Un bilan de l’Europe

Texte (en anglais) d’une interview donnée au journal le Quotidien de Seoul, qui sera publiée en coréen le 1er novembre.

SeoulShimun

Le Quotidien de Seoul ou Seoul Shinmun est un journal qui a été crée en 1904 dans le cadre du mouvement de “Renaissance” nationale, à un moment de l’histoire de la Korée où la survie de cette dernière comme Nation souveraine était en grand danger. Il est devenu le quotidian national de reference avec une diffusion de 500 000 exemplaires par jour. Il possède aussi une version électronique (www.seoul.co.kr) et il a des correspondants permanents en Asie (Beijing, Tokyo) en Europe (Moscou, Paris, Berlin) et aux États-Unis.

1. It has been 20 years since the establishment of EU. Currently, do you believe that the initial goal of integrating the continent of Europe is progressing well? Please indicate the positive aspects brought on by the EU system in the economical and societal areas.

As the European Union turns 20 years old we could try to assess its results, and t is quite interesting to see that few people will applause or rejoice. Never has Euro-sceptics be so strong, so numerous and so widespread in EU countries. This is not without good reasons. Actually the EU succeeded to the “Common Market” created by the Roma Treaty of 1957. The “Common Market” has been quite a success and its economic results have supported the European growth in the 1970’s and 1980’s. But integration apparently went too far. The rife between political elites (including Brussels bureaucrats) and EU population became an abyss. Discontent was expressed in the 2005 referendums (where two of the “common market” founding nations, France and Netherlands, voted a clear “no”) but political elites didn’t listened. The so-called “Lisbon Treaty” intended to replace the failed process of referenda was not just a democratic felony. It was a shame undermining the whole legitimacy of the EU. We are now paying the price, and it will be a high price tag, for this shame. The EU has lost not just its lustre but more important its democratic legitimacy.

It is commonly said that the EU was a peace and stability safeguard for the continent. Unfortunately, this is wrong and misleading. Peace actually was the result of the French-German reconciliation, ending more than a half-century of murderous rivalry between both countries. It was this reconciliation that allowed the “Common Market” to succeed and not the reverse. Actually few people know that France and Germany were already respectively their main trade partners of each other in 1914. This did not prevent the First World War to erupt. It was not trade that brought peace to the continent, but peace that brought trade. Peace was also much helped by fear Soviet Union inspired to Western European countries. To some extent the “common market” can be seen as the economic arm of NATO. Without the so-called “Soviet problem” nobody knows what would have been post-World war II Europe. To some extent the process of European unification was the child of the Cold war, like it or not.

It is also commonly said too that the EU was a mandatory undertaking because of the dissolution of the Soviet Empire in 1991-1992. But Eastern European countries once freed from Soviet rule went first to NATO and then only to the EU. This was a cold shower for all EU enthusiasts. European countries have been unable to imagine and devise a new post-Cold war security arrangement for the continent. From this point of view, the EU is a bleak failure. We had the proof of that in the way the former Yugoslavia civil war was mismanaged. Hidden conflicts between France and Germany, the reluctance of United Kingdom to act European and its preference for an alliance with United States of America, something by the way plainly understandable, plagued the EU and led to the long and protracted process of peace in the Balkans. We have not to forget that the EU has been unable to stop a very nasty but very limited civil war in its own backyard. The end result was the consolidation of the US military presence in Europe.

On the economic side the EU continued at first some of the previous “Common Market” success. But quite quickly it lost steam here too. It is quite interesting that the two symbols of the technological and economic might of Europe, the AIRBUS and the ARIANE space launcher, are dating from the time of the “Common Market” in the 1970’s and were developed on the basis of a bi-lateral agreements (between France and Germany). No similar project has been developed since by the UE. The more we get integrated the less innovative and productive we are. The main reason was the creation of the Euro. The launching of the European Monetary Union significantly accelerated this loss of economic dynamism. Actually EMU countries have known the weakest growth of all OECD countries since 1999. This can be seen in the table here under.

Table 1

Average rate of growth.

A comparison between EMU countries and OECD

2001-2011

2001-2007

2007-2011

Austria

1,6

2,2

1,1

Belgium

1,3

2,0

0,8

Finland

1,8

3,2

0,5

France

1,3

1,8

0,8

Germany

0,8

1,2

0,5

Greece

1,9

4,1

-0,7

Ireland

2,6

5,5

-0,9

Italy

0,4

1,1

-0,5

Luxemburg

3,1

4,2

2,2

Netherlands

1,4

2,0

1,1

Portugal

0,6

1,1

0,2

Spain

2,0

3,4

0,3

Euro zone

1,1

1,9

0,4

OECD

1,8

2,4

1,1

Source : Data from Perspectives économiques de l’OCDE, no 88.

It was said that trade integration would set in motion dynamic economies of scale raising potential output[1]. But this was not so. Fresh round of studies have proven that the value of the EMU was much overstated[2], and its limitations and problems much understated. We are right now paying the price for this mistake[3].

Consequences are far-reaching. With the economy bogged down it is the whole social system, which comes under fire. Actually the EU is turning into the main engine for the European social system dismantling. It fostered an acute competition on wages and social benefits and led to a constant lowering of the level of benefits. The deregulation process led to the dismantling too of public services, sometimes with dramatic consequences as with the sharp increase of accidents in Railways.

With this bottom line it is not surprising at all that nobody cheered when the EU turned 20 and that the anti-EU feeling is reaching previously unheard high. The 2014 European election (for the European Parliament) will turn in a lot of countries (including France) into a massive vote of defiance.

2. From the 2008 economic crisis, there has been much conflict between wealthy and non-wealthy countries. Please assess the position that each of the countries has taken in dealing with the problem.

It has to be understood that any Monetary Union is to need either “perfect” labour and capital mobility or a large “federal” budget to compensate for unbalance created by a single currency of heterogeneous economies. This is by the way what happens in a single country when it has its own currency. Let us imagine that in the 1980’s France had been a confederation of different “countries”. At that time Eastern France was in a deep industrial crisis linked to coal mining. If eastern France had been the former “Lotharingy” of the past, it could have devaluated its own currency. But it was just Eastern France, so the government spent huge amount of money to help this region to recover its competitiveness.

Now, if we apply this reasoning to the EMU, we will see that Germany would have to spend between GDP 8% and 10% for at least 10 years to solve the competitiveness issue of Southern European countries like Greece, Portugal, Italy and Spain. Quite obviously Germany can’t. That would destroy its economy and everybody knows that. But on the other hand we are refusing to face reality that is if a country is stuck into a low competitiveness and poverty trap the only solution for it is to massively devaluate its currency. The end result is that right now we have the worst of both system, a monetary union without any federal mechanism able to correct economic unbalances and huge social competition between countries. Not surprisingly this is raising one country against another. In Greece and Spain, Germany has right now its worst image in the post-World War II years. The same is true about the image of Greece and Spain in Germany.

The situation in Greece is clearly beyond hope. Unemployment has jumped over 27% and the country is free falling. But the situation in Portugal and Spain is not very different. We have unemployment level over 20% (and 25% in Spain). Even Italy is in serious troubles, with a sovereign debt over 130% GDP. On the opposite, the situation in Germany is quite good. This is not surprising. Actually, with the EMU, the German economy is sucking all the benefits of Southern Europe and driving these countries into massive a deindustrialization.

The main risk appears to be conflicts fuelled by the Euro, which could ripe open the EU and bring us back to fateful 1914. The opposition between wealthy Northern Europe (Austria, Germany, Netherlands, Finland) and impoverished Southern Europe (Greece, Italy, Spain and Portugal) never has been so acute. The Euro, or more correctly the EMU is now the worst nightmare of the EU[4]. If we want to keep the EU, even in a reformed form, we will have no solution but to dissolve the EMU.

 3. In the recent years, there has been an increase in the number of archconservatives in France, Germany, England and etc. And exclusion movements against foreigners and foreign countries have been strengthening. Do you believe that the enlarged EU system has had any affect on these settings?

Quite clearly defects of the EU have fuelled discontent and this favouring far-right or populist parties all over the EU. With the development of the economic crisis, the rise of unemployment, the lack of work and the very poor state of public services in several countries, it is understandable that integration of immigrants is becoming more and more difficult. But this is not the only reason. I mentioned previously the loss of democratic legitimacy the EU suffered since 2005. It is a very important but frequently overlooked point. This had strong consequences on the birth of an anti-European feeling now deeply entrenched in the population. As a result, protest movements have gained strength all over the EU and could no more be assimilated to “far-right” or even “populist”.

Figure 1

Decline in EU support

Source; PewResearchCenter, The New Sick Man of Europe: the European Union, May 13th,  2013, www.pewresearch.org, page 1.

These movements are expressing a reject of the economic integration and even of the European project (figure 1), which has reached levels unheard before. This is now a mass phenomenon gaining strongholds in every portion of the population. This movement is now majoritarian in some population stratum like blue-collars workers. It would be a deep mistake to confuse this movement with just a “populist” one. People, constituents of these parties, know what they want. May be are they voting for these parties because no one better is able to represent what they thing, but this is probably irrelevant. They perfectly know for what kind of people they are now voting and they are not afraid of them. It is no more a vote of protest but a vote of global reject of value represented or defended by political elites, and a voter turning more and more to adhesion to other values. And it would be another big mistake to just think that a large share of voters in some countries have just turned racist or extremist. This is a very different process, which at first took place because a large rift has developed since the last ten years between values defended by the political elite, including the very idea of economic integration, and values defended by large stratum of the population. This rift has been exposed to the limelight first in 2005 when the project of a European Constitution was rejected in France and Netherlands. What we are experiencing now is just the continuation of this process.

By the way these parties are themselves changing pretty fast. So we have a twin movement, one of people getting radicalized and more and more conscious of what they want, and want not, and one of parties now evolving, more or less rapidly to give birth to a completely new political spectrum. This twin movement has taken by surprise conventional political forces of the centre-left and the centre-right and have left them unable to adapt to the new situation.

Figure 2


G2

Source; PewResearchCenter, The New Sick Man of Europe: the European Union, May 13th,  2013, www.pewresearch.org, p.25.

 

It is also pretty important to note that this anti-European feeling is not a “conservative” or nostalgic feeling, shared only by old people. It is shared by the young generation (18 to 29 years old). This is highly significant because these young people have not known something different from the EU (Figure 2). It is then important to stress the loss of EU legitimacy, of course stronger in some countries like Spain and France, but nevertheless general a phenomenon. The number of young people now favourable to a strong economic integration is particularly low but for two countries, Germany and Poland.

In such a situation one could forecast a show of strength of these anti-European parties and movement at the next European election by May 2014.

4. What do you believe should be the ultimate goal for which EU should strive towards? Which issues should be resolved first in order for the EU to move forward in a better direction?

It is quite important not to forget what has been said before. The main problem undermining the EU is now the economic problem, even if one could think that the EU has been above all a political failure. Actually what made at first the EU project likable was economic results of the “Common Market”. People didn’t cared about political union. They wanted to have a better life, especially in Southern and then in Eastern Europe. So the future of the EU is to be decided on its economic results.

But, in the same time, people are rejecting a closer economic integration has we can see on figures 1 and 2. So, the natural reaction of political elites, which is to strive toward greater economic integration, is to face a stronger and stronger reject by populations. This is probably the major political problem of today. There is a strong contradiction between solutions as seen desirable by political elites and solutions as seen acceptable by populations of EU countries. It is then necessary to have a look at what is perceived as “big problem” in the PewResearch Center poll of last spring (figure 3).

Figure 3

 G3

Source; PewResearchCenter, The New Sick Man of Europe: the European Union, May 13th,  2013, www.pewresearch.org, p.4.

 

We can then make some computations. “Big problems” are mostly linked or related to the economic policy. We also know that people dislike or have no confidence in economic integration. The logical conclusion is then that a re-birth of sovereign economic policies is to be seen by a large majority as the best way out of the EU crisis. The logical implication of this conclusion is that the EMU, which is making mandatory to have a highly integrated economic policy, is to be dismantled or we are bound to a more undemocratic and authoritarian EU. I think that if we want to keep the EU democratic, and this is an absolute precondition for its acceptability, we will have no other solution then but to dismantle the Euro-Zone. The quickest political elites in France and Germany will come to term with this necessity the fastest we could find our way out of the crisis. Unfortunately economic integration is not just a policy, it has became an ideology, supporting too it is to be said some specific vested interests. This is why I don’t think that political elites will accept the idea of dismantling the EMU without a deep political crisis. This is to be traumatic a process but nevertheless a process we will have to go through if we want to avoid complete a collapse of the EU.

5. In many Asian countries including Korea, as well as countries in North America have continued their efforts in building a system similar to that of EU. Do you believe that the blocking forms spreading around the entire world is advisable?

Quite interestingly the way the EU is perceived outside is quite different from the way it is seen from the inside. From the outside the EU is assessed a success, a view obviously not shared by people living inside the EU. This is not to say that nothing could be imitated in the EU building process. But one has to be very cautious in assessing what strong points could exist.

The first point is that economic integration seems to have been significantly overvalued both in economic theory and in practice. If creating simple integration mechanisms, like free-trade zones could work at a regional level, going farther is both difficult and doesn’t give obvious benefits[5]. Benefits of the EMU have been overstated significantly in some theoretical and empirical works[6], mostly for political reason. We know now that benefits are much less important[7] and problems any Monetary Union is raising are still considerable.

The second point is regional political stability. Here the EU could be seen as a positive example but once again one has to be very cautious in using it. Regional stability came from two very different sources than the EU, the French-German reconciliation and the Cold War. The impact of the EU on regional stability in the post-Cold War environment is much less dubious. As a matter of fact there is no EU integrated foreign policy. It was not the EU who intervened in Mali by January 2013 but France alone, supported by some (and not all) EU members. Foreign policy is still a highly “nationalised” field of competence for each government.

The third point is the setting of international norms regulating both politics and the social environment. The European Court of Justice is frequently quoted here as one example of an important institution with a good track record to protect human rights. This is absolutely true, but actually most of norms here validated are coming from the United Nations charter. The European Court of Justice can be seen as deriving as much as from the United Nations than from the European Union.

The very idea of regional integration still is worth to proceed with, but one has to be very cautious to respect national sovereignty in the process. Nation-States are historical creations with roots going deeply in history. They are not short-time creations for the sake of economic benefits. There is a cultural dimension, and culture here includes political culture and traditions. The process of creating new institutions has been above all a process driven by the willingness to establish its own sovereignty and this process took place under the aegis of the Nation-State. This is reflecting into specificities of all institutional systems all around the world. These specificities are important part of the democratic process and political identity of different populations. The creation of “regional blocks” could well turn into a really Orwellian concept and 1984 could be a nightmare becoming true if we don’t proceed to regional integration with enough caution. First and above all the Nation-State Sovereignty is to be respected. The failure to do so in the EU was both one fatal mistake and the possible cause for its ultimate demise.


[1] Frankel, J.A., Rose A.K. (1998), « The endogeneity of the optimum currency area criteria », Economic Journal, 108, 449, pp.1009-1025 ; De Grauwe, P. (2003), Economics of Monetary Union, New York: Oxford University Press.

[2] Kelejian, H. & al. (2011), « In the neighbourhood : the trade effetcs of the euro in a spatial framework », Bank of Greece Working Papers, 136

[3] Stiglitz J., The European crisis is a man made disaster and it has four letters – the E.U.R.O, https://www.youtube.com/watch?v=qeB95-vGBMo

[4] Kawalec S. and E. Pytlarczyk, Controlled dismantlement of the Eurozone: A proposal for a New European Monetary System and a new role for the European Central Bank, NATIONAL BANK OF POLAND Working Paper, No. 155, Warsaw, 2013.

[5] Sapir J., The EMU (Euro) and economic growth, note published on RussEurope, September 28th, 2013, URL: http://russeurope.hypotheses.org/1575

[6] One good example is: Rose, Andrew K. (2000), « One money, one market: the effect of common currencies on trade », Economic Policy Vol. 30, pp.7-45 and Rose, Andrew K., (2001), “Currency unions and trade: the effect is large,” Economic Policy Vol. 33, 449-461.

[7] Bun, M., Klaasen, F. (2007), « The euro effect on trade is not as large as commonly thought», Oxford bulletin of economics and statistics, Vol. 69: 473-496.


Jacques Sapir

Ses travaux de chercheur se sont orientés dans trois dimensions, l’étude de l’économie russe et de la transition, l’analyse des crises financières et des recherches théoriques sur les institutions économiques et les interactions entre les comportements individuels. Il a poursuivi ses recherches à partir de 2000 sur les interactions entre les régimes de change, la structuration des systèmes financiers et les instabilités macroéconomiques. Depuis 2007 il s’est impliqué dans l’analyse de la crise financière actuelle, et en particulier dans la crise de la zone Euro.

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