“The European Union has a flag no one salutes, an anthem no one sings, a president no one can name, a parliament whose powers subtract from those of national legislatures, a bureaucracy no one admires or controls, and rules of fiscal rectitude that no one is penalized for ignoring.”
— Washington Post columnist
Americans have made immense investments in blood and treasure to sort out European folly. It behooves us to keep an eye on our investment. Especially now that a rancorous debt dispute between Germany and Greece threatens European stability.
Remarkably, Europe’s history once again is driven by Germany. (Bias alert: German Nazis plundered my Norwegian homeland during my childhood.)
German Chancellor Angela Merkel, de facto leader of Europe, calls the shots in the 28-member European Union (EU), 19 of which use the euro. Ironically, the EU and euro were created to act as counter-weights to Germany and secure peace on a blood-soaked continent by binding former enemies to consensual EU dictates and a common currency.
Industrious, fiscally prudent Germany has prospered under the euro. A model post-war citizen, Germany seemingly had learned to play nice with others. Until now.
Greece’s staggering $332 billion debt is too big to be repaid without some relief, says the International Monetary Fund (IMF), the taxpayer-funded loan bank for governments. It’s headed by the second-most powerful woman in Europe, France’s Christine Lagarde.
Germany vehemently opposes debt forgiveness. German finance minister Wolfgang Schauble, widely vilified for heavy-handed humiliation of Greece, opened a boiling fissure in the EU by suggesting — perhaps rightly — that Greece leave the euro zone.
For those who missed the 20th century, a little context:
A mistake was the root cause of the Nazis’ unwelcome arrival on my family’s doorstep during World War II. This mistake was made by the victors after World War I, the historical narrative holds. They imposed punitive repayment requirements on Germany for launching a war that wrecked Europe. It proved impossible for Germany’s economy to recover under the harsh terms, and it defaulted in 1933 — as Greece had earlier on a $1.7 billion repayment to the IMF after five years of austerity.
British economist John Maynard Keynes correctly warned in 1920 that the repayment demands imposed on Germany were politically dangerous. Despair and humiliation are said to have driven the Germans into Hitler’s embrace. Deutschland ueber alles (“Germany above all things”) was Germany’s mantra as it launched World War II, wrecking Europe once more.
With Europe once again laid waste, this time the victors, at American prodding, smartened up. They forgave half of Germany’s debts and offered generous repayment terms, clearing the way for Germany’s economy to recover and dominate Europe today. Among the nations that forgave German war debt? Greece.
“Germany is the country that has never repaid its debts. It has no standing to lecture other nations” about debt repayments, the prominent French economist Thomas Piketty argues. Perhaps national amnesia causes Germans not to treat deadbeat Greece as kindly as deadbeat Germany was treated?
Germany’s aggravation is perfectly understandable; its intransigence is not. While German taxpayers pay the lion’s share of feckless Greece’s bills, Greeks themselves evade paying taxes, retire at age 61 or sooner, renege on promised economic reforms and elect corrupt, incompetent governments. And this from the birthplace of democracy!
Germany argues that if Greek debt is forgiven, other fiscally shaky countries may demand more relief, and this could presage a financial contagion that unravels the whole EU/euro security-in-unity project. So Merkel has dug in her heels to save the EU and its currency.
EU critic George Will breezily dismisses Europe’s desire for unity as “a misbegotten enthusiasm.”
Maybe you had to have been there.
After two ruinous, barbaric wars, Europeans were anxious to unite their quarrelsome nations. So anxious that geographically strategic Greece be allowed to join the euro zone in 2000 even though it was tacitly understood that Greece didn’t meet the fiscal requirements; it cooked its books to obtain membership.
So how much responsibility for this debacle falls on those who subsequently lent hapless Greece these astounding sums? Hello?
The EU is beset by glaring “democratic deficits.” It lacks accountability and transparency. Unelected bureaucrats in Brussels drive decisions made behind closed doors, at far remove from affected citizens. Nations “pool” their sovereignty in the EU — easier done where power historically has flowed down from monarchs, not up from the people. It’s a faux democracy. Still, the EU is worth reforming.
The euro zone? Not so much. Critics call it “a burning house with no exits.” Imposing a common currency on countries that lack common fiscal policies and a common national treasury cannot work, they argue. That requires one national government, not 19.
Locked into the euro, bankrupt nations can’t devalue their own currencies to save themselves when their economies falter. Which may be why the IMF now spends two-thirds of its assets — some of them yours — not to assist undeveloped countries but to prop up failing euro zone nations. Ouch.
Merkel justifies the painful treatment of Greece as necessary to “restore trust.” But Germany too now finds itself with a trustworthiness deficit — of its own tone-deaf making. It would be a supreme historical irony if Germany, in a praiseworthy but blinkered effort to save a continent it twice destroyed, now pursues a high-handed, inflexible path that wrecks Europe yet again.
Solveig Torvik lives in Winthrop.