MADRID – Economics, particularly economic theories, always yield in the end to political imperatives. That is why Europe’s fast-changing political landscape, reshaped by electoral insurrections in France and Greece against German-backed fiscal austerity, is bound to affect Europe’s economic policies as well.
Such an imperative has been at work throughout Europe’s postwar history. Indeed, Europe’s shift from the modest customs union of the European Economic Community to the single market and common currency of today’s European Monetary Union was itself a fundamentally political move, one with strategic implications, of course. France wanted to tame German power by harnessing it to the European project, and Germany was prepared to sacrifice the Deutsche Mark for the sake of France’s acceptance of a united Germany, the nightmare of Europe’s recent past.
An economically robust Germany is, without doubt, vital to the European project, if only because history has shown how dangerous an unhappy Germany can be. Indeed, it was thanks to the euro – and the captive European market that goes with it – that Germany today is the world’s second-leading exporter (China surpassed it in 2009).
Europe, however, has always found it difficult to come to terms with an over-confident, let alone arrogant, Germany. The current political turmoil in Europe shows that, regardless of how sensible Chancellor Angela Merkel’s austerity prescriptions for debt-ridden peripheral Europe might be in the abstract, they resemble a German Diktat. The concern for many is not just Europe’s historic “German problem,” but also that Germany could end up exporting to the rest of Europe the same ghosts of radical politics and violent nationalism that its economic success has transcended at home.
Once the crisis became a sad daily reality for millions of unemployed – particularly for what appears to be a lost generation of young, jobless Europeans – EU institutions also became a target of popular rage. Their inadequacies – embodied in a cumbersome system of governance, and in endless, inconclusive summitry – and their lack of democratic legitimacy are being repudiated by millions of voters throughout the continent.
Europe’s experience has shown that the subordination of society to economic theories is politically untenable. Social vulnerability and frustration at the political system’s failure to provide solutions are the grounds upon which radical movements have always emerged to offer facile solutions.
A concomitant of such Kurzschluss between mainstream leaders and voters has always been the politics of accentuated ethnic identity, ultra-nationalism, and outright bigotry. Former French President Nicolas Sarkozy ended up trying desperately to appeal to those very sentiments in his last-ditch effort to avert his political demise.
What we have seen across Europe of late is a rebellion of voters against mainstream politics. In the first round of French presidential elections, the extreme right and left received more than 30% of the vote, with Martine Le Pen’s anti-EU National Front threatening to supplant the center-right Union for a Popular Movement as the country’s new mainstream rightist party. In Greece, the party system’s dangerous fragmentation into a range of smaller groups, combined with the robust emergence of a new anti-austerity left, Alexis Tsipras’s Syriza, and a neo-Nazi right, has plunged governance into to a state of total paralysis.
Ironically, what the civilized protests of mainstream parties in peripheral Europe failed to achieve – a relaxation of the dogma of austerity – might come about as a result of the politics of brinkmanship proposed by the Greek radical left. By its blatant rebellion against German-dictated austerity, and by making Greek withdrawal from the euro a credible possibility, Syriza is bringing closer than ever the euro’s chaotic collapse in Europe’s periphery, if not beyond. By insisting that the choice is between new terms for the Greek bailout or a Doomsday scenario, Syriza could be creating the possibility for a quasi-Keynesian resolution of the European crisis.
Tsipras might be “impetuous,” as his mainstream adversaries from the center-left Pasok and the center-right New Democracy would say, but he is not irrational. His is a rather sober reading of reality: the austerity plan has become a highway to social hell for his countrymen, and would likely condemn Greece to long years of ruinous depression within a permanent debt trap, and possibly to a breakdown of democracy.
Merkel’s now legendary obstinacy eventually might have to succumb to the imperatives of politics. It is one thing to ignore European Commission President José Manuel Barroso’s call for a more flexible economic policy, and quite another to dismiss out of hand the powerful message coming from French and Greek voters.
Nor is it a minor political headache for Merkel to have to face an anti-austerity alliance of Italian Prime Minister Mario Monti and the new French president, François Hollande. Spain’s capacity to withstand an austerity “cure” that only sinks it deeper into recession must also have its limits.
So now Germany’s finance ministry, the guardian of fiscal rectitude, is considering measures such as using the European Investment Bank to foster growth, issuing EU “project bonds” to finance infrastructure investment, and allowing wages in Germany to rise at a faster pace than in the rest of Europe. The imminent – indeed, inevitable – victory of politics over recalcitrant economics may well be at hand.
Copyright Project Syndicate