Yesterday was International Workers’ Day. It was celebrated all over Europe with public holidays. It is a bit ironic that on the day that Europeans celebrate our workers so many millions of these workers are on the dole. Traditionally, periods of high unemployment are also periods of social and political change. It is easy to see how the present levels of unemployment might lead to political U-turns.
Today, unemployment in Spain is 23.6%, Greece 21%, Portugal 15% and Ireland 14.7%. Greek, Italian, French and Irish voters will all be given a chance to express their preferences over the coming weeks and months. Although some of the political elites are trying to divorce local difficulties from greater European issues, everyone realizes that it is mendacious to try to do so because policy is being set in Europe.
And it is not just policy that is being set in Europe. Governments too are being determined by EU technocrats. This is extremely dangerous. Lest we forget, in the past six months, two legitimate national governments have been deposed by the EU. The democratically elected leaders of Italy and Greece have been thrown out and replaced by technocrats. These are now EU puppet governments. In Ireland, the government’s job, to use the words of one of our senior Labour politicians has been reduced to “policing” EU agreements.
The biggest loser in all this, if other electorates turn, is going to be the German view of the European Union.
Are we seeing the beginning of a process whereby Germany becomes isolated in Europe?
The Germans know that they do not yet have the “permission” to behave like a bully in Europe. If they overstep the mark, most countries have sufficient collective memory of German “form” to react in the expected way.
But Germany itself is changing too.
We now know that the design flaws of the Maastricht Treaty that created the rationale for European monetary union in 1992 have been exposed by the current sovereign crisis. Convergence, the mantra of EU central bankers, politicians and bond dealers in the 1990s, has proved a cruel mirage.
The Mediterranean did not magically transform into Greek, Italian and Spanish templates of sober, inflation obsessed, high savings, high tech Germany. Nor did we become a Celtic version of the Saxons.
The Euro triggered a tsunami of wasteful fiscal spending in Greece and Portugal, the loss of export markets for family owned Italian firms dependent on lira devaluations and an epic construction bubble in Spain whose denouement has devastated its banking system and cajas. Ireland has mirrored Spain.
“Convergence” was an illusion in Europe and the ECB’s “one size fits all monetary policy” was a disaster under Wim Duisenberg, Trichet and possibly even Draghi. Europe simply did not meet the economic model of an optimal currency area even a decade after the creation of the ECB and the Euro.
Germany has unquestionably benefited from the Euro project, the strategic goal of every postwar German chancellor since Konrad Adenaur. The people of Germany loved their Deutsche Mark but German industrialists dreamed of having a cheaper currency. Within the Euro, German business created a trillion euro export colossus and accumulated the world’s largest trade surplus. In fact, the crisis in peripheral Europe benefited Deutscheland AG since it triggered a devaluation of the Euro against the dollar and the Chinese Yuan, increasing Germany’s most important trading partner.
Just examine the graph, which shows the different unemployment experience of Germany versus Spain, Ireland and Italy. German unemployment is now the lowest in twenty years, while the rest are experiencing something quite different.
By using the French-German axis, symbolized by the term “Merkozy”, Berlin has emerged as the geopolitical and financial hub of 21st century Europe. Germany is no longer an American appendage, occupied and self-conscious, but the strategic partner of Russia and China in the brave new world of international power politics.