If it were not a tragedy, if would be a farce!

The reactions of the EU heads of state, after the negotiations to the budgetary framework 2014-2010 had collapsed on Friday at 16.30 were rather sanguine. Whether the reasons for this unpleasant result are due to the fact that they were happy with being able to start their weekends early, or that some of them see themselves as (temporary) victors in the battle of distribution, is unclear. EU citizens, however, should be greatly aggrieved and upset with their politicians, for several reasons:

a)      Even though there is no close connection to the ongoing crisis of some Euro countries, this inability to come to an agreement is just more water on the mills of the EU-detractors, who can claim that the EU is not able to make important decisions. Whether this will increase the much-touted “confidence” in the Eurozone and the EU by other countries and the financial markets, is doubtful.

b)      Economically, this failure to come to an agreement is quite disastrous: People, we are talking about 1.01% of EU GDP, at a time when we know that a number of problems and strategies can no longer be taken at the national level (contrary to what the Brits say!, see my blog of ….), but require the EU level for effective action.
– To fight the politically horrendous youth unemployment, the EU budget plus an action plan could have provided a significant boost, by learning from the best performers.
– To shift expenditures from consumption into investment (R&D for intangible infrastructure, transport and networks for tangible infrastructure, energy efficiency and renewables for the combat against climate change, etc.) would have given states a signal to complement or co-finance such projects with more national funds.
– The focus of EU member states on their respective “net positions” as the final arbiter of how strongly they have negotiated “against Brussels” is so much “old politics” and only pleases the nationalists and populists back home.

c)       This failure has shown, once again, that domestic politics trumps European politics. It is the less extreme form of the surging separatism in many countries, but supports it. Economic theory knows the term “ruinous competition” as a frequent outcome of duopolies: in this model, when two firms compete for market share, they are prone to compete by lowering prices below profitability, until one or both of them collapse. Each of them only observes his immediate goals and forgets about the whole. This seems to be the present mode of EU heads of state: no matter how this affects the EU, my main objective is “not to appear weak”.

Of course, there is still time for negotiations and compromises. But: does any of the involved heads of state think that his/her position will be easier come spring? Then the dreaded elections will be closer, no information campaign will have swayed the voters, the anti-EU populists will pounce on this situation and make more inroads.

Thus, in reality this was a disaster weakening the EU even more. It is highest time for EU citizens to stand up and make their voice heard to their negotiators: We need more Europe, we need to overcome the crisis, we need an EU governance structure which can deliver results.



Filed under Crisis Response, European Union, Fiscal Policy, Global Governance

2 responses to “If it were not a tragedy, if would be a farce!

  1. hochgerner

    just a reminder: the U.S. invested 3% of the post-war GDP in Europe during the European Recovery Program, It was politically and economicly motivated, not looking out for ‘juste retour’, yet the return turned out to be more than justifying the investment – it paid off even to win the cold war.

    • kurtbayer

      Of course, then the whole global situation was very different: after a devastating war; the impending cold war; the undisputed leadership of the US, etc. In some respect, the financial crisis has wreaked a similar havoc on the economy, but nobody sees it this way, and our politicians are not leading, but following poll results. The question is how can we (??) instill some sense of realism and pragmatism – and courage – into the system, in order to do the “right thing”.

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