A troubled EU is nothing to snicker at

WELLS: Rather than point fingers, European leaders should fix the pathologies that have crept into the system

A troubled EU is nothing to snicker at

Christian Hartmann/Reuters

The good news is that when the cover of Canadian Business magazine says “Europe’s Still Doomed,” they don’t actually mean tens of millions of Europeans are about to die a horrible death. For centuries that was the standard for measuring a bad day in Europe.

France lost more of her citizens in the Franco-Prussian War of 1870-71, about 139,000, than Canada lost in the First and Second World Wars combined, and it was barely getting warmed up. Next came 1.7 million French deaths in the First World War, then another half-million in the Second World War. Maybe seven million Germans died in the latter war, and nearly six million Poles. Belarus, at the time a Soviet republic, lost a quarter of its population. It’s easy for us to be glib about these things. They remain present and felt in Europe.

Canadians who chuckle at Eurocrats and Brussels bean-counters don’t pay enough attention to what those tweedy legions of paper-pushers have replaced. They’ve replaced hell. That doesn’t mean they’ve brought heaven, far from it, but the distance travelled is worth remembering. Germany and France work far more closely together than Canada and the U.S. do. Europe’s attractive power has pulled a dozen countries away from Russia’s grasp and closer to prosperity. The European Union’s eastern border, even with quasi-failed states like Belarus, is at least peaceful.

European life since the late 1940s has been shaped by “a miracle of world-historical importance,” Robert Kagan wrote in 2003: “the German lion has lain down with the French lamb.” Kagan is a party-line Republican hawk, a foreign-policy adviser to John McCain in 2008, but he will take Eurocracy over slaughter any day. Fortunately, wherever the European Union is headed, it’s not where it came from. Most of the changes there are permanent. Whether the euro currency lives or dies is a marginal difference.

Still, Europe’s architects have been cutting corners and backing away from hard decisions for years. The limitations of their handicraft are catching up to them.

There were always going to be richer and poorer countries in the European Union. Transfer payments are a reasonable response, but they create resentments at both ends. The rich countries don’t like to pay; the poor ones don’t like to be told what they can do with the money. This is the way of the world, but within countries—say, between Alberta and Atlantic Canada—people are more willing to make sacrifices for their neighbours than between countries. It doesn’t feel right to Germans that they pay for more generous social programs in Greece. They didn’t complain for a long time. Now, when everyone has to make sacrifices, they notice, and they don’t like it. But the Greeks are tired of lectures on fair play from France and Germany, because France and Germany have gamed the system too.

“Neither [Angela] Merkel nor myself were in office when they decided to let Greece into the eurozone,” Nicolas Sarkozy told an interviewer last month. “That was a mistake.” Why? Because to abandon a legacy currency and use the euro, a country had to have its fiscal house in order: inflation and interest rates close to those of the best-performing member states, a budget deficit under three per cent of GDP and public debt under 60 per cent of GDP. Greece missed a bunch of those criteria.

But it’s not as though Greece was alone in this delinquency. Germany’s debt was too high in 1998, when it was supposed to meet the convergence criteria, and it was heading up, not down. Belgium, France and Italy used what the Belgian economist Paul de Grauwe has called “creative accounting” to hide deficits that should have disqualified them. Sarkozy has been less creative. France’s deficits have been well above the three per cent limit for as long as he has been president. The euro rules are “instruments that are used in arbitrary ways to pursue political objectives,” de Grauwe wrote. And yet Sarkozy and Merkel lord it over other countries without shame. In August they called for constitutional amendments in every eurozone country to require balanced budgets. They called for automatic penalties against transgressor states. Would those penalties apply to France and Germany? Don’t be silly.

So the divisions in Europe don’t have much to do with fiscal virtue. Nor do they have enough to do with the consent of the governed. George Papandreou became Greece’s prime minister fair and square, in a 2009 election in which his party won a clear majority of seats. His political career ended when he suggested Greeks should vote in a referendum on the deal they will have to live with. Nobody elected his successor. This sort of thing is annoying enough on an ordinary day. In a global financial crisis, when Greek families have made plans under old assumptions that no longer apply, it must be infuriating.

Now most of Europe’s leaders want to hurry toward deeper integration, on the theory that the only way out of the current mess is to do more of what got them into it. They’d be wiser to pause, and fix some of the pathologies that have crept into the system. The biggest fight in Europe, the battle for peace, is won. Making the union align more closely with Europeans’ sense of fairness is enough work to keep every European leader at home, and it’s a worthier task than finger-wagging across borders.

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