The marathon negotiation process leading to the third Greek bailout has exposed yet again the weakness of the institutional structures surrounding the euro and the fissures opening up within the whole European project.
During the negotiations, it was reported that Malta supported Germany’s suggestion of a temporary Greek exit from the eurozone. If that is correct, it would represent a remarkable political turnaround for a country that has, for years, argued for a Europe of solidarity when it comes to sharing the burden of asylum seekers. It is outrageous to argue for solidarity when it suits but not when it doesn’t.
During the last summit, Wolfgang Schaüble, Germany’s Finance Minister, argued for “a Europe of rules”. Yes, maybe. But whose rules? When?
France and Germany were the first countries to break the rules laid down by the European Stability and Growth Pact. Nobody blinked. France today remains outside the rules. As does Germany which, by running a beggar-thy-neighbour mercantilist economy, falls foul of the ‘rule’ that individual countries’ economic policies should not de-stabilise the eurozone. Germany’s huge trade surplus continues to do just that.
Schaüble also came out with some specific statements regarding rules. He reportedly said that it was “not allowed” for a country to default within the eurozone and suggested a temporary Grexit. Which rules was he referring to?
First of all, which rules say that one cannot default within the eurozone? There is no rule that addresses this specifically since the scenario was never envisaged. Two other rules might apply: the ‘no bailout clause’ and the prohibition of monetary financing of individual countries by the European Central Bank (ECB).
The first of these has already been well and truly consigned to the dustbin. We have had numerous bailouts of various countries in the last several years. As every reasonable person knows and as any court will support, there is no such thing as a totally risk-free loan.
In spite of the misinformation disseminated by creditor governments to their own citizens, any country or institution making a loan therefore implicitly assumes a degree of risk of default. Nobody can legislate for loans to be one hundred per cent secure.
As for the prohibition on monetary financing, this, too, is a matter of interpretation. The ECB’s quantitative easing programme cannot reasonably be described in any other way than monetary financing of individual countries’ debts. This is in place and has been given the green light by the European Courts. That rule, too, has been finessed.
Finally, the German suggestion of a temporary Grexit. Which ‘rule’ exactly allows for a temporary exit from the euro? There is no such rule. In fact the euro was explicitly set up as a one-way street from which there was to be no exit – voluntary or otherwise.
Mr Schaüble walked into the summit brandishing rules and clothing himself in a cloak of self-righteousness. Yet, it turns out that the emperor has no clothes and Mr Schaüble was making up rules to suit his own personal political vision – one that is not even aligned with that of his own boss.
Where was everyone else? Why did nobody publicly challenge this blatant abuse of power?
Unfortunately, the reality is that Europe has, in practice, abandoned the idea of a Europe of equals where the strong do not push the weak around. Decisions are made by the larger countries before any summit is even convened.
Everyone else is then bounced into accepting the pre-agreed script after allowing for some irrelevant modification to assuage the smaller countries’ self-respect. Small countries like Malta meekly go along with this charade, fearful of upsetting their more powerful partners (or is it masters?).
In a recent article, Anatole Kaletsky described European decision-making as “constructive hypocrisy”. He praises this method as being the only pragmatic way of getting things done in a Europe of disparate nations. This approach may be pragmatic but, in citizens’ minds, it is the hypocrisy that stands out – not the fact that it may be constructive. It is this blithe acceptance that continues to undermine people’s faith in politics of any colour and the ever-rising opposition to the European project.
What remains to be seen in the next few years is whether countries will have the courage to stand up to Germany’s newly destructive approach to the EU or if they will simply accept the current reality – this is no longer, and probably never was, a Europe of equal partnership.
We are evolving towards a Europe of masters and servants, the latter bounced into following the rules that their masters make up on the fly as it suits them while the masters conveniently ignore the collectively agreed rules without fear of being held to account.
Beppe Zammit Lucia is a management consultant based in the US.