Debt crisis: Only a new Marshall Plan can do it
6 July 2011
To emerge from the enduring debt crisis, Europe needs a programme as ambitious as the post-war US sponsored plan. But this time, it has to find the resources internally and foster a continent-wide redistribution.
In 1947 the Americans kick-started economic recovery in Europe through the Marshall plan. Today, there are calls for Europeans to draw up a Marshall plan of their own. The European commission president, José Manuel Barroso, and the Polish prime minister, Donald Tusk – the incoming president of the European council of ministers – warn that governments in Athens and elsewhere will be unable to sell further austerity measures to voters without some prospect of growth and renewal. Last week's vote bought everyone time, but little more. Is a new Marshall plan feasible? Or just wishful thinking? Casting our eyes back briefly to Europe's plight in the 1940s helps put the issue in proportion and reveals the real obstacles ahead.
President Harry Truman and his secretary of state, George Marshall, took for granted that crisis was above all a challenge for government. Marshall had been Roosevelt's chief military planner in the war, and was hailed by Churchill as the "organiser of victory". He was predisposed to take bold action to win the fight to restore Europe to economic health. Pushed into action by civil war in Greece in 1947, he launched America into an unprecedented peacetime commitment to save the continent.
Against Europe's problems then ours pale into insignificance. In occupied Germany, the continent's economic dynamo, food intake hovered above starvation levels, and national income and industrial output were barely a third of what they had been a decade earlier. Roughly $13bn was paid out in the European Recovery Program (the Marshall plan's official name) and this proved indispensable in laying the foundations for the "miracle" of sustained economic growth in the decade that followed. This $13bn amounted to some 5% of America's national income in 1948. (The equivalent sum for the EU today would be in excess of $800bn.) The US wrote off prewar French debts; everyone wrote down Berlin's a few years later, even though they had just struggled through a war started by the Germans.
Marshall understood that the real value of the kind of decisive action he initiated was not quantitative but psychological. Only the confidence provided by powerful governmental leadership looking beyond the moment would reassure the markets. He was right; when the economic miracle transformed Europe, it was thanks to a happy combination of government commitment to growth and private investment.
Now compare the challenge Europe's leaders face today. GDP has barely dropped in the EU since 2008. The fundamental debt problem emanates from three small countries – Greece, Portugal and Ireland – whose total contribution to European Union GDP is less than 5%. The German economy is booming. If the stakes – the very future of the EU – are high, the sums required are not. Read full article in the Guardian...