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Billions of Euros have been poured into the EFSF, Eurozone bailout fund; but is solidarity with fellow members a good enough motivation to contribute?
The single currency bloc has been able to withstand the pressure created by the debt crisis and stick together, but the emphasis on solidarity among the European elites has played an important role in preventing a collapse of the Eurozone. Yet, there is deepening resentment towards the monetary union among people across the continent.
Overcoming the national banking crisis has been beyond the governments’ financial resources and capacity in some countries. Portugal, Ireland, Greece, Spain and Cyprus have turned to the EU for financial help. Brussels, the IMF and the German government stepped in with financial rescue plans in the form of loans with attached conditionality: reforming national economies, privatisation, wage and spending cuts, and increasing taxes have been requirements.
The European elites have argued that a failure of finances in one country would spread to others within the currency bloc in the absence of financial aid. Bailouts would stop bond yields from soaring, save the Eurozone, restore credibility in the financial markets, but primarily, they would prevent the core members´ banks from acquiring huge losses.
Ireland has boosted Brussels’ ego as it registered growth of 0.9% in 2012 following the bailout in 2010, and now the EU hopes to replicate the success elsewhere. However, these results have been achieved through tough austerity, and it has angered the populations of not only Ireland, but also Greece and other countries affected by the strict policies.
Austerity has caused widespread job losses and a general drop in the standard of living in the troubled economies. The changing of governments, and the rise of extremist parties, reflects the public resentment, but it has also raised concerns among many.
The only real solidarity has been that of the people’s anger against banks that have received major bail-outs.
The countries hit by the crisis have argued that austerity would impinge their growth and sovereignty. Therefore, the negotiations of the bailouts have been perceived as a zero-sum game by the debtors. This raises a question of what solidarity politicians in both the creditor and debtor countries can offer to their citizens at home, for assuming liabilities and accepting the loss of sovereignty respectively.
In the case of Cyprus, the ECB threatened to cut off the Cypriot bank, Laiki Bank, of the emergency support if the government rejected to pass the bailout programme, which included depositors’ levy in order to reduce the rescue programme. Additionally, democracy has been compromised by placing technocrats in the top job in Greece and Italy to ensure reforms would be implemented.
Slovakia has committed nearly €8bn to the EFSF bailout fund, however, the vote to increase the fund led to the Slovak government’s collapse in 2011. Many in the country argued that it was unfair that a country in their financial situation had to give money to the EFSF, especially given the countries benefiting from it were more developed than Slovakia.
Brussels responded that Slovakia had benefited from EU accession and the Euro; therefore, it should pay its share into the bailout fund. A notion of reciprocity in the debate about solidarity applies, but at what cost for the new poorer Eurozone countries?
Some advocate that austerity measures should be designed according to the countries’ needs, and they should be implemented gradually instead of cutting too fast too deep. Germany could only look to the consequences of the social instability and high unemployment during the Weimar Republic, but it seems to be a taboo subject in the country.
The problem is that Germany has not felt the crisis as other Eurozone members have. Instead, it currently enjoys a current account surplus, and its export-oriented economy has benefited from the weakened euro.
Politicians have used the word ‘solidarity’ more frequently as the crisis has unfolded. However, everyone perceives solidarity differently, depending on their interests. The only real solidarity has been that of the people’s anger against banks that have received major bail-outs.
Politicians understand the seriousness of the crisis and that is the reason why they tend to call for solidarity, which does not seem to have a straightforward meaning and function. This has prompted a debate about solidarity, what it means, and what kind of interpretation it should have, drive and complete the Eurozone project, but, primarily, build the confidence within and outside the single currency bloc.
On the one hand, driven by self-interest, using pressure and threats, curbing sovereignty and bypassing democracy have been the tools used by the core to get the others to do what it wants. On the other hand, rejecting reforms and austerity, fear of the growing German influence and its dominance have proven to be controversial and unacceptable for the periphery. Feathers of European integration have been disturbed caused by the rhetoric of solidarity.
The positive meaning of solidarity should be trickled down more evenly, which signals finding more appropriate choices of policies in order to give the European monetary project more credibility, but also acknowledging the wrongdoing by those who failed to prevent the crisis. The two notions of solidarity and responsibility seem to be intertwined.