Published in Business Spectator (Melbourne), 13 May 2010
The longer the Greek tragedy lasts, the more it is becoming clear that it is not only the problem of a little country at the South-East fringe of Europe. It is not even just a crisis of the Euro currency, which may not survive the upheaval despite the billions pumped in to calm the markets temporarily. What we are really witnessing is the end of the decades-long project of European integration.
Europe’s political class denying this will make its economic consequences all the more disastrous. They can bail out Greece and the euro as often as they like but they cannot gloss over the basic flaws of the European project.
There are two ways to look at Europe. The first is a sober assessment of the continent’s difficult reality. It acknowledges the social, economic and political challenges as well as the inherent limits of supranational problem-solving. The second is a pseudo-romantic view of Europe not so much as the troubled continent that it is, but as an idealised place in which cooperation and multilateralism have replaced competition and nationalism.
The Greek crisis should have dealt a blow to those who still cling on to this harmonious ideal of European integration. If Greece has demonstrated one thing it is the fact that ‘ever closer union’ cannot effectively conceal economic discrepancies and national interests.
Many European leaders would, however, draw the very opposite conclusion. Instead of recognising the failures of the European project, they call for even more of the same. For example, French President Nicholas Sarkozy has repeatedly advocated a joint economic policy for the whole continent – blissfully ignoring that the EU is an institution in which even an agreement on the definition of chocolate can take 15 years.
Unfortunately, last weekend’s rescue package has moved the EU closer to the French ideas of fiscal union while simultaneously damaging the independence of the European Central Bank. The euro, once promised to be as hard as the Deutschmark, will soon become as soft as French camembert as a result.
The refusal to accept the limitations of Europe makes it so hard for politicians to confront the current crisis in the eurozone. In fact, it exacerbates the problem. As long as Europe’s leaders resort to wishful thinking, they are inviting the markets to bet against them.
No two other European politicians better exemplify the differences between euro-realism and euro-romanticism than Czech president Vaclav Klaus and former German chancellor Helmut Kohl. The reactions to their most recent public appearances point to the core of Europe’s problems. Europe does not want to be told harsh truths. It rather celebrates those who indulge in daydreaming.
For the past decade, the Walter Hallstein Institute at Berlin’s Humboldt University has been hosting a series of lectures on the future of Europe. They are remarkable not only for the high calibre of speakers, among them many past and present heads of state or government.
The Humboldt Speeches are equally remarkable for the fact that the first twenty of them were mainly variations of the same theme. The contributions by former French President Valéry Giscard d’Estaing, Irish Prime Minister Bertie Ahern or Luxemburg’s Premier Jean-Claude Juncker may have differed in nuances, but not in their general direction. They all wanted to drive European unification further.
Perhaps the organisers got bored of so much europhilia, or maybe they just thought that another such speech would sound silly at a time when Greece is literally burning. In any case, they invited Vaclav Klaus to deliver his verdict on the process of European integration.
Among Europe’s political elites, the Czech President has a dubious reputation. As a classical liberal, an economist, and an open admirer of Margaret Thatcher and Ronald Reagan, Klaus is isolated among European leaders. The media treat him with a mixture of ridicule and contempt.
When Klaus delayed ratification of a European treaty over constitutional doubts, a commentator mocked him as ‘the lord of the castle putting on airs’. The German weekly Die Zeit labelled him a ‘freedom fundamentalist’. At his last speech to the European Parliament scores of parliamentarians stormed out after Klaus had dared to question the state of democracy in Europe.
In his Humboldt Speech, Klaus certainly did not disappoint his critics. ‘I have no interest in a smoother and faster EU decision-making at the expense of freedom and democracy,’ Klaus told his audience. ‘The fastest and smoothest functioning of society is under dictatorship, which we – hopefully – do not want.’
In an interview coinciding with his Humboldt Speech, Klaus delivered a damning verdict on the euro. ‘Monetary union has failed,’ the former economics professor explained in the Frankfurter Allgemeine newspaper. What followed was a little lecture in monetary economics. According to Klaus, the euro makes it impossible for the Greek economy to regain its competitiveness while requiring other European nations to transfer huge amounts of money to Athens. The only reason why the euro would not disappear soon was the political capital invested into the project, Klaus said. It would be an extremely costly venture, though.
The public reactions were predictable. Klaus’ warnings were either ignored or dismissed out of hand. The headline of a newspaper comment on his views said it all: ‘Right or wrong: my Europe’.
If only Klaus had said a few more of the nice things the overwhelmingly euro-romantic political class likes to hear, he would have received a far more sympathetic treatment. To find out how this works, he only needs to ask Helmut Kohl.
At a ceremony to celebrate the former German Chancellor’s 80th birthday, Kohl defended the euro with the passion of its inventor. It was beyond him, he told the gathered 800 dignitaries, to question the help for Greece. European unity was ‘a question of war and peace’ and monetary union ‘a guarantor of peace’. ‘Of course, this is all difficult but we have to try everything’, he said and earned a great round of applause. German newspapers approvingly reported Kohl’s call for greater European solidarity. It was quickly interpreted as a snub to his successor Angela Merkel.
The two episodes about Vaclav Klaus and Helmut Kohl are symptomatic of the way in which Europe deals, or rather fails to deal, with its problems. Instead of a cold-blooded, economic analysis of its predicament, the big questions are framed in terms of high idealism. To question the policies that follow from this borders on treason against European values.
In the current euro crisis, this political climate is dangerous. The longer Europe’s political elite pretends that it will always and under all circumstances prevent any sovereign default in the eurozone, the more expensive the eventual economic damage will be. As long as Europeans rather like to listen to the political fairytales of Helmut Kohl than take economic advice from Vaclav Klaus, the ultimate bill presented to taxpayers will keep on rising.
By putting European idealism ahead of economic concerns, Europe’s leaders have given speculators ample opportunity to exploit the weaknesses of the flawed monetary construction that is the euro. The latest emergency package has only bought Europe some time. The European catastrophe is only postponed, not averted.