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EU successes empowered eurozone failures

By Xue Guangda (Global Times)    08:28, February 05, 2015
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EU surveys regularly show that Greeks consider themselves to be the hardest-working people in Europe, a sharp contrast with the rest of the continent, which believes them to be the laziest. No doubt neither view is exactly accurate. But it shows up the vast gulf in perceptions between Greece and others. The recent Syriza victory was part of a wave of public anger against the EU, the IMF and Germany, perceived as the creators of Greek's woes. That anger may be duplicated in other marginal EU economies, such as Spain, Portugal and Ireland.

When it comes to the disastrous imposition of austerity, some of those complaints are fair. Yet the anger now being directed against Germany, and Europe as a whole, omits that it was the strength of Europe's dominant financial power that attracted those countries to the euro project to begin with. Moreover, it neglects that the EU, as a whole, has been of massive benefit to previously marginalized European economies.

For countries such as Greece and Spain, with recent histories of political instability, and which had long felt themselves to be on the margins of the continent, the EU was an exceptionally appealing prospect in the 1980s.

EU membership offered political security, backed by a declaration of shared values. It offered economic benefits that meant a real income growth of over 10 percent in Greece and Spain in the 1990s.

Given the success of the EU project, it's no surprise that the southern countries were enthusiastic proponents of the eurozone. The Greek government was keen to align every aspect of national policy with Brussels. Financial union also lent shaky economies the credit they needed to secure cheap loans at relatively bargain rates. At the heart of that was the credibility pinned down by the size and security of Germany.

All this, in Greece's case, was built on a lie. The Greek figures given for eurozone entry were outright invented, with the aid of large financial institutions like Goldman Sachs and the compliance of their European partners. But the EU chose to turn a blind eye, keen on expanding its own ambitious project of currency union and believing, naively, that economic growth would let Greece and others move beyond their shaky foundations.

But this points to a wider problem. The very success of the EU gave the currency union project a credibility it didn't have, and stopped the questions being asked that could have prevented the problems we see today. Between 1945 and 2000, the EU, and its precursor bodies, proved a triumph. At the heart of this scheme was reconciliation between Germany and France, removing the major driver of conflict in Europe. Beyond that, the tearing down of many national barriers made the lives of Europeans not only easier, but also richer, not only in marginal economies but also across the continent.

But the euro was a much more dubious idea. Prior currency union schemes had been tried and failed before throughout European history. And the toughest questions weren't asked. Why were there no mechanisms in place for countries to exit the currency union? Why should 17 economies with very different needs be joined to the same monetary policy? What could be put in place to make up for the flexibility being lost by the union?

Some, of course, challenged these ideas. But the success of other European projects damaged the credibility of the mavericks. They were too easily portrayed, as Peter Oborne and Francis Weaver documented in their polemic Guilty Men, as cranks or bigots, and the terms of the debate went unchallenged.

Today, the pro-euro rhetoric looks almost unbelievable. "With Greece now trading in euros," went one Financial Times column in 2001, "few will mourn the death of the drachma. Membership of the eurozone offers the prospect of long-term economic stability."

Greeks cannot convincingly portray themselves as victims of an uncaring Europe, let alone Germany, when they benefited so much from European politics and so unhesitatingly leapt on the euro. But nor should we blame them for being swept away by the wave of misplaced enthusiasm that seized so many on the continent.

The author is a commentator on current affairs based in Beijing. [email protected] 

(For the latest China news, Please follow People's Daily on Twitter and Facebook)(Editor:Yuan Can,Liang Jun)

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