Europe: An existential crisis

The vision of Robert Schuman who founded the European Coal and Steel Community - precursor of the EU - was well justified for political, economic and social reasons. However the European project has been tested to its limits by the recession and the introduction of the Euro, according to Jospeh Stiglitz. JP O’Malley considers two accounts of the EU today

The Euro And its Threat to the Future of Europe 

Joseph Stiglitz

Allen Lane, €20 

 In Defence of Europe: Can the European Project Be Saved?

Loukas Tsoukalis

Oxford University Press, €18.50

 Following the Second World War, Europe was in need of a massive injection of capital to rebuild itself. Much of this came from the Marshall Plan, and the new economic world order that had already been put in place by the United States in 1944 with the Bretton Woods System.

Thus, On 9 May 1950, Robert Schuman, the French foreign Minister, called for the creation of a European coal and steel community. It was an outstanding success: pooling sovereignty to increase economic output.

The Treaty of Rome in 1957 saw the six members states of the original ECSC become the European Economic Community(EEC). Again, results were positive: annual growth rates of 5 per cent per year for nearly three decades.

In the sixty odd years that followed, European unity has expanded exponentially.

After the Maastricht Treaty was signed in 1992, the European Union was formally established, and a road towards a monetary union began.

Today, the EU comprises of 28 member states.19 are part of the single currency that are collectively known as the eurozone.

In boom times, the EU was a neoliberal utopia. It enjoyed free trade and access to the world's largest internal market. Banks and financial institutions had little regulations from government. Capital, labour and people, meanwhile, moved across the continent like never before.

An endless supply of credit was an offer. And spectacular growth rates created economic miracle stories like Ireland's Celtic Tiger.

And then, like every crisis in capitalism tends to, everything exploded into smithereens without warning. Debt fuelled bubbles, built on speculative money and property, burst. And the sub prime mortgage crisis in the US metasomatized across the atlantic into a major crisis of the euro.

It took Europe's leaders several years to understand they were in deep-deep-shit.

Significantly, though, unlike, say, the United States' economy— which has seen a relatively good recovery, eventually, pace 2009— most of Europe has seen things get spectacularly worse.

One fifth of the Spanish population are currently unemployed. In Greece, the figure is just over one quarter. From 2007 to 2015, Spain's gross to GDP ratio increased from 36 percent to 99 percent, Greece's went from 103 to 197 percent, and Ireland's went from 24 percent to 101 percent.

With the UK now in the process of formally leaving the EU, after Brexit, the entire future of the European project is facing an existential crisis.

Authoritarian far-right parties— with neo-Nazi leanings, contempt for democracy and the rule of law—are already in power in Poland and Hungary. And Austria looks set to elect another xenophobic far-right government this coming October.

In Defence of Europe:Can the European Project Be Saved?i is a book that points out that the EU as a collective unit— unlike the individual nation states its compromised of— does not share common myths, symbols, or identities.

When it comes to managing the bureaucratic and economic structures of half a billion people, this lack of common identity matters a great deal.

Loukas Tsoukalis, a Greek political political scientist, also spends considerable time here talking about globalization. Multicultural-educated- metropolitan types, with the adaptability needed in the global labour market, greatly benefit from the EU. But the uneducated and unemployed— of which there are now millions scattered across the continent— do not.

Tsoukalis calls on the reader to strive for a Europe with open borders, democratic institutions, and inclusive societies. These noble aspirations are all fine in theory. But the tolerant Europe he's imagining still exists has vanished many years ago.

If progressives, liberals, and leftists are to fight the dark forces of far right politics raging across Europe today, they'll need much more than grand aspirations. The stakes are too high.

What makes Joseph Stiglitz's book, The Euro, such a joy to read is because he offers real, practical-radical-solutions.

Stiglitz believes the common currency is threatening the very future of European democracy. And so he is calling for the creditor countries— Germany, and one or two others —to leave the eurozone and create their own common currency. This departure of some of the northern countries, Stiglitz argues, would allow for an adjustment of the exchange rate for the debtor countries: thus stimulating growth.

The Noble Prize winning economist calls the EU out for what he believes it has slowly become over time: neoliberal; undemocratic, elitist and heartless; callous to ordinary citizens, yet in awe of bankers at the same time; capitalist in boom times, yet socialist in times of crisis, and with a fetishisation of accountancy, yet little respect, or understanding of citizenship and the democratic mandates nation states have from their electorate.

Driving this neoliberal ethos throughout the eurozone is the European Central Bank(ECB).

Created in 1998, just one year before the euro itself was actually born, it was given a single mandate: to maintain price stability. This is very different from other central banks— such as the US Federal Reserve, or the Bank of England— who not only control inflation, but also promote growth and full employment.

The ECB is run by technocratic elites who have little sympathy for the ordinary European citizen. According to Stiglitz they are :”Europe's sledgehammer, who have a “deep distrust of democracy.” Nobody, for example, in the ECB is an elected official. And the institution refused to act as a lender of last resort to Greece in the summer of 2015: threatening more punishment on Greece if it didn't knuckle down to the Troika's(The ECB, the IMF and the EC) demands.

Stiglitz— who has served as economic adviser to President Clinton during the mid 1990s, as chief economist of the World Bank shortly after, and on an advisory council to Prime Ministers, in both Spain and Greece respectively, as the euro crisis unfolded—claims that the creditor countries have purposely created a hegemony across Europe to impose austerity programmes for the debtor countries: it says there are two types of countries in the eurozone.

Those who know how to tighten their belts, and get their economic house in order: namely the Germans. And then the southern European countries, and Ireland— who became known for a short time under the rather unkind acronym of PIGS.

This mythology argues that these countries know nothing about fiscal discipline, living within their means, basic budget structures, or self control. And austerity, so we are led to believe, is the punishment for not understanding the simple laws of economics.

This, of course, is nonsense. For it was German banks who purposely carried out reckless lending to other countries in the eurozone: knowing full well they would not be able to pay the debts back.

Why did they do this? In order to maintain economic control of Europe, and save their own banks when times got lean. For capitalism, after all,works on the simple existential premise of reproducing more capital. But that endless cycle, naturally enough, has inevitable booms and busts.

Stiglitz also dispels another German fable: that public deficits and debts were the main cause of the crisis. If this was true, he argues, Spain and Ireland should have never had a financial crisis to begin with, since both countries were running surpluses in the boom years, where their revenues exceeded their spending.

Ireland, who in many respects is the poster boy for right wing Europe—bowing down to almost every austerity programme the Troika imposed on it after the banking crisis— may be one of the fastest growing economies in the eurozone, and finally entering into a period of economic recovery.

However, as Stiglitz reminds us here, almost every economy recovers from a down turn.

The test is not whether it does. But by why what means? And whether those means are built on solid foundations. And, given that Ireland is in the eurozone,and still deeply in debt, celebrating a miraculous recovery might be a little bit premature.

What both of these books teach us is that one should be deeply distrustful of anyone who thinks that economic means can be separated from politics. Or that bankers and finance experts should be left to run the market with little or no regulations.

And, that austerity has never, and will never work. It's an ideology deeply embedded within the consensus of neo-liberal thinking. Anyone who wants proof of this just needs to look at how the IMF destroyed entire societies across Latin America and Africa with ruthless austerity programmes during the 1970s and 80s.

If various heads of state across Europe don't come to a common consensus pretty quickly about what the EU actually stands for— other than an elitist bureaucratic institution where certain countries get placed in a debtors prison where Germany calls the shots— then the unravelling of the entire European democratic project, and its eventual collapse, may come about far quicker than most citizens across the continent would have even dreamed of just a few years ago.


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