Friday, November 28, 2014

In Europe We Distrust

MADRID – For decades, critics of the European Union have spoken about a democratic deficit. I never accepted that reproach of the EU and its institutions, but I do see a new and dangerous deficit within the Union – a trust deficit, both among governments, and among the citizens of various member countries. Indeed, if today’s euro banknotes included a motto, as dollars do, it could well be, “In Europe We Distrust.”

This lack of trust has brought the eurozone to the cusp of implosion, and is calling into question the very future of European unity. The arc of EU history seems to be bending to catastrophe – the sort of periodic European disaster that integration was intended to prevent. Grandiloquent as it might sound, the disintegration of the euro and the disarray that would engulf the European project, not to speak of the global repercussions, would unleash comparable devastation.

But few official pronouncements, let alone policies, are addressing Europe’s deficit of trust and credibility. The current crisis has exposed the original lacunae and widening cracks in the compact between Europe’s citizens and EU institutions, between Europe’s north and south, and between its peoples and its elites.

Indeed, a dangerous emotional discourse has emerged, reflecting – and feeding – the worst stereotypes of the “lazy South” and the “despotic North.” It is indicative that the latest Pew Research Survey in late May reveals unanimity about who the least hardworking Europeans are: southerners, especially Greeks. Likewise, polls and elections signal the ascent of populists across Europe, while financial markets’ vulture-like behavior stems from the cynical calculation that the EU lacks the wherewithal to restore its credibility.

That, after all, is the point of Europe’s straightjacket of austerity, which hampers its growth prospects, and thus makes little sense in economic terms. The ultimate aim of austerity is precisely the restoration of trust – among northern Europeans that the money transferred to troubled economies will not be squandered, and among the peoples affected by painful spending cuts that their efforts are recognized and supported.

Speaking from the heartland of the troubled South, I can attest to the fact that the need for austerity has been the leitmotif of Spanish Prime Minister Mariano Rajoy’s government, a course that gained explicit popular support in the recent elections. Reforming Spains’s cajas (savings banks), labor market, welfare provisions, and how its autonomous regions function top the national agenda (though unfortunately only at the insistence of the European Commission and Germany).

But restoring trust and credibility requires more than southern discipline. Northern Europe must hold up its side of the bargain. Germany, in particular, must acknowledge that, far from being an innocent victim, its economy is the eurozone’s biggest beneficiary – and has been since the euro’s inception. That, together with the counterfactual – the economic calamity that would befall Germany following a collapse of the euro – implies a unique obligation to maintain it.

German Chancellor Angela Merkel has been a favorite target of opponents of austerity for some time now, and it is understandable that, after months of being a bystander to the EU’s painful inability to govern, Germany has reluctantly – indeed, insufficiently – taken charge. Looking ahead, as the threat of disintegration looms larger, the need for German leadership will be even greater. But, once the crisis has passed, EU institutional reform will be a critical element in restoring trust.

The EU’s supposed democratic deficit is a corollary of the “technocratic imperative” that has emerged as a favorite scapegoat in the ongoing European drama. According to this view, European integration was flawed from the outset, more than six decades ago, because it was conceived and developed as an elite project. But, for as long as the European project delivered prosperity, no one bothered to question its rationale.

Today, however, the EU is the last point of reference as far as prosperity is concerned. According to the Pew survey, EU favorability is down almost everywhere since 2007, having dropped 20 points in the Czech Republic and Spain, 19 points in Italy, and 14 points in Poland.

If EU institutions are to regain trust and relevance, they need to articulate concrete policies and deliver on issues that bear directly on citizens’ interests – youth unemployment, urban planning, health care, bio-tech research, energy conservation, transport, and aging. All of these issues were an integral part of the EU’s ambitious Lisbon Strategy (which in 2000 promised to make Europe the world’s most competitive economy by 2010), and all were quickly hijacked by national political agendas. That cannot be allowed to happen again.

In fact, there is nothing inevitable about the euro's failure. The dismal image that Europe projects to the world nowadays does no justice to reality. Europe has the world’s healthiest and most educated population, its largest economy, and huge stores of soft power, owing also to its commitment to human rights and democratic values.

And yet Europe is facing a calamity. Discipline and morality may well be key to reinforcing trust and credibility to Europe’s social fabric – a point that northern Europeans never tire of making. But, unless all Europeans accept responsibility for saving the euro – and, with it, the EU – everything else is shallow rhetoric.

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    1. CommentedMiguel de Arriba

      As Spanish, European and economist,I wish to express that distrust of my fellow speaking have created the politicians like her who not governed for and by the citizens, as it was required, but in favor of big business conglomerates.

      Corruption in the EU is enormous against citizens.

      There is a brutal transfer of money from the pockets of citizens to business accounts: privatization of basic services (education and health) and also slave labor conditions in favor of companies (temporary contracts that do not provide security and mini jobs undervalued).
      The iron law of wages of David Ricardo in full effect in the XXI century.

      The result was predictable and the impoverishment of Europe is a fact despite all the advances of humanity that should have produced the opposite effect leading a better life to most citizens.

      NOTE: In Spain the government, in his madness for favoring big companies (in this case the energy), intends to tax the Sun.
      I think that says it all ... by their deeds you shall know them!

    2. CommentedAndré Rebentisch

      "Germany, in particular, must acknowledge that, far from being an innocent victim, its economy is the eurozone’s biggest beneficiary"

      I can't see that. What we saw was a boom in other nations, not our own. We agreed on Maastricht but as a deal unfavourable to our own nation. Now we are asked to take unforeseeable liabilities again and my government is bullied as it insists on plugging the hole in the bucket (aka Austerity).

    3. CommentedKim Eakin

      Gosh, spoken like an eloquent BANKSTER. The problem has nothing to do with the financial elite subverting democratic institutions and raping the peasants, ummm....I mean taxpayers. What a complete misdirecting load of poo this article is. It is double talking banksters like Ana that have facilitated and absolutely assured the demise of the Euro and the Eurozone. Good job!! I suggest investing long in guillotine manufacturers.

    4. CommentedFlip Bibi

      It just seems to me that there is too many finger pointing going around. Had Governments been more resposable regarding their finances, these troubles would of not risen. If taxation evasion had not been too rampant in Greece, if Spain had not pushed for the Cajas to merge (or had they been asked to merge with greater care with survival in thought and not greatness). There are too many "ifs spreading around. Had Governments not caved in and granted all what Unions demanded, had laws been properly enforced, had Governments done what they are supposed to do, many of the European problems would not be around.
      I know that any form of austery measures are not pleasant, and represent only more suffering for the people, but this would of been avoided had people/politicians been more responsible for their actions. And I am sorry to say this, but many countries should sit down and study the steps that Germany has taken since after WWII. What did Germany do to become the power house it is now? There is something that others have failed to see. After their defeat in WWII, Germany endured hardships after hardships, but look at it now, their position is enviable by many. Germany can afford to call the shots while the rest of Europe can only afford to grumble and complain. Sometimes I wish that my country, Italy, had followed the German path to recovery.
      I hope that politicians can stop grumbling and complaining, and beging to focus on what is important: the people, the country, and Europe. Stop pointing fingers, because for every finger that is pointing forwards, there are three pointing backwards. My advise to politicians: Quit complaining and do what you should be doing to benefit my country and not your pocket.

    5. Commentedjuan carlos

      sorry, but the need for austerity (which in spain means austerity for the people but continued lavish spending for the political/corporate class) is not a course that gained explicit popular support in recent elections... that is simply false.
      nobody will gain trust in the european union if that kind of austerity is imposed, it's obvious.

    6. CommentedJohn Primm

      Well said, Madame Palacio and Mr.Murkherjee. Actions have consequences and each state must be responsible for its actions. Indeed Spain is just the latest to fall into the Socialist foolishness. History has shown that Socialism works for a period of time--until it runs out of other peoples money to spend. Thanks to Dame Thatcher for that quote. There are a number of reasons the EU will never succeed, starting with the outrageous bureaucrats in Belgium and ending with the understanding that a union of states cannot survive without trust. Trust can only be built when each party (ies) actually lives up to the ideal. I do not see that happening in Europe.

    7. CommentedProcyon Mukherjee

      Ana Palacio has said it right, but the responsibility starts from home. The Spanish profligacy, as some point out, in the last eight years is short of the worst socialist regime, doling Billions of Euros to a populace almost freely, thus increasing the moral hazard. Going by the recently disclosed statistics, the list of favors include a completely free health care system, the one of its kind in the whole world, almost three years of unemployment benefits, an infrastructure that takes bullet trains to remote villages and towns, and thousands of public companies that have gone bankrupt; even the number of town halls is four times that of Germany and the number of provincial councils dwarf any European nation’s numbers. The switch from permanent employment to temporary, which became the norm, has done the maximum damage, where employers reaped the benefit at the cost of the workers. Infrastructure development, which is supposed to create further investment avenues, ended up creating mountains of debt on an already pathetic national balance sheet.

      Responsibility and morality should start from home.

      Procyon Mukherjee

        Portrait of Ana Palacio

        CommentedAna Palacio

        I totally agree with you and the idea that responsibility starts from home. In fact, the previous version of the article had that element developed to a great extent, but was later revised due to word limit considerations.

    8. CommentedZsolt Hermann

      The thing is that we never had trust. Our basic human nature is subjective, we only trust ourselves, we make all calculations for self benefit/profit, when we make alliances, unions we do it as long we ourselves benefit from it.
      This is how the EU was formed as well, identifying common profit, forming an alliance against someone else - the Asian and US markets, only making short term calculation completely unprepared for a time when growth, and prosperity might run out.
      Thus now two things happened:
      1. The "constant growth", prosperity exhausted itself since our economic model of constant quantitative growth is unsustainable. So there is no extra income to sweeten to initial shaky foundations of individual, subjective elements connecting for common profit, as long as there is profit accumulation.
      2. In the meantime we evolved into a global, interconnected, interdependent network. Even if the present union does not work and everybody resigned to imminent collapse, on the other hand all the signs, daily events are showing that we cannot exist without connections, no individual or nation is capable of sustaining itself, and thus a collapse would hurt everybody tremendously from Greece to Germany.
      So now we get to the point of trust. In order to create a truly working union, a supra-national collaboration of nations, cultures, traditions, above their differences we have to leave behind what separates us, we have to get out of our subjective, self-calculating boxes and form a mutual, shared space where we can work together, create new institutions, systems that govern us, supply our needs in a mutual, equal fashion, according to everybody's honest and transparent contribution to the common whole.
      This is the only natural way of making our global, integral system work without trickery, coercion building a sustainable future.
      And this can only work based on a global, integral education program, information share for everybody, without the interference of populist politicians and the media trying to exploit the situation for their own good, so people understand it is in their best interest to build such a new system that is fundamentally different from the present one.