It was observed in an earlier post that the ongoing crisis of the Eurozone is unlikely to lead to a complete re-writing of the EU rule-book. But it will make the Euro-area a tougher and meaner place, with its members more willing to castigate those they think are not pulling their weight.
We are beginning to see this already with the developments in Slovakia. One of the Eurozone’s newest and poorest members, Slovakia is also the last still to ratify the agreement on the European Financial Stability Facility (EFSF) first announced back in July of this year. In the hope of triggering new elections, a junior member of the governing coalition, the Freedom and Solidarity Party, abstained on the EFSF proposal, with the result that the government lost the vote. Under a barrage of pressure from other Eurozone members, it looks likely that in a deal between government officials and the main opposition party the proposal will be passed in a second vote held later this week.
The events in Slovakia are significant for two reasons. One is the obvious parallel with previous referendum results where recalcitrant populations were pushed into voting again in order to get “the right result” (viz. Ireland in 2008). It is little wonder that legislatures across Europe fail to inspire domestic populations when their decisions are so easily reversed. Today, the difficulties in passing the EFSF agreement – itself already out-dated as leaders and officials put together a new beefed-up EFSF deal to be announced at the end of October – highlight a key choice between democracy and technocracy. Those who lambast the EU for its slow decision-making and complain about how twenty Slovak parliamentarians are holding up the whole of the Eurozone should be made to reveal their cards. Would they give up national democratic procedures in favour of direct rule by EU committees staffed with national officials and experts? If so, why don’t they say so?
The other important point is that the position of the Freedom and Solidarity Party is no different from the one pushed by governments in The Hague, in Berlin and elsewhere. They claim that Slovakia respected the rules and made difficult sacrifices in meeting the conditions for entry into the Eurozone. So why should it help out a country like Greece whose government failed to respect these same rules? This was exactly the argument put forward by the Dutch prime minister and finance minister a few weeks back. That Slovakia is relatively less well-off compared with some of the bigger member states is important but the real disagreement is about a fair distribution of the costs of austerity. This echoes the theme of protests against cuts that have occurred across Europe. The need for austerity is accepted and at issue is how to distribute the costs.
As we’ve argued before, this puts the cart before the horse. Austerity is not a starting point but a logical consequence of government bail-outs to banks. As European leaders put together a plan for the mass recapitalization of the Eurozone’s banking sector, the real debate should be about the rights and wrongs of this policy. Commentators line up behind the idea that a two trillion Euro commitment by European governments via the EFSF should be enough to calm the markets and put the Eurozone crisis behind us. But throwing government money at the problem hasn’t worked so far. So why should it work now?