Rather than the terms “peace and reconciliation”, “freedom and emancipation”, discussion on Europe today is dominated by terminology from the modern financial economy like “rescue package”, “stability mechanism”, “debt rescheduling” and “government bonds”. Europe has changed from a continent of values and principles to a straightforward place of business where exchange rates, prices, and the corresponding neologisms are traded.
The big idea of the unified continent seems to have become reduced to the question of how the European community can tackle the debt crisis. Professional observers find the vision of Europe’s statesmen, following the horrors of two world wars, of turning Europe into a continent of long-term peace and prosperity, scarcely worth remembering. Instead it is the crisis which rules everywhere, including in the minds of many of those involved.
In Germany for some journalists and political spectators the demand for a debt limit for all Eurozone countries is the logical corollary to their analysis of the reasons for the current crisis: irresponsible spending by member states, at least in the main. Let us not forget that Angela Merkel’s conservative mantra is also: “we have all lived beyond our means”.
Social Democrats have ensured that the debt limit is written into the German constitution. And now, when this limit is being put to the test for the first time, it is Social Democrats who are defending it against the tax-cutting ideologues of the Union and FDP. It is undoubtedly true that for decades Greece lived well beyond its means. Successive governments postponed overdue reforms, allowed irresponsible state expansion, and failed to establish a proper tax system. However, a glance at other Eurozone states reveals the debt crisis was by no means due to irresponsible expenditure policy everywhere. On the contrary, Spanish and Irish debt is the result of responsible spending policies. These states simply had to get into debt to protect their citizens from the financial ruin caused by banks and speculators.
Take Ireland for example. For years, it was acclaimed as the “Celtic tiger”, as a model for the wonderful new neo-liberal world, offering low taxes, minimal social security contributions, and unlimited freedom for financial markets. All of which perfectly suited the neoliberal and market ideologues who, like Guido Westerwelle, praised it as a shining example. Yet given that in 2007 Ireland managed to achieve a budget surplus, it would have found it easy to comply with any debt limit. The problems started when the property bubble burst, leading to the collapse of the new fairytale world of intransparent financial products around the globe. Should the Irish, in view of the imaginary debt limit, have decided not to rescue their banks? For many German banks with commitments in Ireland – and ultimately the German taxpayer – such a decision would have been very expensive.
Like Germany, Ireland’s excessive debt is not due to economic mismanagement by its citizens or governments or due to living beyond its means. Governments in these countries responded sensibly to the crisis by recapitalizing banks, launching stimulus programs, and creating short-time work arrangements to prevent things from getting even worse. Important as they are for reducing debt during boom years (instead of reducing taxes) and to make provision for difficult times, debt limits alone are not enough. Firm regulation of the financial markets is essential but as experience shows with Ireland, it cannot function when confined to national borders. Here, “more Europe” will be required. The complete lack of a common financial, stability and economic policy when the Euro was launched was a congenital defect, and can only be resolved through deeper European cooperation. After all, the Deutschmark would never have been so successful if, since its inception in 1948, the different federal states in Germany had been allowed to pursue their own financial, taxation and economic policies. If they had done so, Bavaria would today still be an economic backwater.
We need a perspective on growth for those countries that in the coming years will not be able, by their own efforts, to free themselves from the debt crisis and to recover economically. This is the real reason why taxation of the financial markets is required. It is here that the money required for investment in growth and jobs must be generated. We will not be able to pay for such growth from national budgets, nor will we be allowed to take on new debt to pay for it. Besides, there is absolutely no reason why financial products should be the only products not subject to VAT. It is a matter of political decency and integrity to involve those people in resolving the crisis who in large part also created it.
The time has come to set Europe back on its feet. For this to happen, the elites must heed their responsibilities and work and campaign for Europe as a project of hope more decisively than before. After all, Europe is more than a community of interests for the rescue of stricken banks, and more too than a free trade zone. Europe means simply (but not only) freedom, peace, justice and solidarity. As difficult as the current crisis is to deal with, it would be both wrong and short-sighted to declare the European idea itself to be pure wishful thinking and empty pathos.
Today, the European idea is also a proposal to the whole world on how we want to live together in the future. It puts the common good above individual economic interests, cultural diversity above conformity, quality of life above the accumulation of wealth, sustainable development above reckless exploitation of people and the environment, cooperation above the unilateral exercise of power, and universal human rights and democracy above the law of the jungle. This European idea of freedom and mutual responsibility is the real capital that must be maintained.
To earn interest on this capital, we will need to continue to work on “project Europe”. Years of discussion and persuasion will be required. Those who want more of Europe must campaign harder for it, so that its citizens are also won over to the project. This will include finding answers to very straightforward questions such as why do we allow the free movement of goods and capital while being unable to value workers’ rights in the same way? Why do we have a European Commission, and then allow national governments to undermine it by putting their weakest representatives in senior positions? Why do we waste words talking about a common foreign and security policy when we are unable to take decisive steps towards a joint European defence army or even to formulate a coordinated European response to events such as the Arab Spring?
Alongside its traditional internal perspective – to establish peace and prosperity in Europe – the European Union must develop an external perspective. In future, it must represent the interests of Europeans on the world stage. Today, Europe’s share of worldwide economic activity is 30 percent. In 2050 this figure will be down to just 5 percent. In 30 or 40 years, neither Germany nor France by themselves will have any appreciable political or economic role to play in comparison with the major political and economic regions of the world like USA, China or India. Only a combined Europe stands a chance in the global contest of ideas and values, politics and economy.
Deeper European union is not possible without giving up some aspects of national sovereignty. We must be ready to acknowledge this and to be honest about the fact that there will be a price to pay for Germany when governments fail, as in Greece, or for excesses on the financial markets, as in Ireland. Yet we should not forget that we are the major winners of European unification, economically, because no other country benefits so much from the Euro as Germany due to its status as an export nation, and politically, because without the European Union, German reunification would never have taken place.
However, “more Europe” will not be possible overnight. A long, hard road lies ahead – as so often in the history of European unification. There will be states who want to advance, and those for whom European integration is happening too rapidly. This is not in itself tragic, because the much quoted “multi-speed Europe” has long been a reality. It is not a matter of choosing between the status quo and a European federal state, or between Europe and destruction and ruin. Rather what is needed is a sustained period of integration. This must begin with a new economic policy, because conservative-liberal free market ideologies, of “private rather than state”, and of competition to cut taxes have been a catastrophic failure. Europe has not failed because of the Euro; rather the Euro has failed due to mistaken conservative ideologies. For this reorientation the next step required is not a new and bureaucratic large-scale institution or a European federal state but ongoing cooperation between the member states, the EU parliament, and the EU commission. If this can be achieved, Europe will also grow together on an institutional level. But it will take time and require patience and persuasion, precisely what politics is all about. The call for a debt limit as a panacea lacks imagination and simply does not go far enough. So much more is at stake and suitably rigorous and ambitious policies are required accordingly.