I have now escaped the near-Arctic chill and back to warmer climes for a little while. While I was in Finland though, the Finnish news media was agape over the – Joint Statement – released by 8 Finance Ministers from the smaller Northern EU Member States (March 6, 2018). The statement released by the finance ministers of Finland, Denmark, Estonia, Ireland, Latvia, Lithuania, the Netherlands and Sweden aired their views on how the Eurozone (EMU) might develop. Nobody should be under any delusion that significant reforms are going to come soon. These characters are locked into the austerity mindset and any claims that a new Macron-Merkel partnership will take the EMU into more progressive territory should be viewed as blind hope rather than bedded down in any realistic understanding of what is likely or possible.
To set the discussion, recall on October 24, 2017, on Wolfgang Schäuble’s last day as German Finance Minister, that the staff at the Bundesfinanzministerium gave him a visual send-off (Source):
300 German Finance Ministry staff, imbued with Schäuble’s austerity mindset gathered in the grounds of the Ministry to form the “famous schwarze null”.
While Schäuble left his position with Germany is poorer shape than when he took over and his partner Eurozone nations, definitely in worse shape, the fanatical commitment to permanent fiscal surpluses, no matter what, will persist.
It defines modern German policy culture where the finance and central bank arms have converged on a common ambition.
The other thing to remember with all this talk circulating about a potential new direction for Germany under its new coalition is that it is not a new coalition.
The Social Democratic Party (SPD) have been in coalition with the Christian Democratic Union (CDU) between 2005 and 2009 and again since 2013.
In other words, the GroKo (as it is being called – Große Koalition) has been in government for some years while Germany has gone off the rails with huge external surpluses, persistent fiscal surpluses, its labour market offering worsening conditions to workers, and its public infrastructure degrading so much that trucks can no longer cross key bridges.
And, in case the reform zealots get too far in front of themselves, which is normal given the almost daily ‘new plan’ for Europe that emerges, there is a little (now big) thing called the Alternative für Deutschland (AfD), which is now the ‘official opposition’ in Germany and attracted 12.6 per cent of the total vote (gaining 7.9 per cent on previous election), including very strong support in the old East Germany and Southern Germany.
In some parts of the East (Saxony, for example), the AfD gained the highest share of the vote.
And … just as an animal that quacks like a duck is a duck, the AfD are nazis. Back from the past. Racist, Xenophobic and anti-Euro.
Don’t expect much radical adventure into ‘more’ Europe coming out of Germany any time soon. The SPD are lame ducks, hanging on to coalition membership because Merkel wouldn’t dare coalesce with the nazis.
The SPD lost serious ground in the September 2017 election and would be better staying out of the arrangement with the austerity-merchants (CSU).
They will continue to slide as the AfD further attracts support away from them (and the CSU).
At least the AfD is publicly expressing that view – this tweet last week (March 4, 2018) gives their prediction for the 2021 election:
SPD Members’ decision pro #GroKo: disaster for Germany … By 2021 at the latest, they will pay the price. Until then, as the strongest opposition party, we will fight for a sensible and sustainable policy in the interests of the citizens!
The caption on the photo says: 4 more nightmare years for Germany.
Enter Emmanuel Macron – touting Eurozone reform as if he is a progressive. Even the British Remainers think Macron is some sort of protector of workers’ rights and one solid reason for Britain staying in the European Union.
The reality is different of course. Macron has started to renew this attacks on French workers. His latest front is to undermine wages and conditions for French rail workers.
And just in case, the Europhiles claim this is just a Gallic manoeuvre, Macron’s policy attacks on workers are part of the European Union’s 4th European railway package, which has to be incorporated into the individual Member States’ legal structure by the end of this year.
This is a big issue for Britain, by the way, if they remain in the EU, as it would severely compromise any attempt by Jeremy Corbyn to renationalise the railways – despite what the Remainers claim.
And on that thorny question of democracy: The French prime minister, Édouard Philippe has admitted his government will bypass the National Assembly (Parliament) and introduce the attacks on workers by regulation (“légiférer par ordonnances”) (Source).
In other words, they are prepared to avoid debate in the Assembly if it suits their agenda. This is a typical strategy of EU governments. Avoid scrutiny and democratic input.
And then we read the Joint Statement by the northern Finance Ministers in the EU.
The initiative has been described as the Northern Member States ‘closing ranks’ to dispel any idea that change is coming any time soon.
The Northern states didn’t waste any time after the GroKo was announced in Berlin to let everyone involved know that the status quo was to be preserved no matter what the SPD or Emmanuel Macron might think.
They were telling Macron what Merkel told Macron’s predecessor François Hollande directly after he was elected on a ‘reform agenda’ – don’t get any ideas. Merkel couldn’t do that directly this time because of her own domestic political struggles.
The headline in the Euobserver (March 6, 2018) was telling – Northern EU states to minimise euro reform.
Merkel had made noises earlier in the year (as she was negotiating with the SPD) that while she rejected Macron’s call for a larger Eurozone fiscal capacity with a Eurozone finance minister running it, she did support a move to a European Monetary Fund (EMF), which would just play the IMF out of the Troika and change nothing.
Led by one of Germany’s strongest ‘austerity’ allies in the Eurozone (Netherlands), the Northern Finance Ministers said that the changes already made by the European Commission were working:
The current strength of the euro area is notably the result of the decisive steps that have been taken at the European level to strengthen the Economic and Monetary Union as well as wide-ranging reforms at the national level.
So things are already in place!
They listed six points to support their position against ‘far reaching’ reforms.
1. Any future decisions had to be “based on strong shared values” and be “inclusive”. In other words, any deal between Germany and France would be rejected.
Change should be “discussed and decided by all”.
2. Member States had to further scorch their economies (“implementing structural reforms”) while “respecting the Stability and Growth Pact”.
In other words, no major changes to the European-level fiscal architecture – but more cutting of pensions, government spending generally, privatisation, etc. at the Member State level.
3. “Further deepening of the EMU should stress real value-added, not far-reaching transfers of competence to the European level. For that reason the discussion on the deepening of the EMU should find a consensus on ‘need to haves’, instead of focussing on ‘nice to haves'”
Very clear. They will not support all the ‘dream’ reform proposals coming from progressive Europhiles that would change the current fiscal architecture.
Why not? Simply because they consider they don’t “need to have” change – their opening statement was that the Eurozone is strong because of “the decisive steps” already taken.
The reform agenda should now focus on:
… completing the single market and pursuing an ambitious free trade agenda. Stronger performance on national structural and fiscal policies in line with common rules, along with these European initiatives, notably the Banking Union, should have priority over far-reaching proposals.
In other words, more neoliberal central. Force Member States to legislate to be consistent with “common rules”.
Deregulate further, privatise further – tilt the playing field further to the favour of corporations and away from workers.
4. The said they are “all committed to the process of completing the Banking Union” – but reject any idea of a federal fiscal capacity that would make that ‘union’ work properly.
They want a host of other changes at the Member State level including “minimizing the use of state-aid”.
5. The Northern ministers were happy that the European Stability Mechanism, which was an ad hoc response to the threat of insolvency among Member States during the crisis, should be formalised into a European Monetary Fund (EMF).
But this development should only “have greater responsibility for the development and monitoring of financial assistance programmes” and not have “decision making” capacity, which “should remain firmly in the hands of Member States”.
In other words, no federal capacity.
6. The final point focused on “the post-2020 Multiannual Financial Framework” and claimed it should be “better aligned to the implementation of structural reforms, whilst respecting the responsibility and ownership of Member States for such reforms.”
They claimed that the:
Recent growth rates in Member States that implemented reforms during and after the crisis illustrate that reform efforts pay off. Potential for further reforms remains.
There was no recognition of the twin facts:
1. World trade has picked up and boosting Eurozone Member States national incomes – for the time being. Which is nothing to do with the ‘structural reforms’ carried out in the Eurozone.
2. More importantly, the ECB’s massive liquidity program, which is effectively funding fiscal deficits through the secondary market purchases of government debt, is the only reason that the Eurozone still survives.
If the ECB had not acted in this way – starting with the Securities Market Program in May 2010 and accelerating the program (via other names) afterwards – then many Eurozone Member State governments would have gone broke and been forced to exit.
That is the reality of the Eurozone.
The European Commission hides behind a Treaty that has a no-bailout clause. But every day, the central bank is violating that Treaty.
Eyes look away and the mouths of the technocrats and the politicians just utter ‘structural reform’ as if they actually believe their nonsense.
The Finnish Finance Minister Petteri Orpo claimed that one of the “key problems of the Economic and Monetary Union of the EU” was “the lack of market discipline” such that states were over-indebted and needed to take responsibility for their own decisions.
Orpo was supported by the boss of Finance Finland, which “is the common voice of the Finnish financial sector and represents the interests of its members”, who claimed the Joint Statement was a “rational and moderate position” to take (Source).
She expressed the common view that Member States had “to take responsibility for their own economies”, seemingly overlooking the obvious point that they can no longer do that in any meaningful way given they do not issue their own currencies and are subjected to harsh fiscal rules imposed by the European Commission.
Undeterred she uttered the standard line:
Each country is responsible for seeing to this and shouldering the costs.
The Northern Finance Ministers’ message again:
Further deepening of the EMU should stress real value-added, not far-reaching transfers of competence to the European level.
End of story.
As an aside, when I was in Barcelona (March 1-3), it was repeatedly claimed by the audiences of the events I spoke at that a unified European culture would eventually emerge, which justifies the progressive Europhile position to stick with the ‘reform’ process and reject breaking up either the Eurozone, the overall EU or both.
Time horizons of around 100 to 150 years were mentioned.
While the progressives share values with me, I don’t consider it reasonable to put one’s faith in a process that will take that long to deliver anything sustainable.
People need jobs now!
At least the likes of the AfD and more recently the Lega Nord in Italy understand that urgency, which is why they are attracting such strong political support, while the likes of the SPD and Italy’s Democratic Party have thrown their weight behind the job and prosperity destroying EMU.
That is enough for today!
(c) Copyright 2018 William Mitchell. All Rights Reserved.