future of europe

Pantelis Sklias & Georgios Maris: Greek, European or Global Crisis?

Greece - crisis © The TelegraphIn 1991, when the Maastricht Treaty was signed an entirely new economic project was created. The Economic and Monetary Union (EMU) was unique not only because its area, magnitude and extension were unprecedented, but also because the European countries transferred important elements of their political and economic sovereignty to transnational and intergovernmental institutions. In fact, the EMU signalled a new epoch in the history of human economic cooperation and organization. However, nearly twenty years later the unique project is not as stable as its founders dreamed. The Greek crisis that started in 2009 revealed its endogenous and exogenous flaws both in political and economic areas.

In 2009, nobody in Greece could link the Greek domestic political and economic problems with the European Union (EU). Yes, in Greece there are huge and severe political and economic deficiencies and flaws. One could enumerate hundreds political and economic problems like the high inflation rates, unemployment, public deficits, public debts, bureaucracy, corruption and populism, the lack of institutional and structural reforms and so on. All the aforementioned factors are highly related to the Greek model of political, institutional and economic development, which is not only acknowledged as obsolete and unsustainable but also as unstable. This model changed everytime the Greeks had elections even if the government had remained the same. This is a very important observation because it is related to the absence of optimism in the markets.

Even though Greece is an extreme paradigm of deficiencies in political, institutional and economic development, it is not the only country in the European Union with these characteristics. In fact, there are many countries in the world that face the same problems as Greece does. Why is the crisis in Greece so severe and why the European Union’s political leaders seem unable to solve the crisis? The answer lies in the foundations of the Economic and Monetary Union. The EMU is a unique example of transnational economic and political cooperation, but it is full of flaws and problems. From its early beginnings the political leaders accepted in many countries that in fact couldn’t be competitive within the Eurozone. There are two important economic laws that affect their sustainability negatively. The first law is the transformation of comparative advantage to absolute advantage within the Eurozone. This means that within the Euroland only the most competitive enterprises can survive. Thus, the states stand unable to help the industries and the entrepreneurs. The second law argues that it is impossible to have a symmetric and balanced economic growth within the whole area of the Eurozone. In this way, we can explain the occurrence of two major different areas of economic growth within the EU, namely the core countries and the peripheral countries. Under these conditions, many countries of the European periphery that have been unable to remain competitive in the Eurozone joined the EU only because of political priorities and decisions. These actions are highly responsible for the today’s outcome.

Moreover, the system of European economic governance is not a well-rounded system that can help all its diverse countries in remaining competitive. The European Central Bank (ECB), although it is a highly credible institution, does not function as the American Federal Reserve. Thus, because the European economic integration is uneven, when the ECB takes a monetary decision, e.g. changing the interest rates or the money supply, the outcome of this decision does not have the same effect on all European countries. In this regard, the ECB cannot help Greece or countries similar to Greece. Furthermore, the Stability and Growth Pact (SGP) has also many omissions and we can’t forget that France and Germany were the first two countries that failed to comply with its targets. Furthermore, the EMU suffers from asymmetric and adverse economic shocks, inflexible labour markets, rigid wages, centralization of economic activity to specific areas, incomplete trade integration, and uncoordinated monetary and fiscal policies. Together with its major institutional weaknesses and the fact that a European political union is not regarded as feasible and the European sense of solidarity is inexistent, the result is ruinous both for the European project and for its member states. Accordingly, the European Economic Governance is also responsible for the Greek crisis. In fact, Greece and many other largely peripheral countries remain trapped within the Eurozone. They cannot use either their monetary or fiscal policies to regain their competitive advantage. This is also an important lesson that the New Member States (NMS) must learn. Living within the Eurozone is not as simple as it looks.

On the other hand, we need to investigate the crisis from a global perspective. In this regard, we can identify many important causes that negatively affect the European economies. First, the neoliberal paradigm, the so-called Washington Consensus, is not anymore viable and sustainable. Second, the United States have lost their hegemonic power mainly because of their economic problems, which are closely related to the rise of China and other developing countries. Consequently, one could argue that a new world order is emerging as the “unipolar” world is transformed to a “multipolar world”. Thus, the United States needs to come as close as they can to the European Union in order to overcome new global challenges. Under the aforementioned conditions it is clear that the Greek crisis is only a sign of something more important. Perhaps we face the first sign of the First Global Economic War and a great transformation will soon happen to the regional global political and economic affairs. The main question then remains ‘Is the Greek crisis a domestic, European , or global phenomenon?’. The answer is yours.

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Pantelis Sklias is is an Associate Professor of International Political Economy (IPE) at the Department of Political Science and International Relations of the University of Peloponnese. He holds degrees in International Studies (Panteion University in Athens), MA in International Relations and Ph.D. in International Political Economy (University of Sussex, UK). He completed his post doctorate thesis at the Hellenic Center of Political Research of Panteion University with a fellowship from the State Fellowship Foundation. 

His research interests include: institutions, states and markets; global governance; global political and economic relations; international development; and civil society.

Georgios Maris is a PhD candidate at the Department of Political Science and International Relations of University of Peloponnese and currently writes his thesis entitled ‘The Political Economy of Global Governance: The Case of the EMU’. He holds a BSc in Public Administration (Panteion University in Athens), MSc in Political, Economic and International Relations in the Mediterranean (University of the Aegean), MA in European Studies (Kings College London, UK).

His research interests include global and European political economy, global governance, European integration, and international relations.

A modest proposal for saving the euro

After the first European bail-out, which did not leave much of an impact on the tragic economy of Greece, the second package is already en route to the country that is helplessly balancing on the brink of collapse. But if one forgets about tiny troubled economies of the European Union, like Portugal, Ireland and Greece, nobody would / should really care about the euro or the future of the euro zone because the collapse of these countries would not make such a big difference, the EU could move on. However, new developments in Spain and especially in Italy, one of the biggest members in the Eurogroup, reinforce the belief that without leadership and strong commitment the euro will eventually sink and the whole idea of the EU will come under question.

2011 can easily be the decisive year not just for the Italians, the Greeks, the Irish, the Portuguese and the Spanish, but for the whole Europe. We now know that smaller and economically weaker states such as Greece, Ireland and Portugal may well fall into default. But we also know and hear that while their collapse would be a serious blow to the European Union, it would still not make the euro history. Leaders of the Eurogroup and the Union know this, and in my view, that is why they are completely reluctant to get their acts together and decide about the faiths of these countries. However, Spain and Italy are playing in a different league than the states mentioned beforehand. Should these two fail to  pay off their debts, European and international markets would simply plummet. Of course, this means that the EU cannot let Spain and Italy behind with their problems!

Nonetheless, I believe that the trouble of Southern Europe provides a one-in-a-lifetime opportunity to both more disciplined member states and the rest. Firstly, countries like Germany, the Netherlands, Austria or Finland that are frustrated about helping out weaker states with their own taxpayers money could force EU counterparts to act more responsibly and more seriously with public finances. It may sound populist, but the carrot-and-stick policy (i.e. we give you money if you change the system as we, the majority, advice you to) could may well work in case of South Europe. Secondly, politicians with clear programmes in Italy, Greece, Spain, etc., who were previously either sidelined or simply did not have the appetite to take part in the shady business of current political elites can now stepin and change the faith of their respective countries. Of course, it is always easier said than done, but there is absolutely no way that there would be no capable people to live up to popular expectations. And thirdly, it will finally turn out whether the euro area is a rich country club where only financially conscious and successful states can flourish with no room for others, especially troubled ones, or a common EU-project where everything rests on solidarity and trust. In theory, it should be the latter, but in real-life, I think the first applies!

I am pretty sure that many people do not, cannot and will not agree with me on this, but still, I feel that there is no room for countries like Portugal, Greece, Ireland, Spain and Italy in the Eurogroup. There should neither be any room for anybody else who cannot comply with EU rules and regulations (oops, in that case there probably would not remain a single country in the euro area) or who cannot function responsibly when it comes to public finances. Yes, of course, this means that there would be only a handful of members in the euro zone (Germany, Austria, the Netherlands, the Scandinavians and let’s say, Luxembourg), but who cares, at least it would not be obligatory for German taxpayers to help out Greeks and also, it would not be a must for George Papandreou to follow EU demands while saving his country. Do not get me wrong, all-in-all, I think the Euro is a great achievement and a solid currency that should be used across the Union, BUT, only with care and a sound understanding of what can happen when something goes wrong, because in the end, something always goes wrong!

A European vision for the Middle East

In this introductory article, I will examine what kind of threats and possibilities does the current power vacuum in the Middle East present to Europe. I will argue that the way the European Union can influence the region will be an indicator of whether Europe can become a great power in the XXI century.

The blame game against the West is experiencing its renaissance among many in the Middle East for supporting the corrupt and highly authoritarian regimes of many Arab states during the last few decades. While on one level this criticism can be justified, the actual situation concerning the European Union (and its predecessors) is even more severe, since European countries were only going with the flow without having a real impact on the political system of the Arab regimes. Accepting the blame is easier, because by this we can maintain the delusion that Europe still has a serious influence over its neighbors, but the reality is that the European Union has a long way to go to if it wants to put real pressure on other countries without the aid of the United States. For the time being let us consider “European influence” as a neutral phenomenon, later I will argue for its necessity.

One might say that “Europe” never had any say in the Middle East, rather individual European powers had. While this observation is true, it is still shameful that France, the United Kingdom and the rest of the EU countries together cannot assert their agenda of human rights and stability. During the Cold War, this was a less important issue, but now, during an era of emerging great powers, it will be very important whether Europe has a stable and cooperative neighborhood, or it will be surrounded by failed states and also by allies of its potential adversaries. This realization had to come during a time of a grand turmoil affecting the region from Morocco to Iran, which has shown, that the corrupt but stable Arab regimes in the end cannot provide security neither to their own people, nor to European countries. On the contrary, they are the reason behind civil war-like situation such as the ones we experience in Libya and recently in Yemen too.

This upheaval in the Greater Middle East region has provided an opportunity for many (mostly regional) powers to fill in the ever-deepening vacuum and the European Union is only one and maybe the least active player in this struggle (except for the isolated and half-hearted intervention in Libya). Our main concern should be the growing Iranian influence in the territories in question. We sat through the rise of Hezbollah in Lebanon, the Hamas’ in the Gaza Strip; but Iraq, Syria, Bahrain and Yemen are also quickly turning into battlegrounds where conservative forces have to face an aggressive Iranian expansion. The main problem with this process is not the fall of the corrupt old regimes, but the possible emergence of another, much more hostile tyranny, which has its origins in Iran. The theocratic regime has secured its grip over its own people in Iran, by crushing all opposition back home, but in the meantime, it has been preaching “democracy” abroad, when its interests dictated it. No one should doubt that peoples of the Middle East have their right to elect their own government and set their foreign policy until the point that it is not threatening others. Europe is facing a completely new security threat, where from the Eastern shores of the Mediterranean Sea to the heart of Central Asia, an extremely anti-Western and hostile power is on the rise. The possibly threatening Iranian nuclear program combined with the continuing development of advanced ballistic missile systems is more than enough to make any European politician worried. A sad thing is that it seems that almost every Western and Arab leader understands the risk, but apart from increased economic pressure and numerous speeches, they do not act against this emerging threat. This European passivity and indecisiveness has become a dangerous habit.

There are other “question marks” in the region, mainly Turkey and Egypt. Turkey seems to be at the crossroads between European integration and an independent foreign policy. The former outcome could be the greatest asset for the European Union to stabilize the Middle East, counter the rising Iran and what is maybe the most important aspect, provide all the countries in the region with a vision that is democratic, highly prosperous and authentically Muslim. An independent and possibly bitter Turkey, rejected by the West, could mean an ally for Iran and counter any European attempt to stabilize the region. These are the two extreme ends of the spectrum, but it is easy to see which one is more beneficial for all the parties involved. Time will tell if the new Egypt will turn into a democratic country, which could rally the other Arab countries Nevertheless, a powerful Egypt could pose some risks too, as we could see under the Nasser regime.

At this point, we have to understand that the most threatening prospect of the current processes in the Middle East is not the new order that hostile actors could create, but rather the emerging chaos that an intensifying power struggle in the region would cause. Today our main concerns should be the spread of biological, chemical and nuclear weapons, the illegal mass migration to Europe, and the eroding security of trading and supply routes together with the violence committed against the local populations: Christians, Jews and Muslims alike. The situation is bad and we do not see any sign of stabilization in the near future. With the rise of China, India and other emerging powers, combined with the steady decline of the United States (due to its unmanageable public debt and other factors), the European Union will face a completely new international situation. The resources of the Middle East will become even more precious targets for other global powers than they are today and therefore the fight for them will be even more ruthless. If Europe wants to create a vision for itself and therefore the international order, it has to protect its vital interests in its surrounding and also the civilian population against local and also global actors, because this is what the European Union stands for. The expanding integration has the potential to fulfill these tasks, but it has to make a steady commitment to certain values, not just in rhetoric, but in its actions too. This will not be an easy shift from the Cold War routine, where Uncle Sam would protect the weak Western European countries against the Soviet Union. Truly standing on our feet will be costly, but the price we all would have to pay will be much higher if we continue to ignore the threatening signs. The peoples of the Middle East and Europe need a positive vision and an increased cooperation between these actors is one of the key tools to deliver this beneficial outcome, which is a more assertive Europe that can protect itself and contribute to a stable and prosperous world order.

Leaderless Europe

In the last few months I have found myself constantly bumping into articles that speak of the dawn of social democracy and with the observation that precisely because of this, we are facing a new conservative (i.e. centre-right) modern age in Europe.  I would argue that it is too early to call a clear winner because European political conservatism, championed by centre-right parties throughout the continent, is in fact in deep trouble as well.

Left-leaning authors across Europe are voicing their concern that social democracy is dead, for good. Well, to be honest, I hope they are right! But contrary to what you may think now, my desire rests more on the possibility that maybe this way centre-left parties and their leaders will reconsider their parties’ role and vision for the 21st century and somehow they will try to update their views to an understandable and socially useful level. Of course, most of you know that social democracy stands for a bigger state, social security, free trade, multiculturalism etc. or to put in simple terms, as some neoliberal right-wing bloggers usually do, it worships devilish capitalism which helps multinational companies to run the world. But I would say that there is so much more on the Left that it is insane that only a handful of people thought about making social democracy modern again (like Anthony Giddens with Labour’s Third Way but we know what was the outcome of that), like it was after WWII. As far as I am concerned, after the Second World War social democracy helped us to rebuild our continent from ashes. It created societies where people can learn, grow and earn their way into a more promising feature.

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