A Power Struggle Is Tearing European Union Apart
Wednesday, 26 May 2010 02:21 PM
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By: Hans Parisis
The Organization for Economic Cooperation and Development, a watchdog for 31 of the world's most developed economies, says that growth is rising faster than expected but risks also are increasing.
There are three danger areas: recovery in the global economy is weak; jobless rates in some countries are persistently high and financial conditions in member countries are worsening sharply.
That said, yesterday in his inaugural keynote speech at the opening of the Brussels Economic Forum 2010, Herman Van Rompuy, the President of the European Council, said: “We are certainly in a critical moment; one can call it ‘unprecedented’ and ‘historical.’ But crises are always unprecedented, that is the whole point. “
He said that the “Stability Pact remains the cornerstone of European economic policy coordination. However, sound budgetary policies are necessary, but not sufficient, to ensure competitiveness. We could have known this from the start, but it took this crisis to hammer down the point.”
He also said that he doesn’t “belong to those who are cheering with a European flag and who are almost thanking the markets” for obliging the European Union to take a step forward on political integration.
“European integration is not a goal in itself. I would rather not have had this crisis, and I am sure the Greek people and most taxpayers in the Union would agree … We are clearly confronted with a tension within the system, the ill-famous dilemma of being a monetary union and not a full-fledged economic and political union … being in the ‘euro zone’ means, monetarily speaking, being part of one ‘Euro land,’” he said.
He said that today, “people are discovering what a ‘common destiny’ in monetary matters means. They are discovering that the euro affects their pensions, savings, and jobs, their very daily life. It hurts … We cannot solve our budgetary problems without more structural economic growth. Without growth, we risk a negative spiral … Therefore political leaders will be confronted with a reform program in the budgetary field as in the socio-economic domains. All this will not be easy to achieve, but it is vital.”
It’s interesting that the president of the European Council says all this at the moment that the IMF Managing Director Dominique Strauss-Kahn is having second thoughts about a synchronized fiscal squeeze across half Europe, saying that growth in Europe is by far too low.
“Germany and the other countries must urgently do more to accelerate growth. The whole world is watching this and is losing confidence in Europe … Europe’s house is not in order,” he said.
From my view, and trying to read between the lines of the speech by Van Rompuy, we see a confirmation that the European Union is experiencing nothing less than an “existential” crisis.
In my opinion, it’s not about Greece, but it is about what the European Union members owe each other — and what controls the European Union institutions have over its members.
Today, the better-off members are called on to help worse-off members at the prospect of spending taxpayer money to assist countries dealing with popped credit bubbles.
It now is clear that if they do help, they really want to have controls over the ways these other countries spend their money so this kind of crisis can’t arise again.
Needless to say, Greece and its peers do not want foreign control over their finances.
To state it in a simple way: if there are no mutual obligations among EU member nations, and the German and Greek publics don’t want to bail out or submit, respectively, then the profound question is raised of what Europe is going to be — beyond a mere free-trade zone — after this crisis.
Yes, the European Union will survive this crisis.
But we must keep in mind that in the EU, something will continuously go wrong because they don’t have institutions that have the power that could handle all these actual and future problems.
Even now, in the past few weeks it has become crystal clear that European countries are not inclined to create such institutions, and, probably much more importantly, that public opinion will limit European governments’ ability to create or participate in these institutions.
History has taught us that building a super state like the European Union requires: a war to determine who is in charge or political unanimity to forge a treaty.
It’s clear that there is no political unanimity in the European Union, not today and not tomorrow.
After that really enlightening speech by Van Rompuy, it is difficult to envision any further integration of European institutions.
His speech is very helpful to see how the European Union will further devolve from its ambitious vision into an alliance of convenience built around economic benefits negotiated and renegotiated over and over again among its member states.
In my opinion, the European Union will further evolve into no more than a treaty — and not into a real union where its member states have no other or higher interests than self-interest.
Yes, this is not a nation in the making. How the euro will come out of all of this is still an unanswered question.
One thing is for sure, it won’t be as good and respected, in every sense you can think of, as the post-World War II German mark.
Yes, replacing the dollar as global reserve currency is not for tomorrow.
Moneynews. All rights reserved.
Wednesday, 26 May 2010 02:21 PM
Article Font Size
By: Hans Parisis
The Organization for Economic Cooperation and Development, a watchdog for 31 of the world's most developed economies, says that growth is rising faster than expected but risks also are increasing.
There are three danger areas: recovery in the global economy is weak; jobless rates in some countries are persistently high and financial conditions in member countries are worsening sharply.
That said, yesterday in his inaugural keynote speech at the opening of the Brussels Economic Forum 2010, Herman Van Rompuy, the President of the European Council, said: “We are certainly in a critical moment; one can call it ‘unprecedented’ and ‘historical.’ But crises are always unprecedented, that is the whole point. “
He said that the “Stability Pact remains the cornerstone of European economic policy coordination. However, sound budgetary policies are necessary, but not sufficient, to ensure competitiveness. We could have known this from the start, but it took this crisis to hammer down the point.”
He also said that he doesn’t “belong to those who are cheering with a European flag and who are almost thanking the markets” for obliging the European Union to take a step forward on political integration.
“European integration is not a goal in itself. I would rather not have had this crisis, and I am sure the Greek people and most taxpayers in the Union would agree … We are clearly confronted with a tension within the system, the ill-famous dilemma of being a monetary union and not a full-fledged economic and political union … being in the ‘euro zone’ means, monetarily speaking, being part of one ‘Euro land,’” he said.
He said that today, “people are discovering what a ‘common destiny’ in monetary matters means. They are discovering that the euro affects their pensions, savings, and jobs, their very daily life. It hurts … We cannot solve our budgetary problems without more structural economic growth. Without growth, we risk a negative spiral … Therefore political leaders will be confronted with a reform program in the budgetary field as in the socio-economic domains. All this will not be easy to achieve, but it is vital.”
It’s interesting that the president of the European Council says all this at the moment that the IMF Managing Director Dominique Strauss-Kahn is having second thoughts about a synchronized fiscal squeeze across half Europe, saying that growth in Europe is by far too low.
“Germany and the other countries must urgently do more to accelerate growth. The whole world is watching this and is losing confidence in Europe … Europe’s house is not in order,” he said.
From my view, and trying to read between the lines of the speech by Van Rompuy, we see a confirmation that the European Union is experiencing nothing less than an “existential” crisis.
In my opinion, it’s not about Greece, but it is about what the European Union members owe each other — and what controls the European Union institutions have over its members.
Today, the better-off members are called on to help worse-off members at the prospect of spending taxpayer money to assist countries dealing with popped credit bubbles.
It now is clear that if they do help, they really want to have controls over the ways these other countries spend their money so this kind of crisis can’t arise again.
Needless to say, Greece and its peers do not want foreign control over their finances.
To state it in a simple way: if there are no mutual obligations among EU member nations, and the German and Greek publics don’t want to bail out or submit, respectively, then the profound question is raised of what Europe is going to be — beyond a mere free-trade zone — after this crisis.
Yes, the European Union will survive this crisis.
But we must keep in mind that in the EU, something will continuously go wrong because they don’t have institutions that have the power that could handle all these actual and future problems.
Even now, in the past few weeks it has become crystal clear that European countries are not inclined to create such institutions, and, probably much more importantly, that public opinion will limit European governments’ ability to create or participate in these institutions.
History has taught us that building a super state like the European Union requires: a war to determine who is in charge or political unanimity to forge a treaty.
It’s clear that there is no political unanimity in the European Union, not today and not tomorrow.
After that really enlightening speech by Van Rompuy, it is difficult to envision any further integration of European institutions.
His speech is very helpful to see how the European Union will further devolve from its ambitious vision into an alliance of convenience built around economic benefits negotiated and renegotiated over and over again among its member states.
In my opinion, the European Union will further evolve into no more than a treaty — and not into a real union where its member states have no other or higher interests than self-interest.
Yes, this is not a nation in the making. How the euro will come out of all of this is still an unanswered question.
One thing is for sure, it won’t be as good and respected, in every sense you can think of, as the post-World War II German mark.
Yes, replacing the dollar as global reserve currency is not for tomorrow.
Moneynews. All rights reserved.