Three years into the crisis European leaders seem to be convinced of the necessity of European unification. They consider that Europe’s dissolution would be a disaster. According to analysts of Prognos, a European think tank, the extreme scenario of an exit from the Euro of 4 countries Greece, Portugal, Spain and Italy, would cost the global economy a loss of growth of €17.2 trillion ($22.3 trillion) by 2020!
Closer economic and political unification presupposes immediate agreement on major pressing issues such as the banking union and finally a new treaty. This presupposes above all, that European politicians present clearly, sincerely and convincingly to their citizens a major implication: that there will be a transfer of national sovereignty to the European level.
Are European citizens ready to accept such a solution?
I do not think so.
The prolonged austerity imposed on the citizens of ailing economies, and the burden put upon taxpayers of richer countries for the aid to weaker ones, generate anti-European sentiment. Income and living conditions of Member States keep diverging dangerously. From North to South, nationalistic tendencies are on the rise and so are secessionist, extremist, populist and neo-Nazi forces. All this, if left unchallenged, can gain overwhelming influence and could lead to the disintegration of the European Union.
The European leadership has the responsibility to speak not only of a banking union and other incomprehensible institutions but also to persuade European citizens that more integration means more prosperity, more jobs, more stability.
A disintegration of the EU would lead to tough competition, protectionism and instability on the European continent and in the worst case scenario the failure of the European peace project could even lead to war. Without their Union, European countries will have a difficult and insignificant role in the global economy. By 2050 the world population will be 9bn and Europe will only represent 7% of that, down from 20% in the 1950s. The largest EU countries will represent a maximum of 1% of the world population. In 2050 Europe‘s GDP will only be 10% of world GDPm, down from 30% of in the 1950s.
Who will assume Europe’s leadership? No EU member, not even Germany, can unilaterally dictate the rules. Germany is the most probable, the de facto candidate, but the EU’s largest and strongest Member State managed with its political stance to be an isolated giant today.
Germany should use its leading position, founded on its strong economy and its size, to build consensus and convince governments and people of Europe. This means a new approach of its role: a paradigm of solidarity, discipline and vision. Instead of dictating the rules or finger pointing and beyond being the inspector of others’ compliance, Germany needs to become a builder of consensus and thus gain respect.
The current German stance produces solutions that can be characterized as ‘too little, too late’. Germany seems to be guided more by internal electoral considerations than by a long-term European vision, which is essential for Germany itself.
A specter is haunting Europe, the specter of discord and fear, the specter of hate and mistrust, the specter of reborn stereotypes of enmity. To face the rising poverty and extremism we need hope, trust and solidarity. A new narrative is needed. The European leadership should propose a new project and a new narrative to the citizens of Europe that consists of:
1. Peace (the EU’s great achievement) and respect for nations and people.
2. A new geopolitical role for Europe (Europe needs to be more than a soft power)
3. Democracy (a new treaty and enhanced democratic legitimacy in decision-making)
4. Economic Justice (harnessing the financial sector which should also share in the burdens of the crisis)
5. Equitably shared Growth (enhance growth and ensure convergence of competitiveness and standards of living between Member States)
Recession with massive unemployment, deteriorating living standards and widespread poverty will not help. Beyond stabilization measures, announced but not implemented, actions to bring back growth in Europe are urgently needed. Without cooperation between European institutions and the ECB for a project of fiscal stimulus (similar to the American one), a policy of perpetual austerity will not automatically produce growth. In every turn of history leadership is what counts. Today’s leadership needs to convince and inspire European citizens, with vision and deeds.
This column is based on a speech by Anna Diamantopoulou given on 23 October 2012 at the Harvard Kennedy School as an autumn 2012 Fisher Family Fellow. It forms also part of the European growth strategy expert sourcing jointly organised by Social Europe Journal, the Friedrich-Ebert-Stiftung, the Bertelsmann Stiftung, the IMK of the Hans Boeckler Stiftung and the European Trade Union Institute (ETUI).
At a conference “Capital + Vision” on the topic of “The development of the Greek economy : when and how?” , held in Athens on Sept.29, former European Commissioner Anna Diamantopoulou, proposed a particular initiative by the European Council. She said:
The crisis of public dept soon turned into a threat of exclusion of Greece from the euro and lead to o question of existence for the Eurozone.
The European leadership faced with the dilemma “unification or break up”, seems to have decided on “economic and political unity” , after all the recent decisions at European level.
We need to put an end to all threats and statements, at different levels, on the exclusion of Greece from the euro. As long as this scaremorgening is continued, there is no chance for economic recovery, no chance for development, even if all the upcoming austerity measures are imposed and fully accepted.
It will be impossible to attract foreign investment, non feasible any small or major internal investment. There will hardly be any interest for the return of money deposits to the greek Banks,
It is necessary, I believe, that the Greek government – with the support of all Greek political parties and the European parties to which they belong – should ask that the Conclusions of the upcoming European Summit confirm its will to defend the cohesion of the Eurozone and its integrity, that is confirm that all eurozone countries will stay with the euro , according to the EU treaties and the interests of the people of the European Monetary Union. In simple terms, the European Council should make absolutely clear to all concerned that no country will leave the Euro…”
After fully analyzing the overall situation in the Greek economy and making her proposals on what she considers necessary for the greek government to do, Ms Diamantopoulou added in her closing statement on the particular issue:
Growth about which everyone talks in Greece and Europe, needs a “proper climate” and “money”. To attract private capital and eventually public borrowing we need to achieve a “climate” of stability both in terms of internal political conditions in Greece and in terms of our currency.
No one does business if he is not sure which currency he will be dealing in. To put now, an end to all the uncertainty on the Euro and its future, the European Summit must affirm in an unequivocal and convincing manner that there is no way back to the Drachma, the Deutschmark or the Italian Lira. Bargaining on the Greek adjustment program, perished before seeing daylight and the extension of its implementation is irrelevant without a firm decision on the support of the Euro.
Speaking notes for
Kolloquium of Stiftung Wissenschaft und Politik (SWP) – Berlin - 17.10.2012
I had the opportunity to serve as a European Union Commissionnaire between 1999 and 2004, a very productive and challenging period for the EU, with among others, the introduction of the Euro and the enlargement to 10 new member states. In that capacity I had the chance to collaborate on issues of Social affairs and Equal opportunities, with the German Government, the chancellor, the ministers of Finance, of Social Affairs, of Employment and the ministers of the Landers.
Germany in Europe
Integrating Germany in the European Economic Community (EEC) (1957), the precursor of the European Union, guaranteed security, hope for a prosperous future and above all peace in the European continent. Germany’s role since the establishment of the EEC was that of a powerful member but not a leading protagonist.
It was during the Jacques Delors era [7 January 1985 – 24 January 1995] that the initiative of two important political leaders the French president Francois Mitterand and the German chancellor Helmut Kohl, the European project acquired a new impetus by extending its scope in many new areas
The unification of Germany initiated by chancellor Helmut Kohl paved the way for a new German role.
It was with Gerhard Schröder, the first German chancellor (1998-2005) born after the war (1944) that Germany asserted its interests as distinct of those of the rest of Europe.
Leadership and pedagogy
It is since the advent of the economic crisis in 2007 that Germany assumes a role of leadership in Europe.As a powerful protagonist it is regarded with admiration mixed with awe. Germany as a leader faces new demands. The economic might of Germany makes it the de facto leader. But leadership comes with responsibilities.
Germany needs to lead Europe while balancing the conflict between integration and preservation of national sovereignty.
While her legitimacy stems only from German voters, the German chancellor, in the person of Mrs. Merkel needs to persuade the rest of Europe for her European plans.
A leader has also a pedagogic role. Many German proposals have been positive, constructive and based on solidarity, but their political approach lacks in pedagogic method.
One cannot treat entire nations and their people as sinners that should undergo punishment as did Mr. Philipp Rösler the German vice –chancellor and minister of Economics and Technology, and he was not the only German politician to do so. A punitive approach provokes negative reactions of people in the periphery that are already in distress. Such reactions will hinder any political project and any positive outcome.
So while many German solutions to the crisis may be correct and there could be agreement on what to do, very little was done in terms of winning the necessary political consensus. Luckily, lately one sees signs of a change in the German approach.
I want to be frank and clear on this. In Greece there has been a financial mismanagement, largely the product of a clientelist political system. This a problem for Greeks to solve, and we will do so, if we continue to leave in a democracy.
At the onset of the crisis Greek people gained gradually self awareness of what was wrong in the Greek economy and the need to fix it. They accepted harsh measures and they were promised a return to market lending and mild growth by 2012. Those were the initial troika predictions. They were proven wrong. The lack of any visible results, the escalation of austerity measures and the deepening pain turned the initial patience into fear, despair and anger. It is now obvious that those in the troika that proposed a longer period of adjustment for Greece were more realistic.
Similar experiences are shared by other countries of the European periphery. As the whole European economy is slowing down, it is now widely accepted that reforms and austerity alone cannot bring back growth to Europe. A growth stimulus is necessary.
European unification – Politicians versus Citizens
The economic crisis has brought in the forefront the discussion for the future of Europe. A more unified Europe is needed, and this is supported by the majority of politicians in Germany and the rest of Europe.
This is not the case for European citizens. Those in the more prosperous countries do not want to share the burden of bailing out the periphery, and those in the periphery feel there are the victims of endless austerity with no sign of hope.
In this context German leaders have the historic task to move Europe ahead while persuading the German people and the European people.
What will the German and European policy and narrative be ?
Should it keep singling out a small country like Greece with 1,6 % of European Union GDP or the periphery countries as the culprits solely responsible for the crisis ?
A crisis that has by now been proven to be a systemic one?
New policy – New narrative
German leaders could rally around them the majority of Europeans if they restore the power of elected representatives and their legitimacy by harnessing those economic powers that led to the crisis and keep profiting from it at the expense of Europe’s people:
By harnessing the financial sector which was left unregulated and beyond any essential control indulged in excesses out of infinite greed. The rating agencies that failed in their task to inform the public on the excessive risks that the financial institutions were exposed to.
Why should profligate Banks be bailed-out at the expense of European citizens, while the prevailing narrative calls for punishment of those who were less responsible for the crisis.
The Financial Transaction Tax currently under discussion would be a positive step in this direction.
This is a policy and a narrative that can ally European citizens. This together with a visible prospect of growth will permit the necessary structural reforms that will restore overall European competitiveness and give Europe a prominent role in the global economy.
Instead of finger-pointing to presumed sinner countries, instead of punishment, fear and austerity, what is needed is solidarity, hope and concerted action for growth, based on the rule of democracy on a path of prosperity and happiness for European citizens.
In a nutshell, Europe needs leadership now, if Germany wants to assume this role it should propose a policy and a corresponding narrative consisting of the following:
1. Peace (EU’s great achievement) and respect for nations and people.
2. A new geopolitical role for Europe
(By 2050: world population will be 9bn and Europe only 7% of that down from 20% in the 1950s, the largest EU countries will have maximum 1% of world population, and Europe’s GDP only 10% of world, down from 30% in the 1950s)
3. Democracy (New treaty, enhanced democratic legitimacy in decision-making)
4. Economic Justice (harnessing the financial sector)
5. Growth equitably shared
Failures of Politicians in handling the crisis
As a politician I can say that our ranks failed in providing proper leadership. My colleagues in the core European countries pointed the finger at and asked for punishment of the profligate periphery instead of addressing systemic deficiencies.
In particular most German politicians and the economic elite failed to speak out and convince their people that helping for the survival of the Euro was in the long-term interest of Germany. Furthermore the German public believes that the bail-out money has been paid out in cash, although most of it is guarantees and loans with interest. And they are not aware of the benefits from the euro crisis: Germany has gained 80 billion Euros so far due to reduced interest rates on German bonds only.
In the periphery, and I can speak of my experience as a Greek politician, we failed to tell the truth to are people, that many reforms were long overdue and should be carried out because they were a condition for the survival of our economies. Instead we chose to present the reforms as necessary because they were demanded by our foreign creditors.
Thus we all worked in the wrong direction, contributing to create two conflicting public opinions.
I believe we urgently need a unified common European narrative.
I have been a long time member of the European Socialist party. The SPD has played a constructive and positive role during the present crisis both in Germany and in the European Parliament. It avoided a populist rhetoric and its leadership as well as its prominent member and president of the European Parliament Mr. Schultz should be commended for their stance.
I believe the SPD can play important role in the creation of a stronger pan-European Social-Democratic Party, and so can CDU with its allies. The existence of strong pan-European parties is a necessary condition for a strong democratic and more unified Europe.
Conclusion – Hope versus Fear
The Nobel prize for peace awarded to the European Union, came at an appropriate moment. While our focus is exclusively on the crisis, we underestimate our achievements, it reminds us what the European project has achieved for Europe, peace and the protection of Human Rights.
Now, building on our achievements, it is the time to advance towards a more unified Europe based not on fear, punishment and austerity but on hope, solidarity and growth for a prosperous and happier future for European citizens.
Dear Mr President,
In this critical moment where European’s edifice fabric may be tearing apart, the leaders' voice of Europeans should be heard. A public intervention by the committed Europeans, by those who had have served the vision of a united Europe united and guided by justice, discipline and solidarity, is of paramount importance for the future of Europe and for the prosperity of its people.
A declaration that reaffirms the vision and renews the mission for a united Europe, proposing along the means for reaching that goal, seems that it can only come from those leaders without the anxiety of re-election and no interest in playing a leading role in today's European scenario of "Cramer vs. Cramer", nation against nation, north vs south, centre vs. periphery.
The catalytic role of President Delors in the creation of the single market with a social agenda and the preparation of the monetary union, along with your decisive contribution to the introduction of the euro and the largest ever enlargement of the Community, justify and necessitate such an initiative.
We have the duty to stop NOW this new version of a paneuropean war flamed by the galloping progress of populism and nationalism, with their distinct characteristics in each country. To stop the risk of dismantling the most noble and genuine accomplishment of Europe’s political history: the union of national states through solely democratic procedures.
I am confident that politicians who are committed to the European ideal, today that anti-Europeanism spreads rapidly and may become the prevailing view, are ready to mobilize and support such an initiative. I feel compelled to reiterate the closing paragraph of my 2012 letter under the title "Europe SOS" :
“Let us move now by strengthening the voices of significant European leaders and dignitaries by creating a movement for the soul of Europe, “Europe SOS”, for the reversal of our course, for extinguishing ongoing threats, offering a common perspective and securing our collective future before it is too late.
The time for initiative is NOW. Let us seize it.”
Europe is at the most serious of crossroads. Usually, at times of crisis, it rises to the occasion and provides political answers to pressing problems. But today, the Eurozone looks broken and the question arises: is there the will to save it? And if there is the will, is there the way?
There is talk of a bond market that no longer functions, a banking sector with interbank lending virtually at a standstill, entire zones which are cut-off from credit, a run by global investors and an alleged, quiet bank run by citizens. Credit is on the verge of disappearing altogether, confidence is low and decreasing, and governments are forced to adopt austerity measures which, in turn, fuel all the above, increase social tensions and strengthen opposition forces based on populism and opposition to rationalization of finances.
The crisis we are facing today constitutes an existential threat for both the Eurozone and the EU. It is obvious that no easy political or economic remedies exist. Although the crisis emerged around 2008 and escalated in 2010, its roots go back to the formation of the common currency: yesterday’s inadequate institutional architecture and the national mismanagement especially in the countries of the periphery, continues to haunt the policy decisions of today.
It is not possible to overcome the crisis without a political union. The current financial crisis should be addressed with a single coordinated strategy and the European Union needs a political union as much as it does an economic one, if not even more so.
European political union would be based on four pillars:
The EU needs a central coordination of public finances. As Mr. Van Rompuy stressed out in his report in June, the EU needs:
Finally, I believe it needs wide European Investment Project concerning the cooperation of the PPP (private public partnership) for the major networks of: