EU: What Are Latin Countries Waiting For ?

 July 23, 2015

Very few American experts grasp the motivations behind the construction of the European Union. As a result, American specialized literature abounds with misguided comparisons, such as that between the US Civil War from the 19th century and today’s tense situation between Europe’s North and South.

Yes, the EEC was initially formed in 1957 to prevent intra-European military conflicts in the future and to create a large-enough internal market for aspiring member-states to rebuild their economies and prosper.

Nonetheless, the European Union does not and will never have the same objectives as – to use another example in US commentary columns – American colonists did against British domination at the end of the 18th century. This is so because unlike nations around the world, the countries of Europe appeared on the ruins of the Roman Empire. Whenever politicians, kings, emperors and military leaders attempted to unite the continent’s nations into larger political units, their inspiration – whether consciously or not – has always been the Roman Empire.

Before 1957, quite a few European nations had tried their luck, rather unsuccessfully, at duplicating Roman hegemony across the continent. The emperors of the Holy Roman Empire, followed by Napoleon or Hitler have all done their best, in their own way, to emulate the Romans’ success by military means. Their efforts eventually ended up in failure, as no European nation was either big enough or strong enough to impose its will on all the others except for brief periods of time.

For the first time in the continent’s history, however, the launch of the political project of the European Union aimed to achieve unification by peaceful and democratic means. The experiment has been partially successful until two decades ago, when neoliberal policies and an ill-inspired monetary union have fatally undermined it.

When it comes to monetary union, it is also useful to remember that this was largely a French-inspired project which Germany joined only grudgingly. The first monetary union on the continent was also initiated by the French under the name of Latin monetary union (LMU). It lasted from 1865 to 1927 and included at first France, Belgium, Italy and Switzerland. Interestingly enough, the LMU was joined by Greece as early as 1867. The Latin bloc’s objective for all participating countries was to impose common standards for coinage at a time when the gold standard dominated commercial transactions on the continent. More astute than Germany of late, Austro-Hungary refused to join the LMU, as it rejected the bi-metallist approach of the French to coinage.

Today’s monetary union is now clearly in danger of disintegration, but preventing such an outcome is still possible. The first step in the right direction would be for the Latin group of countries to act again as a bloc. The latter should make it clear to Germany that a Dexit solution to the current predicament is necessary in order to salvage both the euro and what remains of European political unity. As matters now stand, the political systems of the southern half of the Union are close to implosion, witness recent developments in Greece, Spain, Italy and even France. Germany, meanwhile, does not only enjoy a healthy economic growth rate, but is basking in a political stability obtained at the expense of every other country in the Union…

Again, the historical experience inherited from the Roman Empire is a very useful guide to preventing a Soviet-type implosion of the union. Naturally, Germany’s recurring hegemonic tendencies and the fact that it has benefitted handsomely from the introduction of the euro for its exports, mean that in Berlin there is at present no appetite for doing the right thing by its European partners. This fundamental lack of empathy with the difficulties experienced by economically and politically less stable members of the EU has been proved time and again, with the EU leaders’ conference held on the 13th of July 2015 being just the latest in a string of such episodes.

Still, France, Italy, Spain and Portugal need to get together to gently ease Germany out of the euro and subsequently of the EU. As I have explained elsewhere, the German departure from the current financial and political structures of the Union should not, however, be an acrimonious process. After all, a diminished but more cohesive European Union will still have to trade and live side-by-side with Germany and its satellites, and vice-versa. For the political leaders of the Latin group of countries, however, there is no better solution to the euro-crisis than asking Germany to revert to the D-mark, as it is much better able to withstand an exit from the Eurozone than countries like Greece, Spain or even Italy.

Will the EU Outlast the Euro Crisis ?

 October 13, 2011

According to the laws of aerodynamics, the honey bee is too heavy and its wing shape cannot support it in the air. This, nevertheless, does not prevent it from flying and tirelessly collecting pollen every day, which is the essential raw ingredient in the production of honey.

The sovereign debt crisis has provided fodder to critics of the EU’s institutional arrangements, at home or abroad. According to them, the European project is about to implode. Why, George Soros even compared the situation to that of the defunct Soviet Union ! The euro is described as “the most dangerous currency in the world”(Der Spiegel), the lack of a central government in Brussels is given as a liability, the EU’s soft power approach to foreign policy is being dismissed as less than impressive. From Joschka Fischer to the parties of the Left, many believe that the moment has come to rebuild the Union into a federal superstate, with a central government, a treasury and uniform taxation laws. This overhaul from the ground up of the EU is supposed to solve, almost overnight, all the problems confronting member countries, regardless of gaps between their different levels of economic performance, productivity, labour laws or even attachment to common European values.

I have no way of knowing how many of my fellow commentators have paid 1,700 pounds sterling from their own pocket – as I have in 1997 – to attend international conferences on the monetary union, back when the euro was still a project. As the owner of a small FMCG import business based in Romania, I had considered it my duty to be among the first to learn what the project entailed. Naturally, I would have been happy to be able to use a single currency in order to reduce my transaction fees on every load of goods imported from the UK, and wrote so in a position paper I spread in London among the participants at the conference. During lunch, I was seated at the same table with Russian bankers and an Italian central banker. At the time, I routinely assumed that the Italians, like myself, were interested in learning more about the common currency project as observers, without however hoping to join it as members…

In 1997, I believed that the euro would include initially only EU members with solid finances, high productivity and strong economic performance. Alas, kingdoms like Denmark, Sweden or the UK refused to become part of it. Instead, who would have thought at the time that Mediterranean countries like Greece, Portugal, Spain or Italy would be included in the first wave ? This should have happened, in my view, a decade or two later, only after the euro had been tested by international markets and after southern countries would have significantly improved their economic performance, in a bid to qualify for membership. The fact that the euro’s introduction happened the way it did lends credibility to the theories according to which the planners knew about the flaws, but hoped to use an eventual future crisis to align the EU to the US federal model. Whilst by 1997 the need for another solid reserve currency was more than evident, it made little sense, if any, to draw so many EU members into the project at once, as it has now become clear to all.

And yet, the solutions to the current crisis – be it the shrinking of the euro or even the dismantling of the common currency area – would not, in my view, irreversibly damage the European Union. The proverbial prosperity and stability the continent enjoyed for the past sixty years would not be shattered because the planners went the wrong way about the euro. Both China and the United States, as well as Japan – not to mention weaker EU member states and surrounding neighbours – have become reliant to a high degree on the world’s equivalent of the honey bee, our very own EU. As much as we like to criticise it, or on occasion dismiss it as a cumbersome non-state actor, the European Union is here to stay, even if – and probably just because – it is not simply a version of American-type federalism on the European continent.

Author : Spotlight on Geopolitics
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E.U., Economy & Euro  , E.U., economics, euro