A time bomb is ticking in Europe. It’s called austerity. It was planted over the years through economic indiscipline in southern Europe, and could spread westward, from Spain to France, Ireland, and eventually Britain. The southerners are being pressured by their wealthier northern neighbours to live within their means, but they see such pressure as an affront to their birthright to economic prosperity. The north, however, insists austerity is an unavoidable high price to pay to rescue the profligate south. The end result could be the unraveling of the European Union (EU) project and will most certainly unleash a nastier and bitter Europe.
The austerity is being promoted by European political and economic elite, led by the European Central Bank (ECB). These protégés of Jean Monet and Robert Schulman see unity at all cost as the only sustainable future. Unfortunately, the austerity comes with non-democratic options which political leaders must accept or face ostracisation. Greece is a case in point. In order to carry the public along, former Prime Minister George Papandreou called for a referendum on austerity, but the European elite pressured him to abandon such democratic flirtations. The ‘disrespect’ felt by the Greek people was drowned by the outrage of European elite led by German Chancellor Angela Merkel who did everything possible to prevent such an outcome. They blocked the next tranche of bailout money until Greek politicians could commit to all previously negotiated austerity measures. Eventually, Papandreou was forced to resign and was replaced by a former vice president of the ECB.
But if austerity spreads westward, will the French accept such dilution of their sovereignty by the Germans without re-igniting ancient hatreds? The perception is rife that the EU is actually a mechanism for Germany to surge exports into developing EU countries via the union’s free trade system. Germany also allegedly used Brussels’ regulations and managed the euro such that its profligate neighbours found themselves in an impossible situation.
In Greece, for instance, the 20 years of prosperity since the 1990s benefited many; yet, economic integration left the economy wide open for other Europeans to enter, seriously disadvantaging segments of the Greek economy. European competitors overwhelmed workers in many industries; small-business owners in particular languished. Yet, it’s the broader public whose jobs, pensions, salaries and careers will be eviscerated that will pay the price of austerity. Spain and Ireland might swallow the pill; but it will be a hard sell in Italy whose exposure is too large to hide via the kind of duplicity being concocted for Greece.
Massive decline in standard of living, disappointment in one’s personal life and a feeling of cultural disenfranchisement by outsiders isn’t exactly a good argument for EU. Instead, racial and ethnic tensions combined with economic austerity and a sense of betrayal by an elite perceived as incompetent, dishonest and uncaring creates an explosive cocktail of bitterness and nastiness in their traditional homeland.
Although the markets cheered, one casualty of the European austerity is the free market itself. Public support for free markets is based on two broad arguments: they deliver more efficient outcomes than the alternatives; and, over time they create increased prosperity for society at large. For many Europeans, both these assumptions have taken a severe beating in the past few years; hence, politicians are scared red.
An exasperated columnist at the The Financial Times (London) on Tuesday urged the markets to ‘take flight from Europe’s policy food-fight [because] Euroland’s fingers are pointing in all directions, each member believing they have done more than their fair share to resolve a crisis that appears intractable and never-ending. The world is telling them to come together; they’re telling each other the same; but as of now, it appears that you can’t tell any of them very much.’ The last time Europeans engaged in such economic statecraft during the inter-war years (1918-1938), they ended up with ‘beggar-thy-neighbour’ policies that precipitated World War II.
Eastern Europe is a potential victim of this ugly food-fight. If weak European banks, unable to be bailed out by scared EU political elite, suddenly withdraw capacity en masse from Eastern Europe, economic disruption looks inevitable. Mass migration to a troubled but still better-off West will resurrect crude nativism, xenophobia, naked tribalism, and rabid racism, first towards Eastern Europeans, and more brutally among Easterners. Add to that persistent anti-immigrant, particularly anti-Muslim, feeling among an angry European public, and we might start wondering what became of the EU and its borders policies and its elite’s use of immigration to simultaneously fuel the economy and create both economic and cultural tensions.
The potential to displace European aggression has always lurked behind the elite’s plastic display of cosmopolitanism. New political forces unleashed by austerity could overwhelm and dislodge the Europeanists and cosmopolitans from power, completely reshaping the European political landscape. The large number of elections scheduled or expected in Europe in 2012 and 2013, including a French presidential election in 2012 and German parliamentary elections in 2013 will be a test of the survivability of the European project or the emergence of a bitter and nasty Europe.
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