Daily Bulletin


The Conversation

  • Written by The Conversation
imageSome in Greece could soon be mourning the death of the Euro.Orestis Panagiotou/EPA/AAP

Economic policy is not a morality tale. The Greek tragedy is that the Europeans have treated the Greek crisis as a question of national character. In their outrage at the Greeks – in the context of broader view of austerity as the way out of the European crisis – they have not only weakened their collective economies, but also jeopardised the fate of the European experiment itself.

The risk is that the larger goal of the European project – to create a sense of shared identity – may be undermined by an incidental economic means to that end, in the creation of a euro – a mechanism of economic discipline.

The reasons for this tragedy go deep into European history. Coming out of World War II, European leaders decided nationalist excesses should never again be permitted to divide their people. They therefore sought to create a supranational union, one that would unite the continent in a common vision. In 1950, French Foreign Minister Robert Schuman proposed the establishment of the original European Coal and Steel Community – the grandfather to the modern EU – as a way to “make war not only unthinkable but materially impossible”.

Ironically, given what the Euro has become, Schuman’s vision was never based on any commitments to “hard money” or free trade. Quite the opposite. The tragedies of the 1930s were widely attributed to a classical gold standard that had enforced austerity on the European people. As the European economies collapsed in the early 1930s, states were forced to cut spending and raise taxes – contributing to an ever-worsening slump.

In contrast, the point of the European Coal and Steel Community was to raise the prices of its members’ commodity and manufacturing exports. The ECSC would do this by enabling its initial six countries – most importantly, including France and Germany – to collude and fix coal and steel prices. In this sense, the early European ideal was not about free trade or convertible currencies – it was about enhancing the collective welfare as a means to political union.

Over the decades to follow, the economic dog nevertheless came to wag the collective welfare tail. As the German economy grew more important, German influences in European economic institutions would increase – leading to a shift toward more free market, hard money views. There were deep cultural reasons for this: German memories of the 1920s were of hyperinflation, while the German successes of the 1930s in using fiscal stimulus were repressed from collective memory, for obvious reasons.

The result would see European economic institutions – most notably the European Central Bank – evolve and place financial rectitude and monetary stability ahead of growth. This has been the case even when intellectual arguments for austerity – primarily as a means to limit inflation – make little sense, as the high unemployment of recent years has broken any link between fiscal deficits and inflation.

Large deficits absent full employment are not a problem – they are the solution, enabling revived growth. Greek austerity only makes Greek repayment more difficult, whatever one’s view of their pension system.

Over the past five years, the EU has taken what should have been a practical matter of economic policy – to run deficits during a recession – and turned it into a morality tale.

Internal Greek politics have nothing to do with the macroeconomic needs of the European Union – which would benefit from debt forgiveness across the continent to enable rising demand. On top of this economic malpractice, one can superimpose political error, as austerity politics have revived political extremism and nationalist sentiment across the continent. This is the very essence of a tragedy – as the postwar European dream may be undermined by incidental mechanisms established to bring it into being.

Wesley Widmaier receives funding from the Australian Research Council.

Authors: The Conversation

Read more http://theconversation.com/eurozones-shared-identity-the-final-tragedy-of-the-greek-crisis-44130

Writers Wanted

From 'common scolds' to feminist reclamation: the fraught history of women and swearing in Australia

arrow_forward

Different Ways to Incorporate Natural Stone into Your Home

arrow_forward

The Conversation
INTERWEBS DIGITAL AGENCY

Politics

Prime Minister Interview with Ben Fordham, 2GB

BEN FORDHAM: Scott Morrison, good morning to you.    PRIME MINISTER: Good morning, Ben. How are you?    FORDHAM: Good. How many days have you got to go?   PRIME MINISTER: I've got another we...

Scott Morrison - avatar Scott Morrison

Prime Minister Interview with Kieran Gilbert, Sky News

KIERAN GILBERT: Kieran Gilbert here with you and the Prime Minister joins me. Prime Minister, thanks so much for your time.  PRIME MINISTER: G'day Kieran.  GILBERT: An assumption a vaccine is ...

Daily Bulletin - avatar Daily Bulletin

Did BLM Really Change the US Police Work?

The Black Lives Matter (BLM) movement has proven that the power of the state rests in the hands of the people it governs. Following the death of 46-year-old black American George Floyd in a case of ...

a Guest Writer - avatar a Guest Writer

Business News

Nisbets’ Collab with The Lobby is Showing the Sexy Side of Hospitality Supply

Hospitality supply services might not immediately make you think ‘sexy’. But when a barkeep in a moodily lit bar holds up the perfectly formed juniper gin balloon or catches the light in the edg...

The Atticism - avatar The Atticism

Buy Instagram Followers And Likes Now

Do you like to buy followers on Instagram? Just give a simple Google search on the internet, and there will be an abounding of seeking outcomes full of businesses offering such services. But, th...

News Co - avatar News Co

Cybersecurity data means nothing to business leaders without context

Top business leaders are starting to realise the widespread impact a cyberattack can have on a business. Unfortunately, according to a study by Forrester Consulting commissioned by Tenable, some...

Scott McKinnel, ANZ Country Manager, Tenable - avatar Scott McKinnel, ANZ Country Manager, Tenable



News Co Media Group

Content & Technology Connecting Global Audiences

More Information - Less Opinion