The European Union has successfully stabilized its member states on the brink of bankruptcy. A European Stability Mechanism (ESM) has been put in place that grants struggling member states generous credits on the condition of complying with certain economic reforms. In addition, the European Central Bank has agreed to step in and buy state bonds from countries asking for the ESM’s help. Through these measures, the EU has successfully convinced markets that the euro zone is prepared to go a long way to keep its member states from going bust.
These decisions reflected commitments by Germany and other European economic powerhouses and were demonstrations of solidarity with economically weaker member states. In return, the crisis-stricken countries pledged to bring their budgets and economies in line with the Maastricht criteria and to grant their fellow member states and EU institutions a say in their internal fiscal affairs. In so doing, they curbed the risk of irresponsible spending that could have led to the demise of the entire euro zone. This proves that financially weak states have also shown solidarity in the overall fight against rising debt.
More than altruistic support
The reason that financially stable economies decided to expose themselves to liability is clear: their commitment reduces the risk of crisis contagion across the euro zone, which is in their best interest to prevent. Solidarity, therefore, should not be reduced to a notion of altruistic support, but rather be understood as an investment to safeguard the common capacity to act. It not only helps those in need, but also those coming to their rescue.
Whether this European-wide solidarity can be upheld remains to be seen. Unless a truly European society starts to develop, the prospects of prolonged solidarity are grim. The credit crunch has deepened the chasm between traditional politics and economics on the one hand and an identity- and society-based integration process on the other. Bridging that gap will be crucial to keeping European solidarity alive.
The austerity programs that the EU imposed on the crisis-ridden countries sent shock waves through their economic and social structures; it effectively dissolved the social contracts within them. These measures were justified by claiming that only strict budgetary consolidation could restore the countries’ economic balance and competitiveness. But the drastic effects of the measures took many citizens by surprise and left them wondering what they had signed up for when joining the euro zone.
Many feel that the EU’s promise of prosperity has only been partially realized – at best. If one compares the 2004 levels of GDP development per capita in relation to purchasing power to the 2012 levels, a very bleak picture emerges: In 2004, the EU expanded eastwards and many former Soviet countries like Poland, Slovakia, the Baltics, Bulgaria and Romania were able to increase their levels of prosperity and reduce some of the economic cleavage that had existed before. But catching up to the other European states will take time: Even if Poland were to keep up the rate of convergence it had between 2004 and 2012, it would only catch up to the European average by 2040. In contrast to the countries cited above, the Czech Republic, Hungary, and Slovenia were less fortunate and have fallen incrementally behind the EU average. Crisis-ridden countries like Portugal and Greece are even growing more impoverished in absolute numbers.
The crisis has unveiled how dependent those countries are on other states. It has nurtured doubts as to whether European integration can really ensure mid- to long-term prosperity. Unfulfilled expectations have driven voters into the arms of Eurosceptic and populist parties. Even countries that weren’t as heavily affected by the crisis, like France, have witnessed the triumphs of radical Right populist parties during elections – a trend fueled by increasing levels of social inequality, reduced social mobility, precarious employment, and a perceived competition with immigrants for employment. Today many citizens – especially those with low levels of education – perceive European integration as a threat and opt for parties proclaiming alternatives. Even if the Eurosceptics don’t control any national governments, they are severely limiting Europe’s ability to maneuver.
In the face of all this, what can the EU do to strengthen the basis for enduring solidarity? Fostering socioeconomic convergence of the weaker member states is just one of the many options, albeit a crucial one. The different growth rates among these countries – for example, between Poland and Hungary – illustrate how good governance can spark and drive long-term economic growth. The exchange of best practices between countries and between political actors can help to build a more transparent and accountable way of governing.
Protecting the welfare state
But it shouldn’t stop there. The EU also needs to debunk the myths that link decaying national welfare states to European integration. When the social dimension of the monetary union was being debated last year, the European Commission proposed a fund supporting euro zone member states that experience cyclical fluctuations and short-term budgetary imbalances. The fund’s monetary transfers would be tied to the levels of nations’ respective growth deficits (compared to the euro zone average) or unemployment rates.
Member states should also be enabled to protect their welfare systems against an internal race to the bottom. The introduction of minimum standards for welfare spending – aligned with the economic output of the country in question – could be a step in the right direction. With such sensible policies, economic convergence would ultimately equal a convergence in spending.
Translated from German.