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Friday, February 04, 2011

Closer together or further apart?

EU leaders meet today in a bid to patch up the eurozone (while also dealing with other pretty complicated challenges such as Egypt and energy security).

Dutch daily De Volkskrant yesterday had a feature ("Leer eerst eens je broek op te houden") looking at how the atmosphere in the EU's diplomatic circles is becoming increasingly abrasive and more tense. The paper claims to have obtained various statements from diplomats, making clear the eurozone crisis and ongoing bailouts are complicating relations within Europe.

And it ain't pretty. Here goes:

A diplomat from a "small and rich country" finds it difficult to stay calm, and has to express his anger at what he explicitly refers to as the "the PIGS", Portugal, Ireland, Greece and Spain. He says:
it is incredible: these countries are still posturing. Then I think to myself: well, well, perhaps you should learn how to stand on your own two feet first.
When asked if he is not now insulting them by using such harsh language he snaps back:
it's their own fault [why should] hard working Dutch and saving Germans [pay the bill] for the Greeks, who strike continuously, even now when they have received €110 billion in emergency support from us.
A German diplomat gets more and more heated as he talks about Commission President Barroso's calls for propping up the eurozone bailout fund with more cash. Frustrated, he exclaims:
whose money is Barroso actually talking about? Is it his own? No! It's the money of the Germans, the Dutch, the French, the Finns. Is it so crazy that we get frustrated?
A high ranking Commission official complains about the "roughening of the mood":
the word PIGS alone. The image it conjures of responsible Northerners having to pay for a bunch of lazy people sitting under a palm tree by the Mediterranean. That leaves scars. Most citizens in Southern European countries are not to blame for the economic situation in their country. But they are being depicted as the trash of Europe.
A Portuguese diplomat adds that
I see my German and Dutch colleagues getting more and more authoritarian, as if they are in charge. Even the Finnish, who normally don't open their mouths, make interventions. (...) At the same time I get less and less involved in the discussion.
A diplomat from Ireland, which just received a €85 billion EU/IMF emergency loan, concurs:
I watch my words, it's like that. Our banks are down, not the German ones. Our economy is floored, not the Dutch one. We lost, then you better keep quiet.
Spain, which likes to see itself as one of the big powers of the EU, has a harder time accepting the new balance of power. Spanish Europe Minister Diego Lop├ęz Garrido privately tells journalists:
It's one thing to accept that Germany and France are important for the EU. But it's a whole different thing to accept that they impose an ultimatum.
Frustration is growing with the Franco-German motor, which is increasingly looking more like a tank. "If the other 25 member states would please sign here", is how a Commission official summarises the mood.

Germany, in particular, is causing a lot of anger. France is being taken less seriously. A diplomat from an Eastern European country notes,
The country is after all a bit of an open air museum. That you can keep up such grandeur with a mummy state and a couple of car factories is causing jealousy, but no annoyance or fear.
A German diplomat comments that the Deauville summit, at which Merkel and Sarkozy agreed on the thrust of a new economic order for the eurozone,
was a communication disaster (...) It looked like a diktat. But without Deauville we would still just be talking.
An Irish diplomat remarks that "the dynamics within the EU has completely changed", adding that Germany has evolved from a "mediator" in 2007, when the country held the EU Presidency, to a
role model, but one which imposes itself in a binding way. I understand it, though: we receive, they pay
The Commission official adds that the Commission hears plenty of complaints from Southern European leaders:
they say they are being belittled, or put to the side. The whole Commission is concerned. We should really watch out. This leaves marks. The blood is sticking to the walls.
He notes, however, that there won't be a revolt because of the upcoming discussions on the EU's long-term budget: "they won't bite the hand that feeds them."

Pew! Some people claimed that European Monetary Union was a “dream”. If so, Europe is now waking up to a nightmare.

Is this simply normal bickering in what are tense circumstances or something more? We're not entirely sure, but as Milton Friedman predicted in 1997:
The euro will aggravate the political tensions to the extent that economic shocks, which beat countries in different degrees but which could until now be facilitated through exchange rate adjustments, will change into political controversies.

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