Marek Magierowski, Europe out of Control

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The current crisis should have laid bare all the informal decision-making mechanisms in the European Union. However, the crisis hasn't been a turning point in this respect.

With or without the financial disturbances the process would have remained unchanged. Decisions are made and proposals are tabled by a restricted circle of powerful figures, although not only in Berlin and Paris and not only in the remote corridors of the Berlaymont building in Brussels.

The contemporary European mandarins are basically dispersed all over the place. Sometimes they just pop up awkwardly and unexpectedly and they become leading actors on the EU stage almost overnight.

I have been wondering lately - how many Polish journalists covering international affairs were able to name the Bundesbank governor, say, six months ago.

Now they all know who Jens Weidmann is and how fundamental his opinions are for the future of the Eurozone. He is neither an active nor a former politician, until recently largely unknown beyond German borders, he is just a profoundly Teutonic civil servant, clinging to a set of very conservatives views on the European Central Bank's role in combating the crisis. Why has he become so influential?

Because the debate has changed its course.

 

Another treaty, please

 

Since the very foundation of the Coal and Steel Community Europe has been looking for new ways of economic and social development, which would allow to cement the continental unity and to make the integration process irreversible.

Common market was not enough. New institutions had to be created. Then institutions seemed insufficient - enter the single currency. When it turned out that the single currency project was not as perfect as it was claimed by its inventors at the time of the euro's launch, the leaders of the major EU countries began to spread and implement increasingly bold visions of Europe: be it the EU president, elected by universal suffrage, be it the banking union, be it the new commissioner, armed with the right to veto national budgets.

In the meantime, the EU's treaties, already bloated, grew exponentially, creating a maze of rules and regulations that. On the one hand, they contributed to liberalizing the economic life of the continent, on the other hand they originated its paralysis.

Each new treaty, each subsequent pact was to be the last and definitive one,

an all-encompassing panacea, which would cure all the economic and political ills in Europe.

Therefore, Angela Merkel, Nicolas Sarkozy and many others fought with astonishing determination for the implementation of the Lisbon Treaty, pointing a finger at the unruly Irish, scolding the eurosceptical Czech President Vaclav Klaus and urging Poland's Lech Kaczynski to promptly ratify the document. They wanted to avoid another embarrassment, after the French and the Dutch had binned the Lisbon Treaty's infamous predecessor -

The Constitutional Treaty.

In the opinion of the EU's new aristocracy the Lisbon Treaty was the rock upon which the well-being of all European citizens should be built, and from which the rediscovered strength of Europe would emanate across the world.

The Lisbon Treaty was the shining gate leading to the "United States of Europe", a dream unfulfilled for decades. A dream of all federalists who have seen the European Union as a vehicle used primarily to overthrow the global hegemony of the United States.

For many Euro-enthusiasts - both among politicians and experts from countless think tanks - coming up with new ideas and paragraphs became a way of life. Everyone was so busy "reforming the architecture of the EU", and so blinded by "the success of the euro," that nobody noticed the malicious tumour, growing steadily inside the organism and eating the EU piece by piece.

The Lisbon Treaty was an empty shell. It could not bear the burden of the crisis, did not become the much coveted tool which would allow Europe to exert more influence in the world. The very politicians who were anointed to embody Europe's grandeur humbly assumed the roles of puppets. Herman Van Rompuy's authority is apparently limited to setting the starting hours of press conferences after each summit. Baroness Ashton has significantly less to say in international affairs than the foreign minister of Qatar.

 

The gin's out

 

In December last year eurocrats were telling us: Europe needs a political impulse and political courage. They were trying to persuade the public opinion that the only viable solution to the debt crisis lay in the realm of politics. That it was the politicians who had to undertake some audacious measures to prevent Europe from sliding into the abyss. That it was the politicians who had the mandate to carry out the inevitable reforms and lead the peoples of Europe out of the financial quagmire.

However, shortly afterwards they realized the solution couldn't possibly be only political. You can hardly imagine, how tough it is for a politician to swallow such a bitter pill. Solution was not for them to apply.

And if you are no longer regarded as the ultimate saviour  of the universe, you are, well, redundant. Superflous. I am referring of course to all those hard-working mussles-eating gentlemen in Brussels, who should feel threatened now.

Europeans might now come to a revealing and highly perilous conclusion: if we have Mario Draghi, what do we need Mr Barroso for? If it's Draghi, Weidmann and Angela Merkel, who will be eventually pulling all the important strings in the Eurozone, why are we still listening to Van Rompuy's nauseating gibberish?

Of course politicians will be still exerting their influence. But the balance of power is now slightly shifting towards the ECB - and it's pretty tricky phenomen for EU politicians. They are still important, but they are not indispensable any more.

Moreover, the coordination of their struggle against the financial crisis have been so far quite poor. Coordination between EU states basically amounts to a coordinated response to the woes of Spain, Portugal and Greece: further cuts in expenditure, imposed on the governments in Athens, Madrid and Lisbon, are splendidly coordinated between Angela Merkel and her finance minister, Mr Schäuble, and then conveyed to the rest of the pack.

Now, if you are smart enough, like Mr Rajoy, the Spanish prime minister, or extremely charming, like his Italian counterpart Mr Monti, you can obtain some concessions, slow down the pace of reforms, you can even raise your deficit target a little bit.

But in any such case the coordination is just a mirage - everybody can see it, but everyone knows it is not real.

When it comes to structural changes in the Europen fiscal architecture, coordination is almost non-existent. Whether it's the finacial transactions tax or the supervision of the banking sector, or the EU budgetary perspective, coordination turns into a very nasty infighting, in which no prisoners are taken.

Are the political interests of the individual EU member states prevailing over the economic dimension of the fight against the crisis?

Yes and not. The much touted coordination is just a mask. Behind it there is a merciless battle among the member states, a tug-of-war, which is basically a struggle aimed at retaining control over the national financial and banking systems.

Therefore the debate about the banking supervision is going to be fundamental for the future of Europe. Paradoxically, the very member-state who initiated it, namely Germany, seems to be having second thoughts. Mr Schäuble doesn't want the new watchdog to be in place from January 1st 2013 and he doesn't want all European banks to be supervised, just the biggest.

I suppose it has yet to dawn on the Germans how dangerous and unpredictable is the gin they have just let out of the bottle.

 

 

 

 

 

 

 

 

Europe is not able to break the vicious circle of helplessness. The European Commission, the ECB and the German government would like to see the real effects of changes in the South before they decide on their further funding. However, the effects will not become apparent until a few years from now, while Spain, Italy, Portugal and Greece need the money right now. The promise of purchasing their bonds by the ECB is a good sign. The question is whether this promise will materialize before the euro disappears for good.

In the future Spain, Portugal and Italy, thanks to today's reforms, will have healthier public finances - as happened Germany, when Gerhard Schröder's "Agenda 2010" was successfully implemented. But the peripheral economies may in the meantime fall far behind other countries in terms of living standards and competitiveness.

 

Facing a political void

 

Some social scientists point out that in the long run such a situation could lead to a repeat of the 50s and 60s of the last century, when hundreds of thousands of Italians, Spaniards and Greeks migrated to Germany, France and Switzerland, in search of jobs and stability. In the last five years alone 350,000 people have left Portugal, heading for such remote places as Angola, its former colony.

It is hard to predict what impact today's austerity will have on health care and education in Spain, what fruits higher taxes will yield to Ireland or Greece. And what its long-term consequences will be for their respective political systems.

It is quite natural for the people struck by the economic crisis to seek shelter in the state. And it is natural for the government to widely open its arms and tell the people: yes, we'll take care of you.

Most Europeans are in all likelihood convinced it was the banks that sparked the crisis, granting loans indiscriminately to all clients, no matter their financial standing. Revealingly blame is rarely put on governments which took loans indiscriminately from all banks.

That's why it's much easier to persuade the citizens that increasing state intervention is not a violation of the free market principles because capitalism not always works. And what is the epitome of savage capitalism if not a savage bank?

But bashing banks is not enough. The government is also in the crosshairs, because, paradoxically, instead of taking care of the ordinary people, it is now taking money away from them. When and if the crisis is officially over, both state-controlled economy and free market economy will be discredited. We will face a dangerous void. And politicians will have to cope with quite a headache.