A Marshall Plan for PIGS
I recently watched a BBC interview with Angela Merkel, the German Chancellor – a very rare event since she has only once before given an interview to the foreign media.
The interview represented a considerable feather in the cap of the BBC, further confirming its status as the world’s premier broadcaster.
The interviewer, Newsnight’s Gavin Esler, wanted to get inside the head of the person who will largely determine the future of the eurozone and, to some degree, the rest of the world.
The visual aspect of TV makes it very difficult for an interviewee to ‘fake it’; to pass himself off as someone else. His body language and emotions are often plain to see; and when his face occupies most of a 42″ screen in your living room, you feel you can almost look into his soul. TV greatly assists in our quest to sort out the wheat from the chav.
Merkel came over as a pleasant, but no-nonsense, woman – interested more in getting the job done than in sound bites. Astute as she was with thoughtful responses, she seemed genuine.
And there was more than a little guile there too (but you don’t get to lead the most powerful economy in Europe without a level of that).
It was not difficult to understand why she had taken a shine to our own prime minister – the polished, well-mannered product of England’s leading public school. She may even have fancied the younger man a little, or perhaps felt a tad motherly, seeing him as the archetypal English gentleman as opposed to the coarse, bling-loving French president who wants to smother her at every opportunity with Gallic kisses. The contrast is stark.
Cameron is a most courtly emissary from a fellow Teutonic power which, from early childhood, she had come to respect. Yet despite its bombing of large areas of her beloved homeland almost back to the Stone Age only a generation or two before, it is apparent that – in economic terms at least – Merkel regards Britain as a natural ally and one she is most unwilling either to offend or marginalise.
The BBC was right in picking Gavin Esler as the interviewer, since Paxo might have been too adversarial by adopting his characteristic ‘master inquisitor’ approach.
But what I really gleaned from the interview is an appreciation of the lengths to which Germany will go to save the single currency.
Up to now, Angela Merkel has, understandably, played hardball. The German taxpayer is not going to throw his money at profligate nations which show an unsatisfactory willingness to change their ways.
The Germans want a new economic order in Europe so that nations act responsibly in the future; and to this end they want robust systems in place in the form of a fiscal union.
Germany is not interested in imposing a German jackboot, but wants the whole exercise to be seen as a pan-European affair – even though a fiscal union would result in all 17 eurozone nations’ budgets being overseen by EU officials: a fact masked by a Byzantium-level of cunningness or ingenuity (call it what you will).
I came away from that interview convinced that the German political elite do not want a single member – not even Greece – to drop out of the eurozone. And when push comes to shove, they will do everything in their power to see that this does not happen. They see the loss of a single country as the trigger that will begin the unravelling of the entire single currency and, more than that, of the whole ‘European Project’ to which it is so utterly and irredeemably committed.
So now, it would seem, it is down to the individual eurozone member states to do what is necessary. Only time will tell whether the eurozone’s peripheral countries’ impoverished citizens will – or even can – stay the course.
Pain levels in Greece – and now, more alarmingly, Spain – are at breaking point. A pistol shot to the head outside the Greek Parliament of a 77-year-old retired pharmacist has a terrible resonance with that pistol shot long ago at Sarajevo which set in motion the chain of events which led to the First World War.
Germany has to understand that PIGS’ (Portugal, Italy, Greece and Spain) citizens can take little more pain. While it was necessary to start the austerity drive and change PIGS’ spending habits, it is clear that austerity alone is fast becoming counter-productive.
If Germany wishes them to hold on, she must give them hope – and this can only mean a plan not just for cuts, but for growth. She must put together and spearhead a new Marshall Plan of aid – such as saved Europe in the aftermath of the Second World War.
Germany does not wish to be cast as the villain all over again; the one who did wrong by Europe for a third time, only now by economic, rather than military, might.
Now that we have all come to understand that we must stop living beyond our means, and that the social model we have developed is unsustainable, we are in a position to go forward.
Only by means of growth and a smaller state sector have we a chance of paying down our debt.
Fearful and envious as we may be of the developing countries – and that includes the oil producers – they are as one in wanting us to succeed; for if we go down the pan, we are as likely as not to drag them down with us – and they know this.
They might even feel that it is in their interest to involve themselves in such a rescue plan. But they will not do so if they see north Europe, and in particular the Germans, sitting on a pot of gold but refusing to use it to kick start their own salvation.
God, as they say, helps those who help themselves.
For a brief moment we thought we had got on top of the financial woes of the Credit Crunch and our personal and governmental debts which put all our livelihoods at risk.
At incredible potential cost, we had recapitalised our banks and put them on a sound footing. And then we began the painful long haul task of bringing our deficit under firm control. So far so good; the markets were impressed. The heat was off Britain.
But then the markets turned their gaze on the warring Europeans and their troubled, ill conceived euro.
The sovereign debt levels of the periphery countries quite spooked them. A slanging match had developed between the thrifty north and the spendthrift south. The Germans, in particular, were furious at the feckless and economically illiterate way the south Europeans had behaved, and the talk was that they had had enough of the haemorrhaging of their hard earned dosh. The whole future of the euro – and with it the European Union – hung in the balance.
Greece was the domino likely to go down first and very likely to carry a string of others with them. It was never an easy country to govern, and lovely people though they are, one of their irredeemable failings is that they make almost a national sport of not paying their taxes.
Yet at the same time, because they were part of the wonderful European Union, they expected to enjoy all the social benefits of the conscientious taxpaying north. How do you square a circle like that? After all, the north only got all those benefits because it was willing to cough up.
Greece’s public sector is bloated to the extent that it makes our own flawed product look like a sleekly toned race horse. What’s more, it only turns up for work when it feels like it and its appalling levels of absenteeism pass with just the Greek equivalent of a Gallic shrug. Then, after a semi-detached life of half work they insist on retiring ten years before the rest of us. No wonder the boys in their lederhosen are hacked off.
Yet despite what he and his other diligent north European comrades feel, he will not get his pride and joy deutschmark back. The ruling elite will see to that! The political classes have invested too much political and other capital in the so called ‘European project’ to let it founder. But after terrible dithering and lack of leadership which has propelled them to the wire, they have drawn back from what they see as the abyss of a collapsed Europe.
They are now determined, at last, to get ahead of the curve. They are putting together a package of such breathtaking proportions – three trillion (or 3,000,000,000,000) euros, no less – that even the money markets will recognise that they are putting their money where their mouth is and back off.
Yet the package will need approval of all 17 members of the eurozone and all 27 members of the Union for treaty amendments. Part of the deal, I’m sure, is that the people who underwrite the deal – principally the Germans – will insist on a future level of fiscal rectitude which will make it nigh on impossible for such a situation to arise again. There will be an oversight of all 17 member states’ budgets with a majority power of veto.
It will be, effectively, the final part of the jigsaw towards a united Europe: for all intents and purposes a fiscal union, which along with the existing monitory union will finally give the European single currency credibility. Politically, it couldn’t have happened at the beginning or at any point along the way, but dire necessity has forced the issue. It’s an ill wind that blows no good. The new Europe will not be such a bad place to belong so long as all that nonsense of an interfering Brussels is dealt with.
This is a heaven sent opportunity which will not come again. And because they need our signature on the treaty, we can insist on repatriation of those matters we all know to be flawed, such as the Working Times Directive, border controls, fisheries protection, and even that horney old chestnut: the Common Agricultural Policy.
Way back when we were haggling over the Maarstricht Treaty, they came up with that amazing word “subsidiarity”. What ever happened to it? It was adopted by the Union and was specifically designed to constrain Brussels.
If we seize the moment, we can then settle down to becoming the good Europeans we were always willing to be, instead of the perpetual awkward squad.
The world of tomorrow is going to be one of the big battalions, and Europe is a very big battalion indeed; one more than capable of stopping itself being pushed around by a resurgent China or anyone else.