Archive | June 2018

On Europe, Angela Merkel has been a poor Chancellor

I’ve wanted to write about the record of Angela Merkel on European policy for a while. Given that there is a EU summit next week and Merkel is under pressure over Europe, this seems to be a good time to write. Anyway, I want to argue that Merkel has been a poor Chancellor in terms of European policy. Before I expand on this argument, let me make a couple of caveats. Firstly, I am only writing about the record of Merkel on Europe, as opposed to domestic affairs (in which she appears to be more competent). Secondly, I do not mean that Merkel has been truly terrible on Europe, in the way that one might appraise the Middle Eastern policy of George W. Bush. I purposefully use the word ‘poor’, which one might equate with a disappointing 4/10 performance. These caveats notwithstanding, there are two serious indictments of Merkel which are highly germane to the future of the EU.

1/ Policy on the Euro

Though it was fashionable to criticize the German Government on austerity a few years ago, it surprises me how many liberals/left-wingers seem to have forgotten this issue and ongoing problems with the Euro. I suspect that this is because Merkel is admired by many left-liberals because of the 2015 decision to open borders. Whatever the merits of this policy, the consequences of austerity cannot be underplayed. Quite aside from socio-economic effects, which of course have been devastating, austerity has markedly increased Euroscepticism in Southern Europe and continues to destabilize the Eurozone. Linked to this is the continued refusal of Germany to implement significant reform of the Eurozone which, as authorities such as Simon Wren-Lewis have noted, can be associated with national self-interest.

I am actually not convinced that Merkel genuinely believes in austerity. Given the good evidence that austerity does not work, not to mention strong and consistent opposition to the policy from many quarters, it may be that Merkel has always had considerable doubts; her generally pragmatic character and willingness to adopt Keynesian measures in Germany would suggest this. Instead, what may have happened is that she simply followed the body of German public opinion which demanded punitive measures in Southern Europe and neoliberals from her own CDU party. This would have been politically convenient. If this is what happened, these are not the actions of a European stateswoman however.

2/ The 2015 decision to open borders

As noted above, one of the most regrettable consequence of austerity was that it markedly increased Euroscepticism in the Southern Europe region. A second Merkel policy nonetheless achieved a similar feat, though in a different region. I refer to the 2015 decision to open borders to refugees, which has increased Euroscepticism in Central and Eastern European (CEE) countries to a degree which most in Western Europe do not appreciate. In countries such as Hungary, Poland and Slovakia, opposition to this policy is extremely high, features prominently in public discourse and has proved an electoral boon for the Eurosceptic far-right.

As I previously written on this blog, it can be argued that the 2015 decision was an ethical one. What it is difficult to argue, given consequences in the CEE region, is that it was a good political decision. Many of Merkel’s Hungarian/Polish critics may well be bigots, yet good political decisions must also take into account different political realities; the 2015 decision did not do this and has estranged many CEE voters from European integration.

How will history judge Chancellor Merkel?

Most German Chancellors seem to fare well in the European/international arena; figures such as Adenauer (the re-integration of West Germany in the international community), Brandt (Ostpolitik) and Kohl (reunification) made significant achievements. Given that Merkel has presided over a fragmenting Europe, a process intimately linked to her decisions, I do not think that her record is comparable to past Chancellors. Rather, she has presided over policies on the Euro and freedom of movement which pose existential threats to the EU. In my opinion, she has been a poor Chancellor on Europe.

Italy and Spain in crisis: three thoughts on the future of the Euro

As many will know, there have been political crises in Italy and Spain in recent days. The Italian one, which has involved dispute over the appointment of a Eurosceptic finance minister, directly concerns Italian membership of the Euro. Though the Spanish crisis is not directly related to the single currency, it certainly has consequences for the Eurozone and one can argue that the root cause of the crisis, the fragmentation of Spanish party politics, was instigated by effects of the Euro.

Anyway, these developments give rise to three thoughts about the Euro, which I think are important to the future of the Eurozone/European politics in general. These are related to my forthcoming book on labour movements and the Euro, which will be published later this year.

1/ The Euro is in long-term crisis

There may not be wild panic in financial markets, as there often was in 2010-12, but there are good reasons for believing that the Euro continues to be in long-term crisis. Not only have only limited reforms been made since 2010-12, but fault lines remain the same; indebted and resentful southern countries struggle on attempting to implement structural reforms, whilst northern countries continue to resist schemes for a more redistributive Economic and Monetary Union (EMU). The success of M5S/Lega in Italy is intimately related to the former, whereas the rise in support for AfD in Germany is (a little more loosely) related to the latter. These recent developments may not have posed mortal threats to the Euro, but they are part of a pattern which looks unlikely to end any time soon. In the medium-term, particularly if there is a worsening of economic conditions, such crises may (once again) start to pose existential threats to the Eurozone.

2/ This crisis continues to poison European politics

The capacity of EMU, as it currently exists, to poison European politics also cannot be underestimated. We are living in a global age of populism, as the election of President Trump shows, yet European strains are exacerbated by EMU. The two fault lines (outlined in point one) fuel populism to a considerable extent. In the south, the need to achieve structural reforms drives popular discontent. It is easy to see why this is the case; no public ever enjoyed budget cuts and labour market deregulation. Such discontent moreover has an easy and partly legitimate focus: Germany and other northern countries. The picture may differ in different southern countries – Spain is relatively free of anti-German views whereas in Italy these feelings run high – yet rudiments are similar.

In northern countries, the situation is inverse. Admittedly, there have not been eruptions of anti-Southern Europe sentiment in recent times, but such views continue to be widespread among Northern European electorates and explain why a more redistributive EMU has failed to emerge. In the event of a future crisis which required the provision of more aid to Southern Europe, it is not hard to guess the reaction of Northern European publics.

3/ Something may well give

Though making concrete predictions about the future is not a wise move, the straits in which the Euro continues to find itself mean that it is reasonable to worry about the future of the currency. As I have written, EMU has serious flaws and generally acts as a destabilizing influence on European politics. It is also difficult to see conditions in which EMU could be successfully reformed. Not only were many opportunities missed at the time of the last crisis, but the enthusiasm of President Macron appears to have borne little fruit. The basic obstacle, the recalcitrance of Northern European countries, is unlikely to change soon; even the German centre-left are conservative on Eurozone reform.

In conditions in which these basic problems endure, it is quite difficult to see things remaining the same; the status quo is a source of too much instability. Of course, it may be that further reforms are made to the Eurozone which strengthen the currency. Given the existence of formidable barriers to such measures, which I identify above, an unhappier scenario may unfold. The collapse/shrinking of the zone is possible, though less dramatic retreats are also conceivable. A two-tier Eurozone might be introduced, as suggested by my colleague Michael Arghyrou, or there may be reversion to the European Monetary System of 1979-98, as advocated by Martin Höpner.  Let us be under no illusion however; the implementation of either of these ideas would involve considerable political and economic disruption.

My uncle is a nurse, and my mother jokes that he thinks that every common ailment is cancer. My analysis may suffer from something of this tendency; when it is your job to look for problems, things can appear worse than they really are. Many people I speak with in the European Commission are optimistic about the future of the Euro, arguing that reforms were successful and that EMU is robust. I hope that they are right, yet I need much more convincing that this is the case.