looking at the future Europe behind a veil of ignorance

Proposals to split the euro into northern and southern currency or push Greece out of the eurozone, as for example supported by Frits Bolkestein in recent interviews seem to assume implicitly that the Netherlands would always be among the richer and stronger economies of the EU. With respect to any of the EU’s member states, the assumption that it can predict what its place would be in a future divided Europe, is misguided. Polish Foreign Minister Radek Sikorski reminds us of this in a speech delivered in Berlin last Monday and reprinted in the Financial Times and in Tuesday’s NRC. His examples of economic growth amidst crisis in the EU are Poland (15,4 per cent over the last four years and no recession) and Slovakia. His reminder to Germany that it also has not always kept the rules of the Growth and Stability Pact may have been unwelcome, but it illustrates the same fact from recent history: no EU member state is immune against recession or structural problems. On the other side of this coin, not only Poland and Slovakia but other new(er) member states such as Lithuania are quietly progressing with reform and keeping their budgets healthy. In his opinion piece in the EU observer, Andreas Aslund praises Lithuania for carrying budgetary reform during the crisis without the help of the IMF, implementing a vigorous fiscal adjustment and achieving 6.6 per cent growth annualized growth rate in 2011 after a dramatic slump in GDP in 2009. Most remarkably, the Kubilius government has managed to continue Lithuania’s much praised programme of public administration reforms, initiating this year a functional review system for the administration. Such measures attest not only to prudent fiscal policy but also to a realisation that a capable and modern administration is not a luxury but necessary investment for a country that takes a long term view how to emerge from the crisis. Even Bulgaria, a member state for which no Dutch politician has a good word to say, has been praised by EU Budget Commissioner Lewandowski  in October this year for being on track observing financial discipline. “Bulgaria is improving in budget terms. It is within the debt limit and is decreasing the budget deficit. The economic forecast for Bulgaria is quite decent.” Lewandowski said further.

The point of these examples is not that Slovakia, Bulgaria, Lithuania or even Poland have become as rich as the Netherlands or will be any time soon. Their citizens still suffer from the crisis and from poverty and unemployment. These member states, however, have made serious and credible efforts to keep their budgets balanced despite the crisis, a fact which is completely overlooked in the Netherlands. These newer member states should receive at least some credit for not only not causing the current crisis in Europe, but for persevering in taking fiscal discipline seriously despite the harsh effects on their citizens, on the socially weak and pensioners. Slovak doctors went on strike today because of their low salaries, Bulgarian railway workers have been told by the minister of finance that there is no money to answer their demands.

The inability to keep a balanced budget is not a mysterious cultural trait then,  as claimed by Frist Bolkestein in his recent interview in AD newspaper,  something typical of the Southern EU member states, while only Northern EU member states are careful and prudent in their public spending.

No, the budgetary discipline of Poland, Slovakia, Lithuania and Bulgaria today it is a question of political will, lessons learned from previous crises, commitment to the eurozone and oversight by the European Commission and the IMF. All of this perfectly applicable to Greece or other EU member states faced with similar problems.

The even more important lesson seems to me to be that all of the EU’s member states should decide the future of the eurozone as if behind a veil of ignorance about their own future place in Europe. As Sikorski aptly commented, “To those who would like to divide Europe, I say: how about a natural division into growth-Europe and non-growth Europe? But be forewarned. Their shapes would not conform to stereotypes”.

easyJet Europe

In an interview for SPIEGEL Timothy Garton Ash coins the wonderful expression ‘easyJet Europe’ to refer to the “European freedom we experience every day”:

The fact that a young man in Greece or Estonia can get on a plane in the morning and fly to Paris or Rome, without border controls and without exchanging money, and perhaps find a wife or friends there, decide to live or find a job there — this is progress that no one should put at risk…
… Europe’s biggest problem is its success, which is taken for granted even by young citizens of the Baltic countries, which didn’t even exist on the map of Europe 21 years ago… But if the “easyJet Europe” of freedom is threatened, we will see a mobilization of young Europeans. I’m certain of that. 

I’m certain of that, too.

Education and Integration: A Dutch Party Wants Fewer Foreign Students

The Dutch Party for Freedom (PVV) wants fewer foreign students to come to study in the Netherlands. According to Eric Lucassen (PVV) foreign students take the place of Dutch students. The Germans are singled out as the biggest problem. As a former foreign student in the Netherlands and a current teacher at a Dutch institution which prides itself in being a leading international research university my personal position on this issue should be self-evident. However, the problem with foreign students boils down to be the lack of student housing according to the PVV, and I can actually agree that (the lack of) student housing is a problem in some places. Still, the housing shortage is just an unintended side-effect of an otherwise successful edicational policy and any country should be happy to attract students from all over the world. The housing shortage should be addressed but not at the expense of building fences around Dutch universities.

Europese Commissie moet Eurolanden saneren, niet het IMF!

Velen menen dat het IMF een belangrijke rol moet hebben bij het oplossen van de eurocrisis. Zoals Roel Janssen recent in het NRC betoogde. De ophemeling van het IMF komt voort uit argwaan tegen de Europese regeringsleiders die na maandenlang dralen nog steeds geen duidelijke maatregelen hebben genomen om de crisis rondom onze munt voor eens en altijd op te lossen.

Kern van het probleem is dat het huidige bestuurlijke arrangement van de eurozone heeft gefaald. De regeringsleiders zijn, zoals pijnlijk duidelijk is geworden, niet in staat om de problemen aan te pakken. Binnen de boezem van de Europese Raad is consensusvorming nog steeds de norm. Maar struikelend over nationale tegenzin komt men niet veel verder. Daarnaast hebben de lidstaten al jaren geleden de ‘supranationale’ scheidsrechter buiten de deur gezet. Toen in 2003 de nationale begrotingen van Duitsland en Frankrijk uit de pas begonnen te lopen, heeft men meteen het Europese sanctiemechanisme buiten werking gesteld. De Europese Commissie, die toen veel zorgen over de begrotingsdiscipline in die landen had, werd stevig teruggeroepen. Daarmee was de kiem van een veel grotere probleem gelegd.

Opnieuw staan Duitsland en Frankrijk te tobben over de vraag hoe we verder moeten gaan. Met de maatregelen om het economische bestuur in de Unie te verbeteren, worden de eerdere normen weer op het schild gehesen. Met steun van Nederland vindt men dat de begrotingsdiscipline in ere moet worden hersteld. Ook de Commissie als scheidrechter komt weer in beeld. De vraag is wie de sanering van de probleemgevallen moet aanpakken en hoe we verder gaan. Op dat punt lopen de meningen uiteen.

Sommigen wijzen naar het IMF als betrouwbare curator met jarenlange ervaring. In ruil voor financiële steun moet een land het eigen huishoudboekje saneren. Dat zijn pijnlijke keuzes waarvoor menig nationaal politicus terugschrikt. In de klassieke vorm is dat geen probleem: omdat het probleemland de gevolgen van de eigen keuze draagt, kan men zelf een tempo bepalen. Voor de Unie ligt dat anders: omdat de eurolanden zich monetair aan elkaar verbonden hebben, zal twijfel over de kredietwaardigheid van de één invloed hebben op het vertrouwen in de euro en daarmee op de andere landen. Die samenhang maakt dat het saneringsproces een zaak blijft van de Unie. Het ligt voor de hand dat de Europese Commissie als belangrijkste uitvoeringsorganisatie een belangrijke rol in dat proces heeft. Bovendien kan de Commissie dankbaar gebruik maken van de eerdere ervaringen met ingrijpende, maar succesvolle, hervormingen van landen in Midden en Oost-Europa.

In de tweede plaats hebben de lidstaten van de Unie, waaronder de eurolanden, veel werk gemaakt om de gemeenschappelijke markt te vormen, waaronder het wegnemen van belemmeringen tegen oneerlijke concurrentie. Dat beleid heeft betrekking op een scala van onderwerpen, waaronder sociaal beleid en milieu. Dit beleid moet een randvoorwaarde zijn voor de saneringen. Dat vraagt gevoel voor de doelstellingen van de Unie. Ook moet worden voorkomen dat het saneringsproces de uitvoering van het bestaande Europese beleid aantast, want anders wordt het proces van integratie nog verder ondergraven. Dat is dan vooral in het nadeel van de financieel nog gezonde landen. Om dat te bewaken is opnieuw de rol van de Commissie essentieel.

In de derde plaats biedt het binnenrollen van het IMF geen oplossing voor het falen van het Europese bestuur. Het is alsof de gemeente Den Haag de Austin County Sheriff vraagt om bij ons de wegenverkeerswet te komen naleven. Sterker nog, die ‘oplossing’ verhult het echte probleem. Willen we doorgaan met een gemeenschappelijke munt, dan moet het bestuur van de eurozone worden gewijzigd. Minder nationale veto’s en minder handjeklap over ieders financiële beleid. Meer bevoegdheden voor Brussel waarbij het essentieel is dat ook het Europese Parlement bij de kaderstelling wordt betrokken. Ook moeten de gemaakte afspraken kunnen worden afgedwongen door controle op de nationale overheidsfinanciën en het opleggen van sancties op het moment dat het verkeerd dreigt te gaan. In deze structuur moet de Commissie, naast de ECB, een centrale positie als uitvoerder hebben. Indien het toch mis gaat, moet de Unie lidstaten tijdelijke een speciale status kunnen geven, zoals wij dat bijvoorbeeld in Nederland kennen voor lagere overheden die financieel aan de grond zitten. In dat geval volgt gedwongen sanering onder leiding van de Commissie met noodhulp als beloning.

Om deze drie redenen heeft de Unie een duidelijk belang om zelf orde op zaken te stellen. In dat proces moet niet het IMF maar de Commissie de mogelijkheid krijgen het voortouw te nemen. Gebeurt dat niet, dan wordt opnieuw de kern van het probleem vermeden, met alle gevolgen van dien. Dan kan alsnog de County Sheriff om hulp worden gevraagd.

The IMF, the EU, China, Ukraine, Poland and why culture may not determine democratic success

Just learned from EurActiv that the Chinese Central Bank may support Ukraine in funding its state debt, while Ukraine may be suspending talks with the IMF after IMF report of slowed down reforms. The same Euractiv piece links the outcome of the next round of talks between the Ukrainian government and Russia on cheaper Russian gas for the Ukraine with the continuation of IMF talks.

The story’s immediate impact is to make one wonder about the replacement of the EU’s, imperfect but useful conditionality towards democratizing states, by other kinds of relationships and conditions with China or Russia. It would appear to suggest that the EU’s economic crisis and diminishing importance in geopolitical terms due to its chronic inability to harness the member states’ economic clout and political experience are finally taking its toll. The EU just seems not to matter any more as much as it used to, when there are others, like China, who would provide financial support without setting conditions (but is there such a thing as free lunch?). We shall have to follow this development more closely, but the lesson for the EU is unambiguous – while we bicker amongst ourselves, others are engaging in diplomacy which may achieve their long-term economic interests better than the non-diplomacy of the EU or the short-sighted, short-term focus on own interests adopted  by some member states.

It is not all doom and gloom, however. The EU can take credit for some of recent success stories in democratization and economic development, such as Poland. Here, I cannot say it any better than Timothy Garton Ash in his Guardian comment, As Poland Shines, Ukraine Sinks. I particularly like his argument that democratic institutions can trump culture, with the inspiring quote from Daniel Patrick Moynihan:

“As the American politician and thinker Daniel Patrick Moynihan wonderfully observed: “The central conservative truth is that it is culture, not politics, that determines the success of a society. The central liberal truth is that politics can change a culture and save it from itself.” Good politics, good constitutions and good courts can, given time and luck, change the course of rivers. Degraded, drunken, corrupt societies – such as Poland might have seemed to the casual visitor 40 years ago – can become modern, open, democratic ones. And the liberal wager is that Orthodox, Islamic and Asian societies can transform themselves too.”

 

Eurocrisis takes political tolls: Bye bye Papandreou and Berlusconi

A guest post by Amy Verdun. With our thanks for being the first colleague to join us in this blog’s discussions. 

In the past days the euro debt crisis has cost the political lives of Greek Prime Minister George Papandreou and Italian Prime Minister Silvio Berlusconi. What is going on here? It seems that the management of the euro area has now become serious stuff. Political leaders are required to ensure they are able to meet the requirements of being in Economic and Monetary Union, in particular the euro area, whilst maintaining domestic political credibility.

 What may look on the surface as two similar situations in reality represents quite different situations. The Greek Prime Minister spent the last months of his political life as prime minister juggling between the needs of Europe and the needs of his domestic political constituency. All this time he sought to strike the right balance. He came home with a financial package agreed to by the European Union leaders in the early hours of 27 October to ensure he would be able to attract enough funding to refinance his debt. As a last surprise action he called for a referendum. It was a daring step, for one who held democratic ideals in high regard, but it proved to be a bridge too far. He had failed to inform his European counterparts, who were taken by surprise, and not amused. The financial markets reacted the same way. The result: tremendous financial and political turmoil and talk of Greece needing to leave the euro area, perhaps even the European Union (EU). Papandreou capitalized on the dire situation to obtain approval from the opposition parties to support the reform package. He survived a motion of no confidence but still needed to make room for a coalition government under a different leader. Meanwhile Lucas Papademos, formerly with the Greek and European central banks, has now stepped up to the plate and has been sworn in as the new Prime Minister. It is noteworthy that the choice has been made for a technocrat (an economist) with tons of experience in the European Central Bank, a prominent European institution, but with no political experience. Yet, it probably is the right step at the current junction. The country needs stability and good communication with European partners. The hope is he can communicate equally well with the coalition partners and convince the Greek public of the difficult steps that need to be taken.

 The situation of Berlusconi may seem similar: Political leader makes room because of euro debt crisis and market speculation. In my opinion the situation is quite different. For starters, Berlusconi, contrary to Papandreou, failed to obtain a motion of confidence in the Italian parliament on Tuesday, although he did manage, at the eleventh hour, to push through reform packages. Contrary to Papandreou, Berlusconi has not been trying hard to make the necessary reforms in Italy, to address the urgency of the situation, or to liaise with Europe or with opposition parties. His goal for many years seems to have been to stay in power, to stay out of jail, not having spent too much attention to improving the lives of ordinary Italians. Probably his most remarkable achievement has been to stay in power so long. Italy was long known as a country that had as many governments as years since the Second World War. Berlusconi served off and on since 1994.

 What is of course similar to the Greek situation is that the person replacing Berlusconi as Prime Minister will be Mario Monti – again a technocrat, economist, with strong European credentials. Mr Monti is a former EU Commissioner for Competition Policy. He too has a clear understanding of how European institutions work. At the present time it is unclear what the new government will look like whether it will be made up of more technocrats or a mix of technocrats and elected officials.

 This step in European economic history is an important one, not only for the two countries involved. The rest of the euro area will be keeping a close eye on the new leaders of Greece and Italy in the hope that under their rule Europe can make another step in the direction of moving on toward more integration rather than disintegration. Let’s hope the technocrats will do a good job balancing their jobs as prudent economists and clever domestic and European political leaders.

 Amy Verdun

new forms of governance are growing like mushrooms

One of the striking aspects of the current crisis in the EU, which, as we all know, shows no sign of abating, is that trying to follow who is participating in decision making on it is quite problematic. Once we get beyond the EU leaders who are, obviously, in the spotlight, we are left with vague labels for very important political arrangements that may well be the future institutions of the EU. We hear proposals that the IMF should participate in enforcing and monitoring the new eurozone rules on national budgets for example. Apart from my sincere amazement that Europeans (and at least one vocal advocate in the Dutch press in the last week) are ready to outsource control of national budgets to an (otherwise perfectly capable) organization whose participation and voting rules are under reconstructions and whose strongest members in the future may not be Europeans, I am also left wondering whether the new decision making constructions are going to be transparent at all. The NRC of 8 November, for example, informs us that the ministers of finance are being sidelined in crisis decision making and the European Council – the heads of state and government are getting more powerful again. And then, what about the Euro Working Group? The Financial Times mentions them as ‘finance ministry technocrats’ . The NRC’s correspondent Caroline de Gruyter tells us that they are high level civil servants from the eurozone countries and Commission officials, led by the Italian Vittorio Grilli. But if we take on board her suggestion that they are the only ones who really understand what is going on in the financial markets, it would be nice to know who represents the member states there, beyond the little bits and pieces of information that we get now. After all, Europeans spent decades working out the institutional structure of the European Commission and the number of Commissioners, in treaties, debates, the constitutional convention, not to mention countless textbooks and articles. Presumably because we are concerned about nameless bureaucrats and technocrats taking political decisions on our behalf. With all respect for the difficult decisions the members of the EWG may be taking, it is still important at least to know who they are, if they will be the new technocrats making – well, preparing –  political decisions on our behalf.

On a more general note, the new forms – and fora – of governance which are emerging during the crisis seem to replace many of the functions which the European Commission has been fulfilling, successfully, during decades of European integration. The advantages of the Commission have been that it was created to monitor bargains which the member states have found difficult  to reach and keep. This appears to be exactly what we are looking for in the new arrangements – a watchdog. The Commission is also a body that can be subject to some democratic scrutiny through the European Parliament, unlike many of the Council working groups. And it represents all the member states, including small ones – something that cannot be said about some of the new intergovernmental discussion and decision making configurations led by the largest member states. The reason why I am returning to these well known textbook examples of what the Commission does is that  mistrust in the EU, for example in the Netherlands, has led to a kind of willful ignorance of its institutions that encourages the use of ad hoc arrangements which are less known and transparent than what we already have.

Dutch Labour says Greek referendum would be a deal breaker or democracy a la carte

European integration a la carte, where members would pick and choose which European Union policies they participate in would be the end of the EU, so goes a familiar argument in European integration studies. Even though we do have some member states opting out of some policies (most notably Britain, Sweden and Denmark from EMU), this has been considered by many a construction that, if applied across the board, would unravel the fabric of the EU and undermine the members’ commitment to comply with everything they have commonly agreed to, or , in EU speak, to apply the acquis communautaire.

This of course is valid for any system of interrelated rules where it is important that the bulk of these rules is applied equally. Democracy would be a good example. Treaty after treaty we have been trying to make the EU more democratic and to install some of the principles of the democracy at the supranational level. However, after years of talking about how to make the EU more democratic and countless pages written to explain the democratic deficit, to me it boils down to the crucial possibility to choose between governments (‘throwing the bastards out’) and policies which is still, at the EU level, not present. Now the Greek Prime Minister is apparently contemplating asking the citizens to approve some of the most far reaching reforms in Greek history – as well as, of course, the manner in which they will pay their debt. It seems as if it is the latter which has upset (‘shocked’ was the word used by many newspaper headlines) leaders in Europe. PvDA prominent Plasterk has even declared that his party will not support the vote on the package in Parliament if the Greeks hold a referendum. This is of course a demonstration of the trilemma between democracy, financial globalisation and national sovereignty which we wrote about a few posts back (see also here). As Henry Farrell argues in Crooked Timber, instead of a disaster, it may be the most positive development for the future of democracy in Europe. Yes, it would lead to new uncertainty. But politicians in Europe have procrastinated long enough, also on democratic grounds. They may do well to remember that they may like their electorate to have a voice if it ever comes to reforms as far reaching as what Greece needs to do.

I do not entirely share Farrell’s optimism that a much better package can be devised for the Greek reforms. My experience from Bulgaria suggests that whatever support is provided for economic growth, there is a bitter pill of reforms  to be swallowed before things start getting better. In this sense, I do not think it is the Greek public’s democratic right to refuse to pay their country’s debt or to exercise some kind of invented non-existent option where someone invests a lot of money in Greece without asking for changes and austerity in return. The actual realistic choices that the Greeks have are few. However, it is only right that the citizens who will bear this burden inform themselves of the alternatives and have the chance to have their say. It could be that then they will also feel some joint responsibility ( as opposed to blaming the EU, Germany or their own government for having to pay the debt) not to oppose  the next set of reforms. Arguments why we, in the rest of Europe, should be against this, can only be made from the perspective of the markets and represent a confirmation of the trilemma mentioned earlier. But leaving the markets aside for a moment, blaming the Greeks for taking the time to deal with the momentous decisions ahead democratically appears to me hypocritical (what about Dutch voters in such a situation?) and against the spirit of trying to transplant some democratic principles to supranational decision making. If we are serious about making the EU more democratic, then we must at some point give citizens choices about EU decisions which really matter to them.