- Development & Aid
- Economy & Trade
- Human Rights
- Global Governance
- Civil Society
Saturday, August 8, 2020
This column is available for visitors to the IPS website only for reading. Reproduction in print or electronic media is prohibited. Media interested in republishing may contact email@example.com.
ROME, May 24 2010 (IPS) - It was sixty years ago this May that French foreign minister Robert Schumann made his appeal for a United Europe that would prevent the wars and traumas that had haunted European history. It would be hard to imagine a less auspicious time for celebration.
Since the focus of the crisis of the dream of Schumann and his advisor Jean Monnet is today’s Greece, it would be appropriate to use the facade of a Greek temple, with its three rows of columns, to examine this disaster in the architecture of Europe.
The first row of columns was the sad spectacle of 26 leaders unable to act forcefully and together for almost four months as the price of a rescue rose higher and higher. Responsibility for the delay apparently lies with German chancellor Angela Merkel who sought to postpone measures that were sure to be unpopular until after the elections in Renania-Westfalia. The only leader who had the strength to pressure her was President Barack Obama, who is not exactly European. Merkel paid dearly for the illusion that she could lie to her electorate and lost the majority in the upper house of parliament.
As a result of this process, not only is Germany weaker, with a populace that does not want to continue to pay for the costs of Europe, but Britain has grown more anti-European. This is not good news for the leadership of Europe, which is urgently needed.
The second row of columns is the European politicians that have still not told the truth to their electorate for reasons tied to their own survival. The truth is that all but the northern countries are incapable of maintaining the way of life they have provided their citizens thus far. Italy is notorious, with a public debt 118 percent of its gross national product (GNP), not much different from that of Greece. But the European average public debt is 73.6 percent of GNP, and that of virtuous Germany is 73.2. If deficit spending for social programmes is added to this figure, in 25 years the Europe’s average debt will be 95 percent of GNP. And this doesn’t take into account the indebtedness of European families and businesses. In short, income cannot cover costs. Who will make the sacrifices? The young Europeans who for the most part have precarious employment and earn about 1000 euros per month?
The third row of columns which completes the structure of the collapse of the European political class, is the ineptness in the search for solutions to the gigantic financial crisis of 2007, which swallowed up more than two trillion euros. This crisis left 50 million unemployed and 100 million new poor. We all know why: the deregulation initiated by Ronald Reagan and continued by Bill Clinton paved the way for developments that had been previously unthinkable: the growth of banks into entities that are “too big to fail”; the removal of all controls on the financial system, which transformed the home mortgage market into a field for commercial speculation. For many years central banks made loans at very low interest rates, allowing speculators to run high-risk operations and make giant profits; and among other things, bank executives made absurd amounts of money, completely out of proportion to the system of production.
Today the financial system is far more powerful than the real economy, and there are only timid efforts to introduce certain controls, without attacking the system. Even the astounding case of the ratings agencies, where a 30-year-old functionary without experience or special qualifications was allowed to make judgements that overturned the market. Moreover, it is common knowledge that the agencies were way off in their evaluations of the American banks that went bust, and that there is a clear conflict of interest because not only do they receive money from these agencies but they also have entered directly into financial speculation.
All we can do now is hope for the best, that the West will succeed in balancing income and spending (which will require serious sacrifices) and that the official optimism is valid. But after a glance at the projections of what countries will have to do to return to 2007 levels, any optimism wilts.
For example, the United States will have to run a budget surplus of 4 percent for 10 years to move from its current debt level of 10 percent to the 69 percent level of 2007. To put this in context, the US took 17 years to reduce its public debt from 108 percent at the end of World War II back to the 1941 level of 42 percent. Europe will have to grow at 2.7 percent until 2023 to return to 2007 debt levels. The UK would need ten years of 5 percent surplus, 7 percent for Japan. In the decade to come, the emerging countries will without a doubt continue to grow thanks to their untapped internal markets and because they did not take part in the great financial orgy that blew up especially for the players from the North. The reason that Obama pressured European leaders to put their houses in order is not only that he is a more responsible politician but also because the American banks have a 3.6 billion dollar exposure to European banks (1 billion in France and Germans and 200 million in Spain) and they will not be unharmed by a crisis in Europe.
Meanwhile, China will surpass Japan next year as the world’s second largest economic power. And in ten years, Brazil, Indonesia, India, and South Africa will have overtaken Belgium, Holland, and other European countries with the exception of Germany, France, and the UK. Europe has yet another problem, its aging population: according to the United Nations, at least 20 million more immigrants are needed for Europe remain competitive. Where are the politicians who will tell this to a European population that grows more xenophobic and insecure every day? Whosoever does so will be voted out, and there are few suicidal types in politics. (END/COPYRIGHT IPS)
(*) Roberto Savio is founder and president emeritus of the Inter Press Service (IPS) news agency.
IPS is an international communication institution with a global news agency at its core,
raising the voices of the South
and civil society on issues of development, globalisation, human rights and the environment
Copyright © 2020 IPS-Inter Press Service. All rights reserved. - Terms & Conditions
You have the Power to Make a Difference
Would you consider a $20.00 contribution today that will help to keep the IPS news wire active? Your contribution will make a huge difference.