For those who have watched the Greek people humiliated by the troika’s ever more strident calls for austerity, it is easy to despair about ever seeing any real political change in a Merkozy-dominated Eurozone. But things may soon improve.
Consider the following points. First, Europeans are beginning to wake up to the reality of ‘austerity’ and are questioning the neo-liberal view that belt-tightening is the solution. Yes, even the German centre-left has its doubts about the troika’s prescriptions for saving the euro.
Secondly, not only is François Hollande likely to win the French presidency this year but the programme of the PS is far more radical than one could have anticipated a year ago.
Thirdly, judging by the results of state-level (Länder) elections in 2011, there is a real possibility that the German Christian Democrats and Free Democrat coalition (CDU/CSU/FDP) might lose the German general election in 2013 to a red-green (SPD/Die Grünen) coalition. Ms Merkel’s popularity is on the wane, and the Free Democrat Party (FDP) is self-destructing. Moreover, it is an open secret that policy co-ordination negotiations are taking place between the French and German centre-left parties.
Of course it is far too early to say; the above scenarios are far from certain and — many would argue — unlikely to produce the profound changes Europe needs. But at least there’s a glimmer of hope on the horizon.
In the first major speech of the campaign at Le Bourget at the end of January, François Hollande issued a highly detailed 60-point programme of reform. While sticking to his commitment to reduce the budget deficit, his main economic reforms include renegotiation of Merkel’s austerity pact for the Eurozone and the introduction of Eurobonds, tax reform and harmonisation in France starting with a tougher FTT and higher taxes on high incomes and wealth. Furthermore, he proposes the separation of investment and retail banking, the banning of all offshore banking, the creation of 150,000 new jobs in areas of high unemployment and an end to further privatisation of state-owned enterprise. In sum, Hollande wants the super-rich to pay.
What points are critical for the Eurozone (EZ)? The most obvious are the renegotiation of the Merkozy ‘austerity’ pact and the introduction of Eurobonds. The latter, which would end speculation against the euro bonds issued by individual member states, constitutes a radical departure from current financial arrangements and has widespread support from leading European politicians including Belgium’s Guy Verhofstadt, Italy’s Mario Monti and the Commission’s President José Manuel Barroso as well as from the German SPD and the Greens.
What of the austerity pact; ie, the new ‘economic governance’ arrangements advanced by Merkel under which each member state would sign up for a ‘balanced budget’ (debt brake) law. Although originally agreed under the CDU-SPD grand coalition government in 2009, according to Der Spiegel many are now having serious second thoughts.
For one thing, as things stand, failure to comply with the debt brake law would not be legally actionable since it has not been (and will not be) adopted by the 27 member states. For another, several leading EZ member states are against it — Italy’s Mario Monti thinks it would hamper growth — while Luxembourg’s Foreign Minister has openly disparaged it as a “waste of time and energy”. Crucially, the SPD-Green coalition in North Rhine-Westphalia (NRW) is furious at a 2011 German Constitutional Court decision which, based on the debt-brake law, annulled NRW’s supplementary budget. The long centre-left and centre-right neo-liberal consensus in Germany may finally be unravelling.
But what of Greece? Sadly, its fate now appears to be sealed, and it is unlikely it will long survive (or wish to survive) within the euro. The changes outlined above will come too late for Greece, and perhaps also for other small nations on the periphery. But the hatred inspired by Merkel’s neo-liberal policies towards the Club-Med countries will be long remembered — the longer Greece is left to blow in the wind by the troika, the stronger will anti-German feeling become.
At the end of the day, political change in Germany must happen if Europe is to survive, much less thrive. Ordinary Germans don’t like being hated by the rest of Europe. Moreover, a growing number of ordinary Germans are coming to realise that German economic success rests on an unsustainable export-led growth model financed by flat wages. The great unknown is whether this lesson will be understood by the more ‘progressive’ elements of Germany’s political class.