The EU heads towards a hairpin bend
Ross Chatburn, Overseas Editor, appraises the prospect of an EU grant and why the Union needs to learn from its chequered past.
Every time, without fail, my barber will say to me, “I can take more hair off, but I can’t add any on.” I will avow that the humour factor has somewhat depleted after ten or so years. Nevertheless, the premise of this once-insignificant proverb may just provide some clarity to an otherwise pomaded pompadour of perplexity.
On the 1st of January 2001, two years after the creation of the Eurozone, Greece steps off the curb and onto the mighty European highway. It imprints its yellow star upon the great blue flag which symbolises unity through adversity, progressivism over reactionism, collective prosperity over decadence. Though with great power comes great responsibility. After nearly half a decade of GDP growth between 2000 and 2004, the suspension on Greece’s European super tank dwindled. When the hum of motors quietened and the sun began to fade, the evening fog descended and Europe stopped dead.
When the hum of motors quietened and the sun began to fade, the evening fog descended and Europe stopped dead.
In April 2010, Greece hit the curb. Its borrowing was discovered to be 13.7% of its GDP. Within the space of a year, a country on thin ice saw a continent face an avalanche. The reasons for this failure are complex and have no single answer. Put simply, Greece was expected to be able to deal with its debt according to the same rules and regulations of the great powers of Europe. But like a true Kardashian catastrophe, they weren’t keeping up. The interest rates set by the central bank were too low, Greece couldn’t curb its inflation and then, suddenly, like a strike of lightning, Greece lost its jive. Greece had cut off too much of its own hair and it was too late.
A decade on, Germany and France have struck an accord which marks the beginning of a new era of collective responsibility in Europe. A 500 billion euro bailout fund. This is a lifeline. Not for Greece, not for Italy, not for Spain, but for the future of the Union. One of the greatest weaknesses of this union is and has always been the lack of accountability and encumbrance when the road gets rocky. When Greece lagged on the fast lane twenty years ago, it needed a pit stop, but all it got was a wobbly tow bar. This time, Europe needs to guide its neighbours before they run out of fuel.
When Greece lagged on the fast lane twenty years ago, it needed a pit stop, but all it got was a wobbly tow bar.
Indeed, the proposed bailout initiative would mean that countries, such as Spain, Greece and Italy who struggled enormously to repay weighty loans a decade ago, would not have to. The loans would be accumulated by the European Commission on the capital markets and issued as grants. This would allow countries, in particular Greece, to safely rejuvenate their economies without accruing a mass of debt which was at the crux of the crunch a decade ago.
However, Sweden, the Netherlands, Denmark and Austria, constituents of the famous ‘Frugal Four’, have vented their apprehension. In a recent article for the Financial Times drafted by the leaders of the four nations they argued that, in fact, such a bailout would cause further economic uncertainty at a time when domestic growth is at a knife edge and instead financial assistance should take the form of short-term loans. In other words, they want to give struggling nations a buzz cut and hope that it grows back quick sharp.
Although I can just about comprehend their rather sweeping assertion that, in essence, money does not grow on trees, it would be a gross oversight to perceive this deal as a guileless Black Friday-style free-for-all. Why? Because France and Germany have proposed the dough, in the expectation that endangered EU nations put it in the oven and let it grow. Put simply, if we take the so-called Frugal Four’s recipe, Italy and Spain will, quite literally, have too little time to proof. The countries of Europe need time for their economies to stabilise, before the rest muck in with their Herculean-style bailouts. This deal is a lifeline which signals the beginning of a new era of European politics and in true Hollywood style, I outstretch my arm and say well done.
It would be a gross oversight to perceive this deal as a guileless Black Friday-style free-for-all.
I sincerely hope that this dose of altruism injects this disparate union with a pressing awareness of its stalwart subjection destined to send Europe’s future on the road to recovery. Before Europe gets its clippers out, it needs to make sure that struggling nations can deal with the ramifications. As we keep on hearing, the impending crisis will hit the economy hard and life will immeasurably change. But as long as we keep the engines running, the world will power on.