How do we stop core European countries leaving the EU? We must tackle their economic woes with a European wide New Deal of investment.
This May, the EU once again came perilously close to collapsing. In the presidential elections for France, two of the four main candidates advocated for a french exit of the European Union; Marine Le Pen from the populist right, and Jean-Luc Melenchon from the socialist left. The election ended with a final showdown between Marine Le Pen and the Neo-liberal Emmanuel Macron, in which 40% of the voting electorate endorsed Marine Le Pen’s xenophobic, nationalistic and authoritarian platform. Thankfully Macron won, preserving the European project for a little while longer.
How did we get to this point, where core countries in the Eurozone project threaten to leave the EU, jeopardising the whole of the European project? Much of it comes down to economics. When the subprime mortgage bubble burst in 2007, investors realised that the European economy was doing much worse than they believed, and began pulling out their investments. The resulting recession has led to high levels of unemployment in much of the European periphery, and underemployment in the core of Europe. This has caused a dual problem, both of poverty, and rising migration from the poorer regions of Europe into the core. This has led to a sharp rise in Euroscepticism. Combined with rising migration from the Middle East and Africa, we are witnessing a revival in much of the Eurozone of far-right movements, challenging liberalism and internationalism. In 2010 Hungary elected their equivalent of Trump; Viktor Orban, who has become increasingly bold in his authoritarian stances. Orban has been in the news of late with his proposals to build a wall across Hungary’s southern border, and for attempts to shut down Hungary’s most liberal university. Europe’s rising xenophobia has likewise been devastating for refugees, with sixteen-hundred people drowning in the Mediterranean so far this year.
Ten years on from the financial crash, Europe’s problems have largely not been addressed . The biggest loser after the 2007 crash was Greece, where unemployment rose as high as 70% in the most deprived regions of the country. With its finances tied to the Eurozone, Greece was unable to control its monetary supply and so required a bailout from the European banks. As part of the conditions of the bailout, Greece entered into negotiations with the European institutions to get their economy back on track. It was an opportunity for Europe to assess their failings, and fix the whole of the European economy. Yet it would be an opportunity they utterly failed to grasp. Rather than the investment that Greece needed, they were forced to pursue deep cuts to their public services and to privatise public assets. This was accompanied by a vicious campaign in the European media, painting the Greek people as lazy, and blaming them exclusively for their economic woes. Though Greece does have a genuine problem with tax-dodging, the hypocrisy of the European institutions was revealed in the negotiations, as nothing was proposed to deal with these problems. The austerity imposed by the EU on Greece led to a dramatic decline in consumer demand and economic growth. Eight years later, in 2015, the Greek economy had to be bailed out again, and the EU demanded another batch of harsh austerity measures. At the time, Greece was led by the Eurosceptic party Syriza, who put the EU’s demands to a public referendum with the understanding that a ‘no’ vote would almost certainly mean Greece leaving the EU. In the end, 62% of the Greek people backed ‘no’. The EU only survived then because the leader of Syriza, Alexis Tsipras, made a tactical decision to go back on the result of the referendum, and to capitulate to the EU.
The same problem that Greece faced is on the horizon for Italy, Spain and Portugal, countries who will soon be needing bailouts as unemployment is also very high. The next major threat to the EU comes from the Italian elections in May 2018. The front-runner is the Eurosceptic party, ‘The Five Star Movement’ led by Beppe Grillo. Beppe has previously expressed approval for an Italian referendum on leaving the EU, with polls show majority support from Italians.
Since the election of Emmanuel Macron there has been something of a boom in confidence in the EU, with his election pretty much ensuring that France stays in the EU at least for a while longer. An analysis of his plans however reveals a failure to grasp the scale of the problem, and a poor political strategy. His plans as he describes them are for ‘a common budget for the Eurozone, voted by a Eurozone parliament and executed by a Eurozone finance minister’. This plan has two problems. Creating a common budget would firstly change how some of the money is allocated in Europe, but the amount of money being spent would largely remain the same. Macron doesn’t grasp the need for increased spending, which is not surprising as a firm Neo-liberal, whose main economic policy during his election campaign was a series of sharp cuts to workers rights, making the jobs of French workers much more precarious. The second problem with Macron’s plan is that in calling for the creation of a Eurozone parliament and finance minister, Macron is calling for a change to the foundation treaties of Europe, which means only the unanimous approval of all Eurozone nations can implement his plan. With the Euroscepticism on the rise, it’s very unlikely that such a change would pass, as it would almost certainly be seeing as a further infringement on national sovereignty. Macron’s plans are thus unlikely to happen, and would have minimal impact if they did.
What, then can be done for Europe? It needs to get its economy back on track, to create jobs for the unemployed and the underemployed and to utilise their capacity for productivity which is currently lying dormant.This could be done by a plan similar to the New Deal in the United States in the 30’s, with investment in infrastructure and industry across Europe. The Democracy in Europe Movement (DiEM) explains how this could be implemented in their European New Deal report. The New Deal could be funded by the European Investment bank and European Investment Fund, with support from Central Banks. Since the financial crisis, central banks across Europe and the wider world have been printing and distributing huge quantities of money to private banks in the hope of stimulating growth, albeit largely unsuccessfully. Investment from private banks remains at a historic low, while savings remain high. By redirecting this money to public banks, the money could be put to effective use, helping the economy of Europe to pick up. As growth picks up, the effect would be amplified, as private investors become more confident in the European economy and turn their savings into productive investments.
Beyond that proposal, which could be implemented right away, the European New Deal report contains a variety of longer-term measures. These include a raft of reforms for Europe’s private banking sector, the creation of a Pan-European public body to provide the public sector with the skills necessary for designing and managing the public investment that Europe needs, expertise for the transition to a sustainable European economy and a variety of specific programs and targets, including a jobs program, anti-poverty programs, and a housing program. The report comes at an important time, with nationalist sentiment rising across Europe. The left thus far have been unable to clearly articulate a means of fixing the EU or to describe a viable replacement and thus have been weak in the face of rising nationalism. It is unclear whether political forces will assemble themselves in time to save Europe, but if it does fall, we can not let it be because the people lost faith in internationalism. That path leads to the grave possibility of war in Europe.