Discussion: (0 comments)
There are no comments available.
View related content: International Economics
“Growing Economic Crisis Threatens the Idea of One Europe.” “Members Sharply Split Over Economic Action.” “Europe’s Family Squabbles.” Reading the headlines in recent
days, one would be tempted to conclude that the European Union, which has so
long promulgated an earnest ideology of ever-closer, ever-greater European
economic cooperation, is in trouble–and one would be right. One might also
conclude, reading the stories that follow, that the biggest obstacle facing
united Europe is the economic crisis in the eastern half of the continent, where
the weaker ex-communist economies are dragging down their richer, western
neighbors. But one would be wrong.
In fact, it is impossible to understand what is happening in the somewhat
surreal world of the European political economy at the moment without first
tossing out every stereotype, every cliche and every assumption that has ever
been made about Europe’s political geography: East, west, north, south, none of
it helps make sense of what is going on. Look harder: The first and sharpest
economic crisis in Europe was not in the east but in Iceland, far to the west.
The deepest recession is not in the traditionally slow south, but in Ireland,
part of the recently dynamic north.
Look harder still: While the bankrupt government of Latvia, a new member of
Europe, has indeed been besieged by angry demonstrators, far more violent
demonstrations have engulfed the government of Greece, a much older member of
Europe, and even a member of the common European currency. While the Hungarians
have, it is true, requested, and been denied, an extraordinary $240 billion
loan, a single British bank–the Royal Bank of Scotland–has requested, and will
receive, a far more extraordinary, $425 billion bailout from the British government. For that matter, the bad
debts accumulated by British financial institutions alone far exceed, by many
tens of billions, the governmental debt of Poland and the Czech Republic, two
countries that have had no domestic banking failures to speak of.
Czech banks, by the way, are net lenders to their mostly foreign owners. Which leads me to
an interesting question: Who proved, in the end, to be the most responsible
capitalists? The London bankers who spent the 1990s dispensing expensive
privatization advice in Warsaw and Prague–or the newly elected, shabbily
dressed politicians who paid them for it?
In reality, what this crisis has revealed is not an old fault line between
east and west (let alone a “new iron curtain,” as the petulant and ineffectual
Hungarian prime minister put it, but an even older and more obvious truth: Most people
prefer to blame their problems on somebody else, even when those problems are
clearly self-inflicted. Thus the French president has been hinting that his
country’s weak industrial output is somehow the fault of the Czechs, because
they build cheaper Renaults; the Hungarians are angry that their richer
neighbors won’t rescue them from years of irresponsible public spending; British
workers demonstrate against the foreign workers who mostly do jobs they have
long refused. There is something similar going on in the United States as
well–people who shouldn’t have taken loans are furious at the people who
shouldn’t have made them–but in Europe these passions inevitably have national
overtones as well.
Which means, of course, that they really could break the European Union,
though not along an east-west axis. For years–decades, really–a deep hypocrisy
has permeated European institutions: While European leaders used the language of
international cooperation in public, they funneled money to pet national
causes–French farmers, Spanish highways–behind the scenes. While they spoke of
giving Europe a greater international role, they refused to create truly
European foreign or energy policies, preferring instead to issue regulations and
jockey for advantage. Now that there is a crisis, they can’t break those habits.
Some thus want to use “Europe” to create illegal protectionist havens, others
treat “Europe” as a lender of last resort, while still others prefer to shout
loudly that their problems started in “Europe” and not at home.
What the European Union should do now is in fact very minimalist. Europe’s
leaders should, above all, enforce the rules of trade and competition. They
should stop pretending that the neighbors are responsible for the unemployment
rate. They should remind their citizens that their European neighbors buy their
products and subsidize their banks. They can’t bail out everybody: National
governments are still responsible for keeping their debts under control and
their finances strong. But they can behave as if their rhetoric–phrases such as
“single market” and “free-trade zone”–actually signifies something real.
Anne Applebaum is an adjunct fellow at AEI.
To understand what is happening in the European economy, it is necessary to first toss out assumptions about Europe’s political geography.
There are no comments available.
1150 17th Street, N.W. Washington, D.C. 20036
© 2014 American Enterprise Institute for Public Policy Research