Eenie, meenie, miney, moe, how to save the Eurozone? by Alexandra Gallovičová

“Everything depends on Germany now. Europe is dancing to Germany’s tune.” What used to be a situation assessment made by Charles Grant, director of the Centre for European Reform, has become very much common knowledge for those watching the situation of the Eurozone. Those two sentences alone set up the wonderful paradox of the current crisis; the country that was supposed to be economically weakened by the Euro (an initiative of long-term rival France) is the one calling the shots in an attempt at saving it. In fact Germany fared exceedingly well even throughout the hardest periods of the crisis – in 2010, its economy grew by 3.7 %. Can the average German thus be blamed for thinking that the cases of long-term recipients of EU Cohesion Funds – most famously Greece – could have been avoided? Moreover, can Germany be blamed if the euro falls?

Germany has found itself stuck between the hopes of the EU and a coalition government that is starting to squabble amongst itself. Chancellor Merkel’s insistence on the importance of the euro’s survival is not unanimous in the ruling coalition. Opposition to the ideas of the CDU ranges from the nationalistic-oriented opinions of FDP Minister for Economics and Technology Philip Rösler to CSU leader Horst Seehofer raising the possibility of a Greek exit from the euro zone – certainly not what Merkel would wish to hear from her sister party.

But the truth remains, after two years of attempting to fix the leaking pipe in the Eurozone machinery with its own money, Germany thus far has only an increasing water level and fewer patching supplies to show for its efforts. And the distinctly insensitive nickname of “euro-Nazis” from the “euro-destroying” Greeks, as German newspaper Bild terms the other nation. Germany isn’t seen as a generous benefactor; Greece isn’t seen as a worthy member of the euro-club. Both sides are beginning to tire. The situation is hardly helped by the fact that the markets are already testing the potential collapse of the euro. The worst thing is that this is becoming a real possibility. The fate of the Eurozone may very well depend on someone leaving it – be it Greece or, the less obvious choice, Germany itself.

For Greece, leaving the Eurozone might not be such a bad prospect, at least in terms of Greek public opinion. If the recent protests are anything to go by, attitude towards the troika of organizations governing the country’s economic situation, particularly the EU’s German-led rescue efforts, is hardly favourable. Withdrawing from the Eurozone doesn’t have to be permanent; but a time-out for Greece could allow it to fix its economy without being circled by the European Union, the International Monetary Fund and the European Central Bank. George Athanassakos outlines the declaration of bankruptcy as the best possible scenario for Greece, internally and in terms of its EU membership.

The more surprising alternative is the possibility that Germany might exit the Eurozone, especially considering the CDU’s insistence that it is the most invested country in the project. 55% of Germans didn’t want the euro when it was adopted; 56% wished for the Deutschmark back in 2008. Promises about euro stability ring hollow in the current situation. The population is asking itself how many other countries they have to bail out before they’re done. The euro would be a much weaker, but possibly more stable currency. But if Germany were to withdraw from the Eurozone, how long before its neighbours and others would want to join it?

Of course, the Eurozone isn’t keen on losing any of its members – if this were the case, the European Central Bank wouldn’t so easily be ignoring Article 104 of the 1992 Maastricht Treaty, which prohibits “the purchase directly from [Member States] by the ECB or national central banks of debt instruments.” For the ECB to go directly against an EU treaty, the situation the EU is facing cannot be taken seriously enough. Of course, Article 104c also states that “Member States shall avoid excessive government deficits.” It doesn’t help that Article 104 was stipulated as Germany’s condition for joining the EU system of central banks. The ECB wasn’t able to keep its word on staying out of politics and focusing on monetary stability. Extreme situations call for extreme measures.

 

Nevertheless, the EU doesn’t seem to be willing to take a decisive step towards a less extreme measure on the road to long-term stabilization – a stronger political union to back up the EMU. From its creation, it was assumed that the EU would eventually form a political union once its economic union was deep enough. We are now in the third stage of the EMU, with several of the newest EU members having joined the monetary union in recent years. The question is: why isn’t the EU moving towards closer political integration to support this framework?

The EU is an unprecedented entity on the world political stage, due to its diversity as much as its lack of decisiveness in terms of what it wants to become in the future. And, unfortunately, after the rejection of the 2004 Constitutional Treaty, EU policy makers might not be so keen to leave the future of the EU up to highly divided public opinion. Member states are unwilling to surrender their own powers to the EU, and their citizens are reluctant to trust in an organization that seems too far removed from their daily life to be of any help or use to them. Deepening integration hardly seems to be a popular move; even if the 2009 Treaty of Lisbon carefully removed any mention of a common European identity, the newly-created Barroso-Van Rompuy-Ashton troika hardly seems to have changed much for the day-to-day EU.

One hears of national leaders at the forefront of the efforts to halt the crisis every day; the truth is that despite empowering the European Parliament with the latest treaty, the EU remains as distant from the everyday citizen as ever. It therefore isn’t surprising that even the casual observer sees the strongest link of the chain as the one calling the shots. Germany is that strongest link and it’s on Germany’s terms that the situation is being resolved. Therefore, it does nothing to assuage a Eurozone citizen’s doubts when Mr Barroso and Ms Merkel cannot see eye-to-eye on the subject of whether or not to use Eurobonds to prevent the euro’s demise.

The EU is slowly but surely heading towards a choice: create a stronger political union or relinquish the Euro. ECB President Jean-Claude Trichet views it as a matter of concerted action, not of “mutual surveillance of economic policies.” His suggestion involves the creation of a common finance ministry to bind together the nations’ budgets – the absence of which was a weakness in the creation of the euro. Head of Germany’s central bank Jens Weidman also suggests that a choice is imminent: integration or individual responsibility. All clues thus point to deepening the political union as the evasive peaceful solution of if not this then at future crises. And perhaps a means for the debt crisis gain that evasive silver lining German philosopher Jürgen Habermas hopes for; promoting a cross-border awareness of a shared European destiny.

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