By Paolo von Schirach
September 27, 2013
WASHINGTON – It is a sign of the times that listless Europe, run by unimaginative politicians fearful of social reactions to anything that might even resemble serious pro-growth reforms, is deemed to be finally on the mend. Things are looking up, we are told by policy-makers. The long and grueling fiscal crisis emergency is over. We are back to normal. So much so that incumbent German Chancellor Angela Merkel did extremely well in the recent elections. Her steady hand and her pro-austerity (but still cautious) policies were apparently vindicated, and so she won the day.
Well, it may be so in Germany. But if you look at Europe, the picture is still very grim, unless you really believe that a Eurozone economy now 3% smaller than its pre 2008 crisis levels is a good sign of recovered health. And if you look closely at the sorry Club Med bunch, (Greece, Italy, Cyprus, Portugal and Spain), things are far worse. All of their economies are still way below pre crisis levels, (Greece is down 28%, Italy 8.8%). And no Southern European country is about to begin a strong recovery. And what about a 12% Eurozone unemployment levels, (with peaks above 25% in Spain and Greece)? Is this yet another sign of health?
North South divide
Sure enough, Northern Europe, with Germany, Austria and the Scandinavian countries in the lead, is doing reasonably well. But France, the Eurozone number two economy, is not; and Eastern Europe is a mixed bag at best. Still, if the totally unjustified consensus is that this European Union has recovered and that it is now ready to resume business as usual, this means that there is no interest in facing reality and in re-examining the very foundations of a Union among far too disparate members that demonstrably are unable (because of resource levels, profoundly different cultures and psychologies), to function according to the same rules.
While they all share the geography of this Western appendix to the Asian Continent, the Europeans are traveling at different speeds. Some –Greece being the most obvious example– are in such bad shape that they are clearly incapable of advancing without (permanent?) help from rich Northern partners.
And, even more fundamentally, the financial crisis revealed profound cultural differences between North and South in Europe. The North believes in growth and responsible government. The South believes in debt, while tolerating graft and corruption as rather normal ways to conduct business.
Governance, Italian style
Way before the crisis, Silvio Berlusconi long premiership showed the world that the Italian voters could not care less about glaring conflicts of interest (Berlusconi retained de facto control over a vast media empire as he served as Prime Minister) and self-serving legislation. Not to mention that he was the Prime Minister who hosted many “bunga-bunga parties” featuring sexy young women, saucy events described by Berlusconi’s friends as “elegant dinners“. Even now, with Berlusconi finally convicted of tax fraud at the end of one of so many trials, it is not clear that he will be expelled from the Senate, as the law would mandate. In fact, should he be expelled, his party may cause the collapse of an ultra fragile government coalition as a protest against what it believes to be a political punishment. And this is happening in Italy, the Eurozone third largest economy, and one of the original founders back in 1957 of the European Common Market, not in Sudan or Mali.
A slimmed down EU, with only the more modern countries in it, can do rather well. But this patchwork Europe, with the rich having to carry the negligent and indolent poor for the indefinite future, is doomed to eventual irrelevance.