3 February 2012
This time around, there was no question of a last-ditch summit. Nonetheless, the 30 January European Council meeting will have far reaching consequences. Twenty five member states – in other words the EU without the UK and the Czech Republic, which refused to be involved – adopted the fiscal and budgetary pact that Germany, seconded by France, wanted to impose.
Once twelve national parliaments have approved the text, which is slated to be signed in March, participating countries will no longer have the right to declare a spending deficit of more than 0.5% of GDP, and will be subject to automatic sanctions if this figure exceeds a ceiling of 3%. So from now on the economic policy of virtually all of Europe’s member states will be confined to a strict and immutable European framework.
This should have been a logical consequence of the Maastricht Treaty and the introduction of the single currency, but it was a challenge that the European leaders of the time were reluctant to face. Under pressure from the crisis, today’s leaders have moved a step further towards a federal Europe, or – from another perspective – they have abandoned even more national sovereignty.
The new order will thus be characterised by Merkelian discipline, but that does not mean an automatic end to the eurozone crisis. At a time when Athens, its private creditors and the troika are continuing to blame each other for the persistence of the threat of Greek default, and demanding additional efforts from each other to resolve it, the discovery of a new €15bn black hole in Greece’s books is not likely to facilitate discussions. Nor is the unofficial German plan to appoint a budget commissar for Greece.
And this situation may be further compounded by the ratings agencies, and in particular Standard & Poor’s, which will probably not be prepared to politely wait for the ratification of the pact before announcing further eurozone downgrades.
Finally, the manner in which the pact was adopted has left a sour atmosphere, which could herald further difficulties in the future. No one can be happy to see London and Prague shy away from the proposal, even if internal politics played an important part in those decisions. A Europe without the British would certainly be a much weaker world power, and Central Europe’s need for a solid anchor in Europe has never been greater: Hungary is increasingly in breach of community standards, while Slovakia is being rocked by a corruption scandal which may have unpredictable consequences. Meanwhile, Romania is perhaps only beginning to revolt against austerity.
In Ireland, arrangements to ensure that the pact can be adopted without a referendum could backfire and undermine the bailout plan established in 2010. Finally, with regard to Greece, everyone – with the apparent exception of Angela Merkel and the troika negotiators – is aware that, regardless of the inadequacy of national authorities in the country, the population is close to breaking point.
In the middle of all of this, Germany is continuing to design the Europe it wants to see, especially now that it has been “freed” from the constraint of partnership with a domestically weak Nicolas Sarkozy, while remaining reluctant to assume the new responsibilities thrust upon it by the crisis.
The consequences of this state of affairs are not only economic, but also cultural. Angry and impulsive outbursts have become increasingly common, and allusions to Germany’s Nazi and Prussian past are more and more prevalent in Europe. More insidious than economic and social ills, the emergence of this trend and the renewed rise of nationalism are cause for serious concern of a kind that cannot be allayed by a budgetary pact.