delivered a speech at Algiers soon after Allied forces had gained control of North Africa.

“There will be no peace in Europe if the states are reconstituted on the basis of national sovereignty. The countries of Europe are too small to guarantee their peoples the necessary prosperity and social development. The European states must constitute themselves into a federation,” he said.

Monnet went on to join forces with Robert Schuman and with a Dutch diplomat, Max Kohnstamm, to engineer the establishment of the European Coal & Steel Community. These men recognised that West Germany would have to be re-established as a partner within a union of western European countries standing up against the threat posed by the Soviet bloc.

They were fortunate in that a group of influential Americans were able to persuade President Harry Truman to back the Marshall Plan, a project of funding for capital reconstruction which helped trigger the economic revival of a war-ravaged continent.

Fear of communism, the same fear that fuelled the career of the infamous Senator Joe McCarthy and his campaign of persecution of suspected ‘reds’, provided political cover for those in Washington DC in backing the plan.

In 1957, the efforts of Monnet and his friends yielded a great harvest in the form of the European Economic Community.

A tussle got under way between the supporters of a US-style federation and those like General de Gaulle, French president from 1958, who believed in national sovereignty and the idea of a confederation of European states serving French interests, of course.

De Gaulle blocked British entry, suspecting perhaps correctly that the Brits would be a thorn in his flesh.

Ironically, today Cameron and his government are acting like true Gaullists arguing that limits should be placed on the whole project of a united Europe. The British vision is of Europe as a trading area with limits placed on EU regulator powers and on the freedom of EU citizens to move to Britain.

The founding fathers had direct experience of conflict. Kohnstamm had emerged from a concentration camp to serve the Dutch Queen Wilhelmina.

The 1970s brought tougher times following a long period of economic expansion. However, many of the new generation of leaders, people like Helmut Schmidt, Ted Heath and Denis Healey had served in armies. They were instinctively pro European, dismissive of parochialism.

The European Commission however, lapsed into a slumber until the arrival as president of French finance minister Jacques Delors, a strong believer in workers’ rights, but also in economic efficiency.

Delors backed Peter Sutherland’s shakeup of air transport and presided over the creation of the single European market and the Maastricht Treaty. Morale in the commission soared. However, Delors may have over-reached himself with the plan for European monetary union.

It would be later implemented in the absence of a fiscal union.

Such a union was never on, even in the more benign atmosphere of the 1990s. It was with deep reluctance that the Germans were persuaded to abandon their beloved deutschmark under pressure from a French government that wanted to lock a united Germany more closely into the European project.

The German government in Bonn, a major net contributor to the European Community, was never going to write yet another blank cheque for the embryonic currency when it was already funding the rebuilding of its battered eastern region.

Margaret Thatcher warned with some prescience, it must be admitted, about the dangers posed by the euro project. Nobody listened, least of all the haughty French.

Many in the British Labour party shared Thatcher’s scepticism. Her successor, Tony Blair was a big supporter of the euro. His economic adviser, the late Derek Scott, most definitely was not.

In 2004, he warned that “interest rates can be too low as well as too high”, adding that if Britain had joined the euro at its inception, rates would have been half the level judged appropriate by the Bank of England. The result would have been a boom followed by a bust.

Scott was proved right. Vulnerable eurozone states ended up being stuffed with debt. The banker creditors were later bailed out big time by a nervous European establishment in 2010 and we now find ourselves in a dangerous spot.

Allegiance to the EU itself is in doubt as backing for populist parties grows.

Recently, Jacques Delors reminded people of the importance of keeping the flame. As he put it: “I once said that ‘Europe needs a soul.” He criticised member governments for failing to acknowledge the work of European institutions. He also accepted that the European project was in deep trouble.”You cannot make Europe against the governments yet they are far from enthusiastic about Europe, at present,” he said.

The consequences of allowing the EU project to enter a phase of dissolution amid a welter of parochial recrimination is too grim to contemplate. The European Union needs to enter into a new phase of reform based on practical co-operation rather than unrealistic aspiration.

Continental elites have pushed the message of integration without being willing to put any cash up front.

The pro-European message needs to be repackaged and resold. The populations need to be brought back on board. The voters need to be asked whether a fractured, balkanised continent is really such a good idea given the level of external threat, not to mention the threat posed to national economies by such a break up.

Citizens of the EU’s prosperous core must be made to recognise that short- term sacrifices in the form of financial transfers to struggling regions could prove a lot less costly than under alternative scenarios.

We should ask ourselves how the founding fathers of Europe would have reacted. They would not have scuttled back to their prosperous homes with their wallets kept firmly closed.

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