Economic crisis: Club Euro, an erratic door policy
15 March 2010
Long-standing members against new ones, irresponsible states against virtuous states, tolerance of the EU against excessive demands: the crisis over the single currency has revealed a new faultline within the union, according to the Bulgarian political scientist Ivan Krastev.
Let’s face it, if Greece were a Central European country, the Greek crisis would never have happened. First, Germany and France were never going to allow a country known for its poor economic performance, bad political manners and genius for creative accounting to join the single currency union. Secondly, if by luck or negligence the Greece of Central Europe had ended up in the euro zone, Brussels was going to thoroughly scrutinize Athens’s finances. But Greece is not a Central European country. While the European Commission was crusading against corruption in the Yalta Club countries, the Club Med countries enjoyed the privilege of being treated as good Europeans without actually being good Europeans.
Imagine that Bulgaria’s or Romanian’s prime minister controls 80 percent of the national media and is in the habit of spending his holidays entertaining prostitutes. Or imagine that the Hungarian prime minister – contrary to all advice coming from Brussels – declares that he will not freeze public sector wages, despite the severe economic crisis. It is difficult even to imagine the outcry that would follow. But what outrages Brussels in Sofia or Budapest simply worries it in Rome or Madrid. Many in Europe dislike Italian prime minister Silvio Berlusconi’s version of freedom of the press, but German and French governments prefer to be silent on the issue. Many fear the economic policies of the current Spanish government, but nobody dares to criticize them. Brussels is an accomplice in the current Greek tragedy. Its role in it can be compared to the role played by Arthur Anderson’s auditors in the Enron scandal in the US.
Only Poland did not slide into recession
The Greek crisis revealed the disturbing reality behind EU’s rhetoric of solidarity. The EU talks solidarity but European nations do not subscribe to it. It is indicative that more than 70 percent of Germans want Greece out of the euro zone, and that a member of the German Parliament advised Athens that selling some of its islands would be the best way to deal with the crisis, while Greek media are busy running stories about the Nazi’s war time occupation of Greece, and insisting that Germany owes Greece war time reparations. Contrary to the expectations of some politicians and commentators, the economic crisis did not lead to the resurgence of the spirit of solidarity in Europe. On the contrary, the crisis led to re-nationalization inspired by the fears and the anger of the European publics. And it is South Europe, not Central Europe that has turned out to be the economic danger zone.
While a year ago many feared that Central Europe was too corrupt and politically unstable, and its economies too liberal (too Anglo-Saxon) to survive the crisis, now it has become clear that it was actually South Europe that was too sleazy and unreformed, and too little restrained by Brussels, to respond effectively to the challenges brought about by the crisis. What distinguishes Hungary and Greece today is not the scale of the problems they face, but the political will on the side of their governments to pay the price for getting out of the mess. At the moment there are more EU countries that are not members of the euro zone but fulfill the Maastricht criteria than there are members of the euro zone doing that. Poland is the only EU economy that did not slide into recession. In the words of the Lithuanian prime minister, “as long as the country is not a member of the single currency, the Maastricht criteria are applied very strictly, but once you are in, you can do almost what you want.”
EU more divided than at beginning of Iraq war
Central Europe can pride itself for passing (so far) the crisis test, and proving that it is the most change-friendly camp in the Union. But at the same time Central Europe has much to lose if the EU takes the wrong lesson or follows the wrong instinct in the aftermath of the Greek debt crisis. Economists are in broad agreement that it does not make much sense to be outside of the euro zone when the euro is doing well, but it is even worse to be out of the euro zone when the euro is doing badly. And now countries like Bulgaria and Estonia fear that they will be “rewarded” for their decision to keep the Maastricht criteria in the time of crisis with some more years in the euro zone waiting room. The fear is that, shocked by the vulnerability of the “PIIGS” (Portugal, Ireland, Italy, Greece and Spain), Germans and French can concentrate their effort on consolidating the euro zone before enlarging it.
The economic crisis leaves the EU more divided than it has been since the beginning of the war in Iraq. Fortunately this time it is not about “old Europe” versus “new Europe,” it is about the euro zone versus the non-euro zone members. Unfortunately, if you look at the map, the euro zone EU overlaps with “old Europe,” and the non-euro zone countries includes most of the Yalta Club countries.