According to Michael Barr and Daniel Halberstam, Europe’s leaders had one last chance to get it right as they headed into their Euro-Crisis summit last week.
And—if I understood Barr and Halberstam correctly—Europe’s leaders blew it.
Here’s what B and H said needed to happen:
1) Europe’s leaders needed to place “the long-term survival of the system as a whole” at the center of their preoccupations, and “consider not only their own immediate re-election by their local electorate, but also their accountability to the electorate of the system as a whole.” They needed to “bring politics to the Center.”
2) European member states needed “to commit to a binding fiscal policy”—including a surrender of some control over national budgets to European institutions.
3) Angela Merkel needed to step up and put pressure on the European Central Bank to act as a lender of last resort, by buying up enough euro-zone debt in order to keep bond rates at a sustainable level.
Well, obviously, the summit didn’t work out this way.
David Cameron contented himself with the opportunity to throw some red meat to anti-European Tories by vetoing the deal that the other EU leaders had hammered out. Not much commitment to the long-term survival of the system there.
With his veto, Cameron condemned the summit to a small Europe solution, limited to the 17 member Euro zone. Not much evidence of “binding fiscal policy” there, although I suppose we can hope that the current deal is a start. Cameron’s tantrum seems guaranteed to tick off everybody, except the implacable conservatives of his own party and the London bankers who fear the dreaded financial transaction tax.
Merkel has so far been unable or unwilling to push the ECB to act as a lender of last resort—this too seems a transparently political decision, as such a move would be very unpopular in Germany, and especially so with Merkel’s party. Her answer last week was the same as it had been all along: austerity, fiscal responsibility, more budget cuts.
And Sarkozy? The summits, in spite of all his posturing, have left him with exactly one tidbit—the opportunity to make hay about Cameron’s treachery in front of the French electorate, which he will milk for what it’s worth, but to little effect.
Sarkozy faces re-election in May 2012 and although the polls have narrowed slightly since François Hollande was selected as his socialist opponent last month, Sarkozy faces an uphill battle. Nasty scandals involving accusations of illegal party financing, kickbacks in international arms deals, and manipulation of the justice system (for a taste, just check out the French version of Wikipedia under “Affaire Bettencourt,” “Clearstream” or “Affaire Karachi”) have produced a long list of former associates of Sarkozy who are under investigation for corruption, and the incessant drip-drip of incriminating information has worked to de-legitimize the political class as a whole.
And this is what worries me. If the current austerity plans are all that the European governments can come up with to deal with the sovereign debt crisis, then it is unlikely that the political movements that we will see emerging in Europe in the next few years will be headed by competent and comforting technocratic figures who feel that they have a stake in the long-term survival of the European system.
Austerity is unlikely to spark more enthusiasm for Europe’s political elites. The austerity programs might help keep the financial markets happy for the time being, and in so doing, they might also keep interest rates down for governments that need to borrow more money to continue making their payments in the short term. That’s the argument from the people that the governments owe money to, of course.
But austerity will also make it necessary for European governments to cut back on healthcare, social security, unemployment, education, neighborhood policing, research in basic science, efforts to fight global warming, public transportation, public libraries, public safety, public anything. (That’s why Scott Greer calls the austerity programs “right-wing social engineering.”)
This much seems clear: the austerity programs take care of the banks at a cost, a cost paid by everybody else. The austerity programs will almost certainly make the current economic recession in Europe worse before it gets better. Unemployment will go up. Tax revenues will stay low. There is not even any guarantee that the austerity programs will prompt banks to begin lending again, since their emphasis is on building up cash reserves to weather the crisis.
Economic growth, if it comes, might not come soon enough to alleviate the very real distress of many millions of people. Confidence in the mainstream political parties could ebb even further, and among the beneficiaries will almost certainly be those political groups on the fringes who offer something else, something more visceral.
Some commentators have even suggested that Marine Le Pen, the extreme-right wing candidate from the Front National might make it to the second round of voting in the French presidential election next May—by beating out Sarkozy himself. Current predictions put her between 16 and 19 % of the vote in the first round.
It took just under 17 % of the vote in 2002 for Marine Le Pen’s father, Jean-Marie Le Pen, to eliminate Socialist candidate and prime minister Lionel Jospin from the second round of the presidential election. Jean-Marie Le Pen went on to get almost 18% of the vote in the second round. This means that nearly one out of five people in France cast their votes in 2002 for a man who devoted his life to sustaining the long tradition of right-wing national populism in France, a man who was quoted about being a torturer during the Algerian war in an interview with a magazine as early as 1962, and who asserted that the Holocaust was a minor “detail” in the history of World War 2.
Sarkozy’s party is already worried about Marine Le Pen, who is more photogenic than her father, but who stands for much the same thing. In order to inoculate themselves to a challenge from the right, the UMP has already begun to trot out the divisive and xenophobic issues that have worked for them in the past: immigration, Islam, the headscarf, giving the vote to foreigners, national sovereignty.
This has worked well for Sarkozy’s party before—and he is an expert at poaching votes from the hard-right at election time by stealing their issues and giving them a new respectability by mouthing them against the backdrop of resplendent ministerial buildings and government press conferences.
But according to recent reports in Le Monde, there are signs that this effort by Sarkozy’s UMP is not working so well this time. Many French people who voted for Sarkozy in 2007 over Socialist Ségolène Royale are unlikely to vote for the bland François Hollande in 2012 (he is Royale’s ex-partner and the father of her children). And, it seems, many are now unlikely to vote for Sarkozy. Some, at least, are now asking themselves: “Why vote for the National Front lite when you can vote for the real thing?”
When people say that it’s going to get worse before it gets better, I think this is what they mean.