National horizons to Europe’s crisis

16 Nov

One the one hand, the Eurozone crisis seems to be a quintessentially European one. Economists line up to describe it as a product of regional economic integration in the absence of full political integration. The rolling force of contagion suggests that national frontiers mean little when international markets begin to worry about a government’s ability to repay its debts. On the other hand, the conventional wisdom about the causes of the crisis points to national roots: weak-willed Greek politicians have funded an overly generous welfare state through excessive borrowing; Italy’s problems stem from Berlusconi’s unpredictable antics; a Spanish fondness for home ownership, sanctioned by regional banks willing to lend to all and sundry, explains Spanish economic woes today.

Europe’s crisis is a complex mix of national and European-wide dynamics. Whilst a single European currency zone exists, composed of 17 countries, there is no single European economy. Here national differences co-exist alongside systemic features of the Eurozone as a whole. One such feature is the deep and reoccurring division between surplus and deficit countries. Luxembourg, Netherlands, Germany, Austria and Finland all ran current account surpluses consistently over the 2002-2008 period. Italy, Ireland, Spain, Slovakia, Cyprus, Portugal and Greece ran systematic current account deficits over the same 6 year period. This imbalance alone, in combination with the convergence in interest rates across the Eurozone, helps explain how some governments found themselves so indebted. Add an unplanned bail-out of banks and we arrive at today’s sovereign debt crisis. However, there are also a crucial set of intervening national details. Germany’s ability to achieve what was to all extents and purposes a competitive devaluation within the Eurozone was made possible by the hold of its government over wage-setting in key export-oriented sectors. This made an overcoming of the deficit/surplus divide very difficult. Greece’s public borrowing problems reflect a combination of social democratic expectations and weak public institutions: the result of Greece’s particular historical trajectory in the post-1945 period.

In terms of the politics of the crisis, we see the same curious mixture of national and European dynamics. Take the protests. These might seem the perfect example of a pan-European movement: based on the occupations of public squares in Madrid and Athens, similar movements have mushroomed around Europe (and in the US of course) with surprising speed. A closer look at these movements, however, suggests they are closely tied to national contexts. As observed by Christian Scholl, political scientist at the University of Amsterdam, the language of the Occupy movement in Amsterdam is Dutch, with little English spoken (see its website here). Scholl also recounted in a discussion with The Current Moment that before the recent occupation began, Amsterdam’s central Dam square had seen in June regular meetings of hundreds of Spaniards – there as part of a solidarity movement with their fellow Spanish Indignados in Madrid. As the Dutch occupiers took over the Beursplein (Amsterdam’s equivalent of Wall Street) there was no sign of the Spanish protestors. With different national preoccupations, the protests have not combined.

Looking at national politics, the European dimension is inescapable. The Eurozone’s sovereign debt crisis has led to an unprecedented degree of Brussels-based negotiations between national leaders. Ad hoc Franco-German summits have become the norm. Germany’s Angela Merkel has gone from being a staunch opponent of making amendments to the European Treaties to a supporter of such changes, even though they would imply years of negotiation, summits and national referendum campaigns. New European institutions have been created, like the European Financial Stability Facility; others, like the European Central Bank, have been thrust into the limelight. The European Commission has adopted its own plan, the ‘six-pack’, which involves strengthened supervision of national budget procedures.

And yet, the story of recent weeks has all been about the ups and downs of national political leaders. The fate of the Eurozone was in the balance when Greece’s Prime Minister, Papandreou, called for a referendum in Greece on the austerity measures demanded by the EU and IMF as a condition for their loans. Spreads on Italian government bonds have been tied to Silvio Berlusconi’s political fate. Once his resignation was confirmed, the issue became who would replace him. Today, we see two technocratic governments in place in Athens and Rome. Whilst decisions are made at the European level, everyone also knows that these decisions will only matter if political stability can be guaranteed in national capitals.

There is no way of avoiding this confusing mixture of the national and the European. Years of European integration have seen national governments steadily embedded in a set of promises and obligations at odds with their commitment to represent – first and foremost – their own citizens. Political parties have become unconnected from domestic constituencies, transformed into governing parties rather than forces of political representation. Growing politicization from the public squares of national capitals challenges these developments but the protests remain embryonic and remarkably unconcerned with providing their own analysis of the crisis and what to do about it. The present crisis is reshaping some of the basic rules of the political game in Europe but as yet we are still some way off knowing what the new political landscape of Europe will look like. One thing we can probably count on is that the confusing mixture of national and European dynamics, an engrained feature of European politics today, is here to stay.

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2 Responses to “National horizons to Europe’s crisis”

  1. spiritofjubilee December 15, 2011 at 5:19 am #

    Hello Thecurrentmoment,
    Interesting Post, No Profile Comment
    Kindest Regards
    In America: governments, businesses, individuals are now buried under a mountain of debt. A mountain of debt that will never be repaid.

    Who will borrow when they can’t make the payments on the debt that they have already? The math alone calls for a system reset, a debt jubilee.

    Investors are already losing… in a rigged monetary casino that rewards usury, speculation, and currency manipulation while looting main street.

    There is a moral principle that debts should be honored. That is, debts between businesses that buy and sell real products, not bundled ponzi schemes, debts between individuals, between friends and businesses that know each other to be rational and moral, debts based on investments where there is a rational expectation of return.

    There is also a moral principle that unjust debts should be cancelled, and usury legislated against. Debts that are ‘odious’, debts based on fraud, debts to dictators, debts arranged by oligarchs without the consent of the general population (the 99 percent who have been left out of the equation), debts based upon compound interest upon compound interest, that should have been written off long ago, the debts need to be cancelled in a general jubilee. Think outside the box. It’s time for a jubilee.

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  1. Behind Europe’s employment figures « thecurrentmoment - January 6, 2012

    [...] with the trade figures, where repeated deficits and surpluses consistently divided the Eurozone area, unemployment figures [...]

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