Greece and the mythology of the EU

April 6, 2010

Laurence_CopelandLaurence Copeland is a professor of finance at Cardiff University Business School and a co-author of “Verdict on the Crash” published by the Institute of Economic Affairs. The opinions expressed are his own. –

The (probably temporary) resolution of the Greek crisis seems to have produced a result which was unexpected – by me, at least. For the first time in the history of the EU, the German taxpayer has refused to be sacrificed on the altar of European solidarity.

To see the significance of this event, recall that the Eurozone was born out of the willingness of former Chancellor Helmut Kohl, supported by the majority of Germany’s political class, to ride roughshod over the wishes of his electorate in the name of the country’s supposed postwar responsibilities and the associated moral imperatives.

By contrast, the current chancellor’s stance is an eloquent statement that Germany no longer feels any compulsion to play that role, that it can now be guided by its own national self-interest just like France or Britain, and that it is time for the EU to grow up and stand on its own two feet.

In the meantime, in the same way that, in spite of decades of brave talk from Brussels, Europe still depends on NATO for its defence, it will now have to rely on the International Monetary Fund for its economic security, Economic and Monetary Union notwithstanding.

In an important sense, this is the old EU problem recurring, going back to its birth in 1958. From the outset, it was the triumph of top-down government, the result of a series of key decisions taken in smoke-filled rooms by several generations of mostly French and German “statesmen”, then proudly announced to a waiting world like Papal edicts, with the job of coercing reluctant electorates left to domestic politicians using whatever shabby and dishonest tools came to hand.

It is too soon to conclude that this process will no longer work – never underestimate the ingenuity of European (including British) politicians in finding ways to bribe the voters with their own money to act against their best long term interests – but the Brussels way of doing things has certainly suffered a major setback.

The Germans have not choked on the gross cost of a bailout. After all, Greece’s economy is, barely a tenth the size of that of Germany, and Portugal is even smaller, though the prospect of Spain and Italy close behind them in the queue is far more daunting.

The key issue is one of trust, however – or, rather, of its absence. It is not that the Greek government is in denial. Unlike our wonderful British politicians with their seemingly unendless list of sacred cows they promise never to slaughter, their Greek counterparts are committed to delivering painful budget cuts.

But the German “nein” effectively questions either the extent to which the Greek government’s resolve will stand up to the protests and strikes it is already facing on all sides as it announces where the axe will fall, or even the ability of the government itself (and possibly Greek democracy) to survive.

In these circumstances, the Germans have wisely decided to steer well clear of a situation in which they could end up with the worst of both worlds, being cast in the role of the domineering Germany of old while still failing to get their debts repaid. It follows that those who concentrate on the economic credibility or otherwise of Greece’s retrenchment plan are missing the point.

As ever, talk is cheap. As anyone who has ever tried slimming knows only too well, guaranteed weight-loss diets are ten-a-penny. Germany, having been once bitten when Greece and the other Club Med countries cleaned up their act just long enough to satisfy the EMU entrance criteria, only to backslide as soon as they were admitted, is now twice shy.

Formulating a plan for fiscal stability is the easy bit; carrying it through is the hard part. In this regard, Germany is in a no-win situation: refusing a bailout invites accusations of non-communautaire selfishness, but lending to Greece risks even greater opprobrium if, or rather when Germany presses for repayment or attempts to restrict the Greek Government’s freedom to carry on spending.

A senior Greek politician has already given a foretaste of the possible reaction, with an attack on Germany harking back to the wartime occupation. Under these circumstances, Germany would be crazy to get involved.

As ever, the underlying problem is the central founding lie on which the EU has been based ever since its inception in 1958, the myth that somehow the people of Europe feel the urge to unite in one nation, and that therefore Berliners feel the same responsibility and warmth towards Greeks, Italians or Britons as they do towards Bavarians or Rhinelanders, and vice versa.

Talk to anyone outside the political class and you find this is as much wishful thinking today as it was when the Treaty of Rome was signed. What unites Europeans, over and above the determination to get out of Brussels in subsidies at least as much as they contribute in taxes, is little more than shared anti-Americanism, to an extent which varies from country to country.

All the rest is simply politicians’ hot air. So far, they have always been able to paper over the cracks, or more often stuff the cracks with money. As soon as the money runs out, so does the Euroenthusiasm.


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Its true, the euro enthusiasm is to be found in decreasingly close proximity to the offices of Barroso and van Rompuy.
The admission of the countries mentioned above raised eyebrows at the time and the fact was it was too much too soon which shows the intentions of those at the helm – then and now.
Their aim was, and still, is enlargement and power.Monetary unions have existed before the EU but largely where the economies were all doing the same like e.g the East Carribean Dollar Economic Area.
Maybe Germany, France, Britain with Holland, Sweden, Denmark,Finland, Austria with Ireland would have made a more viable Eurozone than what they have got.It was smash and grab.A vital pillar for the superstate -“irreversable”.
Well very little is irreversable and monetary unions definitely can be reversed.Singapore, Malaysia, along with Brunei embarked on their own monetary union at the time of independence from the UK. Just three countries,no way as disparate as the bunch cobbled together by those that wanted to go down in history as architects of new Europe.Comparatively similar economies ,though today they exist without Malaysia.
The people of Europe have been sold a lie with Euro and the EU and like most lies, the truth normally surfaces despite the best interests of those who lust for power.

Posted by Clive | Report as abusive

This is an article written so obviously written by a Brit, where there is utter confusion and misunderstanding between economic power & military power. EU was not set up to be a military power so it can never challenge the US on the battlefield. It is an economic alliance. Further, as we see in the US, California may be in a worse state than Greece, but it is sorrounded by serious support. Is it so wrong to want to emulate the greatest economic & military superpower in the world??? – written by an Asian bank’s Risk Manager

Posted by onlyafeleft | Report as abusive

In a simple way this harks back to late 19th and early 20th century strategic political thinking where countries had their own sphere of influence. It is within this context that one can see EU/USA/Russia/China having the economic muscle to dictate/further their own causes. Without the EU it is difficult to envisage any EU country on an individual basis sitting on the same table as USA/Russia/China. This is why EU will survive because without this their sit on the international stage would disappear. As such it is not that people of the EU think “European” but the political reality that they would be nothing without the EU at a strategic level.

Posted by Manoj Patel | Report as abusive

Well said, a very astute article!

Posted by Jimmer XXX | Report as abusive

The bottom line is that the only thing Brown ever got right was not to join the euro. We’d be up the creek with Greece now if we had, and there are several other countries that soon will be. The ludicrous spectacle of France’s Finance Minister recently criticising the Germans for being more successful than everybody else shows just how perverse the “EU model” vaunted by the oh so odioso Barroso really is.

Posted by Matthew | Report as abusive

A sharp analysis, but I was not able to find “unendless” in the OED – am I part of just a tiny minority who wish to claw the English language back from the careless hands of the technicians and commentators on matters economic?

“onlyafeleft” asks the rhetorical question of whether we should want to emulate the greatest military and economic superpower – the USA – or not. Originally myself from the land of “utter confusion and misunderstanding between economic power & military power” I think the answer is provided by comparing the yield curves of bunds and US Treasuries.

The USA, politics and all, is now the property of the investment banking community which even according to its own prominenti adds little or no value in economic terms. Europe should not be encouraged to adopt or extend that model lest its social and economic variety disappear – absorbed in the pursuit of the bankers’ bonus.

Posted by Bozzy | Report as abusive

This article hits the nail on the head. But to those of us who have no faith in the ‘European Idea’ Prof Copeland’s ideas increase our mystification as to how Britain got into this mess in the first place. I remember the level of discourse during the run-up to the referendum which took the UK into the EU. It rarely got more sophisticated than: ‘we’ll get cheap wine’, and look how that turned out. Both directly and indirectly, Britain has been impoverished by the EU and this can only get worse.

The commentor who uses the ‘only by being in the EU do we get a seat at the top table’ argument is barking up the wrong tree. Subjugating British interests to the chaotic, dishonest and undemocratic EU simply subtracts from the UK’s world role, which has far more to do with the English language, the time zone it is in, its history of political stability and its uncorrupt legal system.

Few welcome the needless stresses caused to Greece by its mistake in entering the Eurozone. However, as an emblem of that huge mistake, the so-called European Union, the present situation could not be improved. Oh, and for those who think that distaste for the EU is the same as distaste for Europeans, I myself have happily traded with and lived in European countries for years. But I say that, apart from needing a customs union, we should all say ‘vive la difference’.

Posted by John Lamble | Report as abusive

very good article. what is been critically over looked is how the ordinary European on the street is been affected. the Euro was adopted too quickly for many countries such as Greece and Spain (which had lower living costs), so devaluation is now impossible. the living standards increased for the rich and some middle classes, but now the money has gone the Euro is creating large pockets of hardship which is leading to increasing grass roots rebellion. something that has the potential to cause social upheaval (Europe has a history of this). expect a summer of strikes, already we are seeing the first swallows of spring in what may be a turbulent summer.

Posted by blackantelope | Report as abusive

Germany and France operate export driven trade surplus economies and as such have always derived maximum benefit from a central european regulated and dominated commercial union.
Both these countries lack any significant internal consumer demand therefore to enable the game to continue either they find new customers for their products, start to ratchet down growth or the most likely scenario just instigate a back-door bail out of the PIGS and resume business as usual.

Posted by shortsqueeze | Report as abusive

The columnist’s real name is Norman Tebbit.

Posted by Daniel R | Report as abusive

As a 24 year old I know for a fact that the educated European youth feels very much European. It will take decades before we can achieve that sort of shared social identity as people of the US or Canada, but we are on the right track. And so we need to invest more in building the foundations now. Germany should not pay for other countries’ mistakes, but the issues of European integration must not be sacrificed through disputes of such ordinary nature as money.

Posted by Piotr Bakker | Report as abusive

Germany lends money to various entities, so why not Greece.
It’s not a grant. It’s a loan at pretty good rates.
Give me a break. Do I sense a touch of racism.

Posted by Andy | Report as abusive

About time soemone came to their senses and write what is right. Some aspects of “Euro-ism” such as standard rules for all, and bail-outs for another country, without repayment guarantees will not work.
Why should only the wealthier nations provide the bail-out and not some input from the other Nations. Are the newer member nations going to put their hand in their pockets or just the older established Countries.
Too many officials for the world’s largest committee, thats all the EU in Brussles is.

Posted by Colin Gwyther | Report as abusive

“…or even the ability of the government itself (and possibly Greek democracy) to survive.”

For those that have a little knowledge of Greek politics and society, it is amusing to see people questioning the survival of Greek democracy. They are obviously referring to the military regime that lasted from 1967 to 1974. Now, in 2010, the army has absolutely zero presence in politics, and any talk of that is considered absurd in Greece itself. You see how much people are opposed to many government measures – imagine the backlash in a different situation.

Posted by george | Report as abusive