All for One, One for All

Europe is at the crossroads. Either unity or national populism will determine its future. The new union would start as a community of debt.

When Alexandre Dumas published Les Trois Mousquetaires in 1844, Europe was in deep crisis. The conservative attempt to restore old legitimacy had failed and the ancient regimes could no longer guarantee social stability. Dumas’ novel actually celebrated 17th century feudal sentiments, but when it appeared it echoed modern revolutionary morals. A story of faithful comrades who live by the oath ‘tous pour un, un pour tous’ could voice the aspirations of freedom, dignity, equality and unity that were held up by citizens in almost all the European capitals. Those national democratic revolutions formed the political self-consciousness of Europe, which is a valid narrative till today. The project of the European Union is being declared a daring effort to transform the civic virtue of solidarity within a nation into European unity. With one exception: ‘Beim Geld hört die Freundschaft auf!’ says a well-known German proverb, literally translated: When it comes to money, friendship ends. The English version of this peoples’ wisdom – ‘correct accounts keep good friends’ – is more polite but not less austere. Austerity of member states combined with a strict no-bailout clause in the community law laid the ground for the euro regime and the Lisbon Treaty. A single market, a common currency, yes, but no fiscal union! That is the red line German politicians draw in order to appease taxpayers and voters. The Musketeers keep their wallets closed.

In May 2010 eurozone leaders broke the Lisbon Treaty. It was a clandestine revolution, because to reveal openly that the no-bailout clause is dead would have lead to an outcry. Such a revelation has the potential to break up the German coalition government. Conservatives of Angela Merkel’s own party already went to the constitutional court to bring down the euro rescue package. The majority of conservative governments in Europe face a dilemma. They have learned the hard way that the old union does not work anymore. And they are not ready to sacrifice their all in all pro-European legacy and abandon the euro. But they also fear the consequences of the next step forward. As far as the German chancellor is concerned, she tries to obscure what is happening. Behind the veil of tough words that she would not accept a ‘transfer union’ in which Germany has to pay for the debt of budget sinners, she adopted a silent strategy of creeping in. Germany nodded and agreed to more than 600 billion euro in guarantees and credits for euro members, channelled through a Financial Stability Facility, the EU commission and the European Central Bank, which alone bought bonds of member states in trouble worth 67 billion Euro. In addition, the IMF, with the support of its European stakeholders, stepped in with a more than 250 billion euro package. As a matter of fact, Merkel probably is the founding mother of the European fiscal union. But she will not recognise it as her legitimate child. Nobody does. The new union seems to be born as an unloved orphan.

It all comes with the third wave of the financial crisis. First was the collapse of the banking system, second came the slump of the real economy. The third shock is the public debt crisis. Many conservatives misuse the debt debate now to disguise that nervous markets drive erratic policy decisions. They distract attention by pointing the finger to mismanagement and maladministration. That does not mean corrupt bureaucracy doesn’t exist. But it is silly to assume that the states came under such pressure because of their pre-crisis deficits alone. The expenditure that is needed to save banks, to stimulate growth, to pay for rising unemployment, and the sharp decline in tax income, all this amounts to giant public deficits. Although balanced budgets in ageing societies (that dislike immigration) are imperative, the close link between socialised losses of the bankers, speculative attacks on weaker euro members and cuts in the welfare system is a provocation. When expanding subsidies and privileges for big business go side by side with shrinking unemployment support or cuts for minimum wage earners and pensioners, the social divide threatens to break up the social contract. And when the EU comes in the position to demand and to execute such unfair policies, this could very well blow the European Union into pieces.

No romantic illusion: Not every protester of this autumn does have a left movement of international solidarity in mind. The sentiment in the streets of Europe’s capitals too often is too nationalistic and protectionist. The populist quest is autonomy from unity within the EU, and much anger is directed against the whole idea of a unified Europe. Moreover, simply expanding the budgets, as protestors wish, would not tame capitalism. The politics of accelerated debt play a dangerous game with aggressive financial markets. Bankers love debt. Excessive borrowing increases risk and attracts investors who deal risk for high profit. High banking profits mean expensive debt service for the public sector. This amour fou is heating up the vicious circle of overburdened state budgets and destabilised financial markets. We need financial sobriety and fiscal austerity. But austerity needs the dimension of long-term consolidation, which is always two-fold: Reducing expenditure and securing state revenues. We need a fair sense of burden sharing by balancing the levels of taxation according to the capability of earners. Those at the top have to pay considerably more, the squeezed middle needs breathing space, and those of low income need relief. No doubt, the politics of blind borrowing is dependent on financial markets, whereas a social contract of austerity is genuinely democratic.

Where to save money then? In the case of Germany a modest minimum wage would save the state billions in subsidising wage dumping through additional social benefits and it would give some more momentum to domestic demand. In the case of Greece one would like to recommend less hostility with Turkey and less military spending. One could think of a single European army instead of many prestigious but senseless armaments. How to secure state revenues? For a start, by introducing a bottom line of common European corporate taxation and by getting the financial industry pay financial transaction taxes. How to stabilise the price of borrowing for weaker euro members? By declaring openly what is already under way, the common risk management through euro bonds.

Europe is in a precarious state. The fiscal union came into being under anonymous market pressure. The political consciousness of a wilful European unity lags behind. Marxists can say ‘I told you so’. Once again the driving force of capitalism is about to crush limited boundaries of national autonomy, once again it is heading towards ever more internationalisation of the economy. Liberals can be optimistic too because open markets prove ever more powerful than defensive protectionism. But what about the ‘ever closer Union’ Europe has promised itself to become? Marxists and market liberals can feel vindicated. Democrats though have to worry whether new dependencies will be transformed into new political institutions, whether citizens and political classes throughout Europe will be reasonable and determined enough to seize the critical moment in order to reformulate the social contract on a European level. ‘Crisis’ is an ancient Greek word meaning ‘moment of decision’. The decision that is at stake is the unity of Europe. It comes with a price. The new union will start as a community of debt.

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