Le Monde diplomatique
 The Nation
Richard Bulliet
Rami G. Khouri
Peter Kwong
Patrick Seale
Immanuel Wallerstein
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The Lessons of Europe’s Crisis| by Patrick Seale | Released: 12 Apr 2010 |
The Greek crisis has given the European Union a serious headache. Greece, a small member state of the Union, has run up enormous debts of some 300 billon Euros – 113 per cent of its Gross Domestic Product (GDP). To service the debt, at the very high rates the markets are demanding, Greece would need to raise over 50 billon Euros this year. It is in danger of going bankrupt.
If this were to happen, the Euro might collapse. Worse still, the vision of a strong, federal Europe would receive a devastating blow. There is, therefore, a great deal at stake.
The crisis is being closely observed around the world. There is much to learn from it -- for the United States, for Latin America, and perhaps most immediately, for the Arabs. Just as the vision of an integrated Europe is fading, so Arab nationalism no longer inflames the masses. The slogan of Arab unity has lost its mobilizing power. Arab League summits -- like the recent one at Sirte in Libya -- are occasions for dispute rather than for concerted action.
What can the Arabs learn from the European crisis? An obvious lesson is that unless they coordinate their policies -- both economic and political -- they will not be able to defend their interests or make their voices heard on the international stage.
This is what the Europeans are themselves realizing. The flight of capital out of Greece has endangered Greek banks -- and the state itself. Rich Greeks have withdrawn some 10billon Euros from their deposits. To avoid bankruptcy, Greece needs a bailout from Europe -- and fast.
On 25 March, EU leaders adopted a rescue plan for Greece, with the help of the International Monetary Fund. But, in spite of the extreme urgency, the plan has not yet been implemented. Last Friday several European Union leaders spoke out in support of Greece, allowing the Euro to recover some lost ground – but words alone will not solve the crisis.
The main reason is that Germany, Europe’s financial powerhouse, is opposed to an instant bailout for Greece at rates below market rates. With elections coming up, Angela Merkel, Germany’s Chancellor, is reluctant to open the national check book.
Playing tough has won her great praise at home, but it has also attracted accusations of racial arrogance abroad, especially when she commanded the Greeks to wake up earlier!
Greece would like to borrow 30 billion or 40 billon Euros from Europe and the IMF at around 4 % interest. But Germany wants it to pay a much higher rate -- perhaps as high as 6%. Germany fears that if Greece is bailed out on generous terms, Portugal and Spain will follow. Having exerted great efforts, after its costly unification, to ensure its own financial stability, Germany does not want the bad behavior of others to be rewarded. Germany believes that financial stability should be the Eurozone’s absolute priority.
This has led to a dispute between Germany and France. The Franco-German partnership, so far the motor of Europe, is not working well. If the two countries diverge too much, the motor could implode. Potentially, this would be a much more serious problem than the Greek crisis itself.
The EU has emerged more slowly than other regions from the world economic crisis. It has been unsettled by radical geostrategic changes, which have moved the center of gravity towards Asia. The emergence of a US-Chinese duopoly has reduced Europe to a more modest role in world affairs. For all these reasons, Europe is suffering from uncertainty and gloom.
The crisis has also revealed serious weaknesses in the EU’s institutions. Governments have not respected the stability pact. Deficits in several countries have spun out of control. Although Europe has a single currency, member states have not exercised the discipline necessary to defend it.
The EU finds itself in a delicate situation. It has embarked over the years on a process of integration, but it is now discovering that there is little support for this process on the national level. In other words, while the EU has moved beyond a mere association of sovereign nation states, there seems to be no will to advance towards a federal model.
The problem is not purely financial. It is about politics and nationalism. Those who believe in a united Europe are now on the defensive. The dream of a United States of Europe has faded. As the Financial Times reported on 8 April, European capitals are debating whether Germany has lost its European vocation. Has it succumbed to a creeping nationalism? Has it abandoned its belief in a closer European union? If that were truly the case, it would mean that the EU could never become a powerful federation, but would, at best, revert to being a weak association of states.
We are not there yet. Pressure from the markets may still force Europe to move forward. Chancellor Merkel is still thought to believe that a Europe of 500 million people would carry far more weight in the world -- and in global negotiations -- than a lone Germany of 80 million.
This is a lesson the Arabs, too, should heed in managing their own affairs.
Patrick Seale is a leading British writer on the Middle East. His latest book is The Struggle for Arab Independence: Riad el-Solh and the Makers of the Modern Middle East (Cambridge University Press).
Copyright © 2010 Patrick Seale – distributed by Agence Global
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Released: 12 April 2010
Word Count: 858
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