Hollande’s initiative - A chance to blend hope and discipline

It is not overstating the case to say that the measures announced after yesterday’s meeting between France’s new president, François Hollande, and German chancellor Angela Merkel are the most important since the Marshall Plan — officially the European Recovery Program — was announced and sponsored by America in the rootless and hungry days after the Second World War.

The prosperity enjoyed by Europe in the decades after the war was a direct consequence of that 1948 stimulus package administered and funded by America. Its enduring dividend is the peace the great majority of Europeans have basked in since 1945. Though primarily designed — from an American perspective at least — to block Soviet communism, the ensuing stability built economies and markets that allowed millions of Europeans to enjoy social and material advances that might have prevented the Second World War had they been available to earlier generations. This applies particularly to the millions of Germans condemned to terrible austerity and inflation by the penal Treaty of Versailles after the First World War. This harsh imposition provoked, just as can be seen in corners of Europe today, the rise of irrational extremism.

It may seem vainly disproportionate to compare Europe of 2012 with the wasteland left after six years of the worst human conflict in modern times, but as there has been no crisis comparable to today’s since, it is unfortunately fitting.

Surpassing possibly even the Treaty of Rome, which laid the foundations for the EU, yesterday’s communiqué is the first statement of common purpose agreed by opposite poles of the political spectrum since the EU and euro projects began to totter towards the abyss. It may lead to their survival. Its signatories are among the few capable of delivering measures on the scale needed to confront today’s crisis. It recognises that the survival of the European project outweighs the ambitions of even the most entrenched political philosophies and that it is the priority of our time.

Admittedly the most recent in a long and disappointing series of thumb-in-the-dyke measures, this may be the last best chance to balance the discipline and hope essential to ensure its acceptance by the millions of Europeans dependent on its success but dreading the hardship it may impose. It is hard not to think that unless the Merkel/Hollande proposals on market stimulus are at least partially successful, the consequences, unordered and chaotic, would be far worse than anything contemplated by even the sternest German finance department hawk.

Greece has decided to have another election to try to reach a conclusion that is workable, but it remains to be seen if the result will mean a government in Athens prepared to administer the kind of austerity made inevitable by a debt-to-GDP ratio of 165% and national debt around €600bn. Yesterday our Central Bank’s quarterly financial accounts recorded that Irish state debt rose by 2% on the previous quarter, reaching €173.3bn so, proportionately — Greek population just under 12m, Irish population just over 4m — our position is not so very different to our Hellenic cousins. Yesterday’s acceptance by Germany that survival and renewal is a two-sided coin, and the prospect of chaos in Greece and Spain, should make it more likely that the May 31 referendum in Ireland endorses the EU fiscal treaty, as the alternative does not bear thinking about.


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