Questions and answers during the national briefing by Wolfgang Schauble, Federal Minister for Finance of Germany, following the ECOFIN Council on 6 December 2016, in Brussels. Snapshot from a video. (European Council – Council of the European Union, Audiovisual Services).
There is no doubt that Europe is in disarray. The long standing malaise of high unemployment and economic stagnation has already mutated into critical political problems. The mutations of the European political ecosystem take various, unseen before forms. In the northern EU countries they invariably appear as extreme right or even semi-fascist political parties, inflated by anti-immigration, xenophobic and chauvinistic rhetoric, also directed against the ‘lazy’ and over indebted southerners in Greece, Italy, Spain and Portugal. In the south, the political mutations take other forms including left wing extremism in Greece and Portugal or assume a clown outfit as in Beppe Grillo’s Italy.
However, there is a common denominator in all those cases. This is a populist narrative containing mainly crude Eurosceptisism and irrelevant or even crooked anti- systemic cries. As if destructing the European Union and throwing the immigrants in the Mediterranean would automatically create good jobs and cure the everyday frustrations for a large part of the population. There is an audience, though, for all that. According to the EU statistical service, the Eurostat: “more than 1 in 10 people in the EU cannot afford to get together with friends or family for a drink and 1 in 6 is not able to participate in a leisure activity”. Add to that the part of the population which is traditionally captive to chauvinistic cries and the sum becomes uncontrollable. The rest has to be charged to inept, self centered politicians, who have distanced themselves from the agonizing parts of society.
A critical mass of people
This dreadful reality was manifested in last Sunday’s Italian referendum. Most voters didn’t care to answer the question asked, namely, should the constitution be changed in order for the institutional decision making system in the Parliament to be more effective. Nearly 60% voted ‘no’. They rebuffed the ‘system’, the EU, the elites, the globalization, the immigrants, the Germanic Europe and whatever the populist politicians had for sale. So, Matteo Renzi received a double blow. For one thing, the Italians denied him the chance of becoming the dominant political figure. At the same time though, many earnest Italians showed their complete disappointment with the way the EU functions, which is to penalize almost everybody who cannot comply with the Germanic way in which the economy functions. The 18 to 34 years of age group voted by 81% ‘no’ for a good reason. Youth unemployment is around 40% nationwide and more than 50% in Rome and southwards.
This is the outcome of six years of economic misery in the south of the EU, caused by brutal austerity, over indebtedness and Teutonic economic policies. It was not like that before. In Italy and Greece unemployment rates were for decades down to single digits. The Greeks still pay the price for rescuing the Germans and in many ways the western banking system, back in the 2009-2010 financial meltdown. The country was forced to pay its oversized debts in nominal values, which would have been drastically cut down had Greece chosen to go insolvent, and asked its creditors to sit down and negotiate the servicing of a workable debt. The three rescue programs of German inspiration and profit imposed on Greece have increased the country’s public debt from 120% in 2009 to 180% today.
It’s the turn of Italy
Now, it’s the turn of Italy to go through the same appalling process. Some weeks before the referendum, Renzi asked Germany to agree to a European solution for the recapitalization of the ailing Italian banks, with first in the list the Monte dei Paschi bank, the oldest lender of Europe. Berlin denied to even discuss the prospect of activating the European Banking Union tools, insisting that Italy is alone in this and the EU cannot offer any help.
The Germans forget that back in the banking crisis era of 2009-2010 they violated all and every EU law when rescuing their own failing banks. They also forget that their exponential economic development of the 1950s and the 1960s was built upon the full write-off of their debts which the rest of world had the generosity to offer them.
Germany v ECB
On top of that, Germany is systematically attacking and undermining the efforts of the European Central Bank under Mario Draghi to alleviate financial pressures burdening heavily indebted Eurozone members. Today, Thursday 8 December in Frankfurt, the Governing Council of ECB, on the insistence of Germany, is reportedly expected to discuss the reduction or even the gradual withdrawal of the unconventional monetary measures used by the central bank to support the weaker member states.
Draghi himself indirectly blames the political stubbornness of Germany for the deadlocks that Eurozone may face in the future. In an interview with the prestigious Spanish newspaper ‘El País’ when asked if there is a risk of “going back to the 1930s with protectionism and authoritarianism” he answered “All in all, the banking sector and perhaps more generally the financial sector, is stronger than it used to be before the crisis. But in the medium term it is not yet clear what the consequences of past, current and future political uncertainty will be. There will be consequences, that much is certain”. Given that, so far the political choices in Eurozone’s economic affairs are almost exclusively dictated by Germany, the ominous reference is clear.
In short, after the realities of the Brexit and the Italian ‘no’ towards a Germanic EU, things have to change. If not, the Italexit is not very far away. The currently followed economic policies, inspired mainly by Berlin, invariably lead to a Germanic Europe that everybody else rejects. Of course, the question is if Italy, Greece, Spain and Portugal will be willing or able to continue participating in it.
Soon, the Germans will be obliged to choose – it is impossible for them to have it all. Germany cannot , at the same time, gain from British and Greek customers for its expensive cars but ignore their hardships, because, in the long term, it is a lose-lose situation.
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