Eurozone - From Franco-German partnership to German Hegemony

The European Union was originally conceived as a major process of reconciliation between France and Germany, and became a fertile ground for unification of the continent. The post-crisis failed policies interrupted the integration path. Next election for the European parliement could hold striking surprises. I

At the beginning of April Jacques Le Goff, the great French historian who changed the perspective of the Middle Age, passed on. “Le Goff has explored the Middle Age in its most neglected features - Umberto Eco wrote - the life of intellectuals and merchants, the marvelous and the everyday life”. Eco adds that Le Goff “actively participated in the political life of his time, although he did  not take part in a specific group".

It is worth remembering how the great scholar of the cultural roots of Europe judged the European policy of our time. “Globalization - Le Goff wrote - has created two major comparable centers of power, the United States and China. It is worth to safeguard the existence of a strong third space for his values , his energy, and his riches: Europe”. It also wrote: "From the political point of view, efforts should be applied to reach the possible Europe, which - from the historical point of view - is the Europe of the Nations (which allows defending our culture, our politics and our economy), while I would be cautious about the idea of a federal Europe. I believe we can preserve the sovereignty of states, giving the European Parliament an important role, through the vote of the European citizens. "

A vision that today may seem unorthodox, and in contradiction with the federalist rhetoric that envisages the impossible United States of Europe. However, a vision deeply rooted in the tradition of French policy,  based on the idea of a deep European integration, strongly institutionalized, but not  tending to erase the existence of the Nation-States.

The reconciliation
The rubble of World War II were still smoldering, when the French political elite matured plans for a future of Europe based on cooperation and peace, the base of which had to be an everlasting covenant of friendship and cooperation with Germany. Robert Schuman, foreign minister and head of the French government at the turn of the 50s stated that: “ The union of the nations of Europe requires the elimination of the age-old opposition of France and Germany." It was the overthrow of the unfortunate position taken by France after the World War I, when it insisted, in spite of the British reserves, on the line of the punitive "reparations" imposed on Germany. And, not surprisingly,   Winston Churchill, at the end of World War II, stated: "The first step in the reconciliation of the European family must be a partnership between France and Germany".

It was not a coincidence that a leading role was recognized to France in the creation of the new Europe. The first step was the establishment of the European Coal and Steel Community (ECSC), with the participation of Italy and the Benelux countries. The Presidency of the High Authority of ECSC was taken by Jean Monnet, one of the founding fathers, along with Schuman, of the European Union. The historic step followed in the subsequent years with the founding of the European Economic Community.
For France, the Community had a more general meaning, as a means of opposition to the post- war American overflowing hegemony. While, from the point of view of the divided Germany , the anchorage to the European Community was also a mean to strengthen the position of the  Federal Republic led by Konrad Adenauer; as well as, later, it represented an important background for the development of Willy Brandt’s Ostpolitik. In the seventies the indisputable centrality of the Franco-German partnership, enhanced by  the  strong link between Helmut Schmidt and Giscard d'Estaing, seemed to give rise to a sort of " condominium" in which, as wrote Tony Judt , Bonn took care of the economy, while Paris determined the politics.

The triptych of the Delors
A condominium in which the initiative of the definitive leap forward was due once again to France with the appointment of Jacques Delors to the European Commission’s presidency. During the decade of Delors’ presidency (1984-95) it was realized the passage to the European Union with the accomplishment of the internal market and the Maastricht Treaty, that opened the way to the implementation of the euro. Delors was a complex figure of technocrat and politician of socialist and Catholic culture. He had served to the Bank of France, then to the Commissariat for Planning; had been economic adviser to the trade union movement, partecipating to the foundation of the CFDT (Confédération française démocratique du travail), and later Mitterand government’s Finance Minister.
Armed with this multifaceted experience in the most sensitive areas of public life, and enjoying an undoubted charisma, he combined in an original triptych three basic figures of the economic philosophy of the European Union: the British free trade policy, the French State’s interventionist tradition, and the basics of the German social market economy. The European social model was, in turn, a combination of the different roots of the welfare state: from the Beveridgean universal shape to the Bismarckian German tradition; along with a prominent role attributed to the trade-unions, which together with business associations, acquired a para- legislative role in matters of Community competence. These were the pillars on which was built the original makeup of different cultures and traditions which, converging, were aimed, according to Jacques Delors, to pave the way for a Federation of sovereign states.

Optimism of the end - century
Fifty years after the tragic fratricidal conflict, the task of redefining the relationship within Europe, reunited after the collapse of the Soviet Union, was essentially accomplished. And, from there, the new Union could start to deal with the globalization process, taking a prominent place in the world, as that third area that we have seen evoked by Le Goff, alongside the United States and China.

The years that followed appeared as a clear achievement of the ambitious goals of the European Union. Once closed the currency crises of 92-93 which involved, among others, Britain, Italy and Spain, economic growth did record an extraordinary acceleration, while between 1995 and 2000 twelve million of new jobs were created. The European Union had nothing to envy in this respect to the successes of the Clintonian New Economy that in the United States characterized the second half of the Nineties.

We can reasonably say that, on the eve of the new century, the euro was born under auspices that could not be more favorable. Not surprisingly, in February 2000, the Lisbon Conference of the European Heads of State and Government ended with a solemn Declaration assessing the objective to achieve an average yearly GDP growth of three per cent, along with the goal of the full employment by the end of the decade. This was the European Union that seemed ready to face the challenges of the new millennium in an atmosphere of great optimism.

From the partnership to the hegemony
Never predictions were more blatantly and unfortunately denied. After Just a decade, the scenarios drawn in the turn of the century seemed to belong to a legendary prehistory of the continent. How it happened? Unfortunately, the analysis of the fall are vitiated by some mantra, such as globalization and the information revolution - indeed, processes that were already underway for two decades . In any case, the passage to European Union, with the final completion of the internal market and the implementation of the single currency was clearly conceived as a tool to meet the challenges of the new century. It will be up to historians to spell out the origins of the failure of the European purposes of the early years of the new decade.

Yet, the eurozone’s debacle belongs, more then to history, to the chronicles of the crisis started in the U.S. in 2008, with the collapse of Lehman Brothers. In fact, the European Union has dealt with the consequences of the financial crisis between delays and apparent contradictions. Already at the beginning of the decade, Germany, which had fulfilled the process of unification, began to use the euro as the alter- ego of the mark - the chief objective of monetary policy becoming the fight against inflation, even when its threat was imaginary.

Germany , by far the largest industrial power in the eurozone, was interested in increasing exports, compressing domestic demand, focusing through the “Hartz reforms” to the tightening of the wages’ dynamic and welfare provisions: two old pillars of the social market economy .The belief that the euro would dragged the development of all countries proved misleading.

As for France , the undisputed protagonist of the European integration policies during the past decades, it could have taken the initiative , in agreement with the Mediterranean countries , such as Italy and Spain, to preserve and carry forward the project of a sustained and lasting growth which had accompanied the transition to the euro. Instead, France remained anchored to the trap of an out-of-the-way partnership with Germany, when the economic and political equilibrium was in fact broken.

Austerity and its failure
The crisis of 2007-2009 and the perverse way in which it has been addressed belongs to the current chronicles. The aim of austerity imposed by the triad Berlin-Frankfurt-Brussels meant the consolidation of public finances; in fact, the outcome was a striking sovereign debt’s increase.

The case of Greece is exemplary of the foolishness of that policy. The debt, which was high at the beginning of the crisis, but below 120 percent of GDP, after the lethal treatment of the troika (European Commissione, ECB and IMF), has reached 170 percent, while the national income has fallen by a quarter and unemployment has hit 26 per cent of the workforce. Yet, at the beginning of April, Antonis Samaras, head of the Greek government, and Angela Merkel have paradoxically celebrated in Athens the beginning of the end of the crisis. "The fact that we celebrate the issuance of a bond market, said Joseph Stiglitz, without discussing the devastation that remains in people's lives is simply criminal." (La Repubblica, April 11, 2014).

Greece is the tip of the iceberg , but we must not forget that Spain ended 2013 with deflation, while the sovereign debt that at the start of the crisis was over 40 percent of GDP, the lowest among the major eurozone’s countries, was doubled;  and, as in Greece, unemployment hit 26 percent of workforce.

What happened to the Franco-German partnership that had been an instrument of balance in the first half-century of European community building? With the presidency of Nicolas Sarkozy, the partnership was already tarnished, if not completely cancelled, with the ironic definition of Merkozy. However, things have not improved with François Hollande, despite the hopes initially placed in his socialist presidency.

Even though heir to the European tradition of Schuman and Monnet , Mitterrand and Delors , the architects of the European Union , Hollande is reduced to simulate a partnership that allows him to meet periodically with Angela Merkel, even though  without any political result. The local election with the advance of the National Front of Marine Le Pen was a debacle for the Socialist Party; but the defeat did not induce Hollande, reduced to a popular consensus of 18 percent, to reflect on the electoral results and the loss of credibility. Instead, he appointed as new  head of the government, Manuel Valls , the rightwing exponent of the party, obtaining the approval of the French right along with the deepening of divisions within the Socialist Party.

The Berlin- Brussels trap
Brussels seems to appreciate the change, but it is not easily satisfied. The President of the Eurogroup, with a hard Dutch name, Jeroen Dijsselbloem rebuked the French government for having breached by two decimal the budget, hitting 4.3 against the agreed forecast of 4.1 percent. Mr. Hollande and Mr. Valls agreed to confirm the commitment to reduce the deficit to 3 percent of GDP, albeit with another year of grace, and promising fifty billion euro of cuts in public spending.

This is the dismal drift of the old Franco-German partnership. What, according to Delors, had to become a Federation of sovereign states appears more and more as an aggregate of countries under the not veiled hegemony of Germany, which Germany marks the line of conduct, and controls the execution of programs through the secular arm of the European Commission. Olli Rehn, an obscure Finnish rightwing politician, now at the helm of the feared Directorate of Economic Affairs, has to assess the conformity of the budget and economic programs, which  the Member states have to send to Brussels before they are discussed and voted by the national Parliaments.

The governments, according the new agreements, are obliged to abide by the Commission’s injunctions. We saw  Samaras government's satisfaction after Mrs. Merkel visit to Athens. On the other side, we saw Mariano Rajoy, the Spain’s premier, welcomed into the family of Brussels, as a novel "Prodigal Son". Spain, despite having closed 2013 with a budget deficit of 7.3 percent of GDP, is considered a model to follow, as a fine illustration of the labor market’s reforms enabling enterprises to reduce up to 20 percent wages, together with substantial freedom of dismissal.

As for Italy, we saw the new prime minister, Matteo Renzi , after the first whispers of protest against the austerity policy, solemnly confirming, in his pilgrimages to Berlin and Brussels, the harsh budget conditions already imposed on Berlusconi, who was forced to retire, and then accepted by of Monti and Letta governments. Despite the fact that Italy is still in quest of recovering, after two years recession and a total reduction of about 9 percent of GDP, the 2014  forecasts  announce a dismal prospect of growth hovering around zero comma some decimal. The picture could not look more gloomy. But Renzi, as Economist writes, “has convinced many Italians as well as those who applaud him in Brussels and Berlin that he is the last chance to save Italy from the decline." To paraphrase Eduardo De Filippo, the great Neapolitan playwriter, one should conclude that the paradoxes, like the troubles, never end.

The complicity
Going toward a conclusion let's stress two points.
The first is that we cannot merely ascribe the devastation of a number of European countries, notably the “peripheral” ones, to the austerity imposed by the Berlin-Brussels Axis. That those policies have given a clear proof of nonsense is now a widely accepted judgment. In fact, the policies of austerity and structural reforms would not have been achieved without the consent and complicity of national governments.

For the financial, economic and political national elites the austerity policy has been, and still is, the way to cut public spending and the welfare state, and push toward privatization of what remains in the hands of the State after the wave of privatization of the nineties. But even more important, the mother of all structural reforms is the reform of the labor market. In short, the neutralization of the trade unions, the progressive dismantling of collective bargaining of wages and working conditions through the shift from national/sectoral bargaining to the corporate and individual levels, along with the freedom to hire and fire. In last analysis, the neoliberal stance deceivingly called reformism.

The interplay between class interests at national level and European neoconservative policies could not be more stringent. In many ways, the existing policy implemented in the eurozone by the Brussels technocracy, under the Berlin umbrella, is similar to the policy carried out by the Republican Party in the United States. The difference is that in America the Republicans represent the opposition, while the Brussels technocracy is, for many aspects, the supranational government of the eurozone.

The unknown of May
The second consideration relates to the next election for the European Parliament. The political environment in which the election will be run at the end of May could hold some unpleasant surprises for the national as well European elites.

In fact, the only stable government is the German one. Angela Merkel was triumphantly re-elected to a third term and she can govern without opposition, as the SPD is member of the government’s coalition. But apart Germany, the political framework is for the first time in the history of the European elections unusually uncertain. In France, as it is likely, the forecasted large abstention along with the forecasted success of the National Front and the downfall of the Socialist party would show that the socialist government of Francois Hollande and  Manuel Valls represents a mere minority of the French electorate.

In Italy, the Democratic Party can aspire to retain the top spot, but for the first time a movement openly hostile to European policies, such as the Five Stars of Beppe Grillo, could finish second, surpassing the Berlusconi’s center-right Forza Italia, which in turn needs to take distance from the current European policies, not to leave too much ground to the Northern League, harshly anti-euro.

It’s true that the eurozone’s authorities are used to overlook the normal scrutiny of the democratic process. Yet, if a similar fate will hit the governments of Greece, Spain and Portugal, just to mention the southern Mediterranean side of the EU, the new European parliament, which has to elect the President of the Commission, must wonder about its actual democratic representativeness. If current predictions should be by and large proven, it will appear in the light of the sun the incompatibility between the existing European policy under the helm of Berlin and the opaque political technocracy of Brussels, and the normal functioning of democracy within the Eurozone.