Whatever it Takes

The battle for post-crisis Europe

George Papaconstantinou

• Publisher: Agenda Publishing
• Year: 2019
• ISBN:
  9781788212878
• Topic: Politics & International Relations
• Subtopic: European Politics
• Index: Politics & International Relations

For generations, Europeans have become accustomed to rising prosperity, an increasingly supportive social safety net and the expectation that each generation will fare better than the last. Europe has built a social model that is second to none, and fashioned a continent of disparate nations into a community that shares common values with democratic institutions that are the envy of the world.

Yet, Europe, as a common project is increasingly questioned by its citizens. The emphasis on solidarity, the driving force behind the social and economic integration, has given way to suspicion and nationalism. Openness and tolerance are strained by xenophobic, anti-immigrant sentiments, while populists and extremists set the agenda and dominate the policy debate.

European countries have borne the brunt of the global economic forces that have strained its institutions and capacity to respond appropriately. Characterised by uncertainty and delay both in handling the Euro crisis, Greece's ongoing economic woes, Brexit and now a migrant crisis, Europe is at a crossroads in its development: a restructuring at the very least, if not a new settlement of power within the union, is on the cards. This book will attempt to understand what "post-crisis Europe" will look like, and what the opportunities are to rethink its economic, social and institutional architecture as well as to address the nagging democratic deficit that undermines its legitimacy as a democratic entity.

George Papaconstantinou is uniquely placed to offer commentary on the machinations of the union and its internal behaviour. Appointed Greek Finance Minister by Papandreou in the newly formed government in 2009, he played a key role in the Greek crisis, negotiating the first bail-out with the Troika.

PART I

FORGED IN CRISIS

1

How we got here

It is often disparagingly said that the process of European construction is the result of negotiation and compromise. There is nothing wrong with that. Negotiation and compromise are at the heart of democracies; they guide the evolution of any social and economic process and have characterized all the stages of European integration, from the Treaty of Rome to those of Maastricht and Lisbon. They have been there at the enlargement of the Union and in the myriad of large and small decisions reached by EU heads of government at European Councils. Indeed, in most stages of this process, the dominant force driving forwards difficult decisions has been the political will of participants; economic considerations, although the raison d’être behind many of the initiatives, have generally been of secondary concern.

In the current environment of collective self-doubt about the future of the European project, a recurrent criticism is that Europe is a project of the elites. Frequently vocalized by populist politicians looking to capitalize on public discontent, this characterization pits Europe against the average person and has propelled populist parties to high polling numbers and even to electoral triumph. It is, however, also an accusation made by people who do believe in Europe, but feel it has forgotten its citizens in the process – people who feel that to move forwards, Europe needs to pause, correct its course of action and regain the confidence and trust of the Europeans it has lost, presumably because it has strayed from its original purpose and ideals.¹

So there it is. An elitist construction, the result of negotiations and compromises made in dark rooms, behind closed doors – today’s Europe in a nutshell, according to many of its critics. As reductionist as it may be to describe the EU in this way, it has to be acknowledged that there is some truth to it. Despite the signs of economic growth and the general sense that Europe has emerged from the economic and financial crisis, there is a general EU malaise. It is a sense that the Union is no longer delivering, that too many people are being left behind, that social protection systems are no longer able to cope, that democracy within Europe is not functioning as it should, that the ideals on which Europe was built have somehow been betrayed. As economic results fall behind expectations, and as cultural identities are threatened by real or imaginary external enemies, people have begun to turn on the project itself, and on its perceived inability to answer their everyday problems.

The original aims of the European project were breathtaking in their audacity and scope. At a time when the continent was recovering from a catastrophic war, the idea was to bring together the former enemy nations in a community of shared ideals, to unite peoples with different histories and identities and to bind them for ever, economically and politically. Nothing like it had been attempted before – at least, not through peaceful means. Understanding the difficulties that the EU faces today requires getting to grips with how it has evolved since, both in terms of its politics and its institutional machinery. Although this book does not in any way pretend to contribute to the various scholarly attempts to analyze the complex and rich tapestry that is the construction of the European project, some remarks are needed in order to set the stage and offer some context for what follows.²

This modern history and its main milestones – institutional, economic as well as political – is an essential part of any attempt to understand where we are today and, even more, to get a sense of where we could be headed. In turn, it requires identifying those actors, personalities, institutions and in particular the modus operandi that have enabled the progress Europe has exhibited over the past decades. Progress that has nevertheless proved inadequate – perhaps limited by the very design of European construction – to deal with the large external and internal shocks of recent years.

The early years: first steps for peace and prosperity

It is striking that at the root of the European project one finds simultaneously two elements. The first is the overarching moral imperative of ensuring that the continent never again experiences the horrors of war; the second is the practical understanding that the best way to achieve a lasting peace is through deeper economic connections between nations and through political integration. The first is famously foreshadowed in Winston Churchill’s 1946 speech at the University of Zurich calling for a “United States of Europe”.³ The second can be found in the other historic declaration of the time – that of French Foreign Minister Robert Schuman in May 1950, proposing a community to integrate the coal and steel industries of Europe – which were themselves of course the industries of war – and by reverse implication safeguard peace.⁴

At that very early stage of the process, almost 70 years ago, before the first treaty was signed in Paris in 1951 to create the European Coal and Steel Community, it is evident that the founding fathers were already looking far into the future – actually attempting to design it. The precursors of today’s institutions were established, and the two largest continental European countries (France and Germany) and their “political elites” were in charge of the process. Ideas that would not take shape for decades, such as the creation of the single currency, were initially debated behind closed doors at that time. Other ideas that are yet to be fully realized, such as a fully fledged political union and a defence community, were first mooted at that point. Equally importantly, that was also the time when today’s ideological divisions between those pushing for a federal Europe and those wanting to safeguard national sovereignty first emerged.

The early years were a period of hope and progress. With the war over, European nations were beginning to rebuild and grow again. They were doing so in an evolving global political and security environment whose rules were being shaped by Europe and the United States; the threat of the USSR and another type of war – the Cold War – making this transatlantic cooperation stronger and more intense. It was an environment characterized by the establishment of new international institutions such as the IMF and the World Bank to ensure global economic cooperation and development. Overall, it was a world order tailored to the values and interests of the victors, but also gradually open to change and to helping new participants integrate.

In this setting, the signing of the Treaty of Rome in 1957 creating the European Community was a milestone and a coming of age for the old continent. The initial “inner six” countries of the European project (France, Italy, Belgium, the Netherlands, Luxembourg and West Germany) were establishing piece by piece its framework and institutions, while still being hesitant and unsure about the breadth and scope of the exercise they were embarking on. It was a gigantic first step in a clear direction, even if enthusiasm for the end destination was not shared by all.⁵

This was by no means a linear process without difficulties. Just as the main pillars of the new construction were being put together – the European (at the time EEC) Commission, the Parliamentary Assembly, the Court of Justice – the “outer seven” countries of Europe (Austria, Denmark, Norway, Portugal, Sweden, Switzerland and the United Kingdom) were establishing their own European Free Trade Agreement. Soon, some of these were asking for membership in the Communities created by the Treaty of Rome (merged into one Community in 1967), but applications were suspended for a while as France vetoed United Kingdom membership in 1963. The tortuous love–hate affair between the UK and the other European continental countries had just begun – it would lead to UK entry into the EEC a decade later, to a complicated membership full of twists and turns, and to the first-ever decision of a country to withdraw from the EU (leaving aside the idiosyncratic case of Greenland in 1985), 45 years after its accession.⁶

Progress in this period was gradual, fraught with problems and characterized by difficult compromises. A case in point was the decision-making process; before the end of the 1960s, member countries had to learn to balance supranational ambitions with strong national feelings (in this case, France and financing of the Common Agricultural Policy); they had to restore the veto in areas of “national interest” as the price necessary for getting France back at the table of European institutions. At the same time, a deepening of European institutions was under way; step-by-step, with its successive rulings, the European Court of Justice cemented the dominant position of European law over the jurisdiction of national courts.⁷

More members, some turbulence

Problems notwithstanding, this European project was gaining traction, and the first wave of accession countries was a clear sign of this. Following the reversal of the French veto against the UK joining the EEC, the UK became a member in 1973 along with Ireland and Denmark. Norway, however, rejected membership in a referendum. This was a first sign of the dissension that would come with popular referenda in different countries on major decisions regarding the future of the European project. However, direct representation of citizens in the construction of the European “project of the elites” was boosted by the first direct elections to the European Parliament in 1979.

The economic agenda during this period was characterized by internal progress amid external shocks. Maintaining monetary stability was quickly understood as being a crucial tool for bringing European economies closer. The collapse of the Bretton Woods and the ending of dollar convertibility to gold in 1971 led to the creation of the European “currency snake” in 1972, whereby currencies were allowed to fluctuate against each other but only within narrow limits (2.5 per cent). This represented a tentative first step towards the introduction of the common currency 30 years later. However, as the external economic environment deteriorated, the process of integration languished.

The process was relaunched in 1979 with the creation of the European Monetary System (EMS) and the European Currency Unit (ECU). The former allowed participants of the European Exchange Rate Mechanism (ERM) to create a zone of increasing monetary stability; at the same time capital controls were relaxed. The latter acted as a reference for the ERM, and as a reserve asset and a means of settlement between EMS central banks. In the process, it managed to gain popularity in the market as a denominator in financial transactions.

The 1970s was, however, mainly a decade of turmoil for the European and global economies. The two energy crises of 1970 and 1973 and their oil shortages disrupted economic growth. While the economic downturn caused by the oil shocks was felt across Europe at the time, in retrospect, it actually pales in comparison to that which followed the more recent 2007–8 financial crisis. However, not all news was bad; these adverse economic developments simultaneously combined with significant positive political developments at the edges of Europe: the restoration of democracy in Greece, Spain, and Portugal paved the way for European enlargement in this direction of the continent in the decade to follow.

From “eurosclerosis” to the revenge of geopolitics

This second wave of European enlargement started with the accession of Greece in 1981 and continued with that of Portugal and Spain in 1986. It was accompanied by new and substantial funding for Europe’s ...

Table of contents

• Cover
• Half Title
• Series Information
• Title Page
• Copyright Page
• Contents
• Preface
• Acknowledgements
• Part I FORGED IN CRISIS
• Part II POST-CRISIS
• Epilogue: the way ahead
• Chronology 1: from inception to the eurozone crisis
• Chronology 2: crisis milestones and policy responses
• Bibliography
• Index