ABSTRACT
Default on a dream In 2004 the American political scientist Jeremy Rifkin published a book called The European Dream, where he wrote that, unlike the United States, the European Union appeared to be a model of an emerging ‘soft power’ in a hard world. Already an economic giant, with a single currency stronger than the dollar, it lacked the arrogance in world affairs of the US. It had emerged from the ashes of WWII with a project for peaceful unification of hitherto warring states. All its members were democracies. With the end of the Cold War, most former satellite states of the defunct Soviet Union already had joined it. It had drawn up a Charter of Fundamental Rights, which was to be part of a new Constitution for Europe. It seemed a model for what might in due course be a new global order (Rifkin 2004). Yet, within months of Rifkin’s claims, something went wrong. The Constitution for Europe was serially rejected by those electorates given the chance to vote on it. Since 2009 Europe has less than fulfilled Rifkin’s dream. Rating agencies which had ranked toxic debt as safe as government bonds until the subprime crisis threatened banks and hedge funds with collapse turned their sights on European governments whose debt, in key cases, had soared to salvage them. Threats to the single currency, which Helmut Kohl had presumed would lock Germany into a democratic Europe, instead proved to be the template for resurgence of German hegemony, with debt-distressed member states succumbing to the claims of Angela Merkel that there was no alternative to saving them other than an austerity which denied the very principles of achieving rising standards on which the Rome Treaty, founding a European Community, had been based. The outcome, by 2012, was a Stability Treaty agreed by 25 of the then 27 EU member states that national governments should submit their budgets to European technocrats before these were submitted to their parliaments and that they should commit themselves to ‘budget balance’ as a principle, despite this being as progressive a response to crisis as a return to the gold standard. This was matched by another principle that would have satisfied Milton Friedman, that European governments should govern only by market criteria, rather than those for social welfare, which was a denial not only of Keynesian reasoning but also of the
principles of Marshall Aid from which Germany herself had been a key beneficiary, and of the European Social Model to which nation states emerging either from dictatorship in southern Europe, or in the former Soviet Union, had assumed that the then European Community and later European Union was committed. The path towards this had been laid by the earlier failed attempt to impose a European Constitution, which was rejected by the electorates of every member state to which it was put for ratification, yet then recycled as a Lisbon Treaty, and later endorsed by the Irish electorate only on the basis of an offer they could not afford to refuse. For an austerity pact, of itself, will not placate financial markets, which, by 2012, became increasingly aware that, without growth, the European economy could not reduce its debt and deficits. For example, when Standard & Poors downgraded nine Eurozone member states in January 2012, they stressed that the three key reasons were: (1) simultaneous debt and spending reduction by governments and households, (2) thereby weakening economic growth, and (3) prolonged dispute among European policymakers on what to do about it (The Telegraph 2012).
