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Has ‘Europe’ Failed?

Posted by (Author) on August 28th, 2012 - 15 Comments

LAST week, European leaders met in Berlin amid new signs of an impending recession and an emerging consensus that Greece could leave the euro zone within a year — a move that would have dire consequences for the currency’s future.

There are many reasons behind the crisis, from corruption and collective irresponsibility in Greece to European institutional rigidities and the flawed concept of a monetary union without a fiscal union. But this is not just a story about profligate spending and rigid monetary policy. The European debt crisis is not just an economic crisis: it is an escalating identity conflict — an ethnic conflict.The European Union was a political concept, designed to tame a bellicose Germany. Strong economic interdependence and a common European identity, it was thought, would be cultivated by the institutions of the union, as Europeans benefited from the economic prosperity that integration would create.

Elites could sell that concept to their publics as long as Europe prospered and had high international status. But the union has lost its shine. It is slowing down and aging. Its longtime ally, the United States, is shifting attention to East Asia. Its common defense policy is shallow.

As Europe’s status declines, the already shaky European identity will weaken further and the citizens of the richer European nations will be more likely to identify nationally — as Germans or French — rather than as Europeans. This will increase their reluctance to use their taxes for bailouts of the ethnically different Southern Europeans, especially the culturally distant Greeks; and it will diminish any prospect of fiscal integration that could help save the euro.

The result is a vicious circle: as ethnic identities return, ethnic differences become more pronounced, and all sides fall back on stereotypes and the stigmatization of the adversary through language or actions intended to dehumanize, thereby justifying hostile actions. This is a common pattern in ethnic conflicts around the world, and it is also evident in Europe today.

The slide to ethnic conflict in Europe is not violent, but it can nonetheless be destructive, both economically and politically. Take the roiling tensions between Greece and Germany. A recent survey finds that a majority of Germans want Greece out of the euro if it doesn’t reform quickly, even though most analysts say that a Greek exit would have incalculable costs for Germany. Clearly something deeper is motivating the German public.

A recent study by the political scientists Michael Bechtel, Jens Hainmueller and Yotam Margalit found that German voters’ attitudes toward the bailouts are explained by their degree of “cosmopolitanism,” or the extent to which they identify with geographically or culturally distant groups. More cosmopolitan individuals are more likely to support bailing out Germany’s southern neighbors.

Unfortunately, cosmopolitanism can be the first casualty of rising ethnic tensions, as populations react negatively to escalating political demagogy, strengthening the hand of extremists. Examples of such stigmatization in Europe abound, from the disparaging acronym PIGS, used to refer to the troubled economies of Portugal, Italy, Greece and Spain, to the tired medical analogies of an infection of the North by the contagious South. Germans tell the Greeks how to live; the Greeks reply by calling them Nazis.

This is not just the result of economic weariness or fear. It is the predictable re-emergence of hard-edged national identities, which the European Union hoped to banish. True, many Greeks, especially those living abroad, still toe the European line about “taking the medicine” prescribed by the European “doctors,” no matter how painful.

Why? Some fear the social upheaval that a transition to the drachma would cause. Others worry that populist politicians would abandon all structural reforms without European oversight. But social psychology suggests that many Greeks might be desperately clinging to the last shreds of their European identity, because that gives them more self-esteem than the alternative — the Near Eastern or Balkan identity they have been trying to shed for decades. Greece’s wounded reputation makes some Greeks cling to their European identity. But even that may not last long.

Germans must have a frank public discussion about what it means to be European, how good European citizens should behave toward other Europeans and why a strong Europe is good for German interests in a world dominated by the United States, China and emerging powers like India and Brazil. Without such a discussion, and real concessions to Greece, a Greek exit is inevitable — and with it the triumph of parochialism in Europe.

Nicholas Sambanis is a professor of political science and the director of the Program in Ethics, Politics and Economics at Yale.

 The article was originally published in the New York Times on 26 August 2012, and is republished by StockWatch with the permission of the author.

Categories → Οικονομία

  1. avatar
    K.P. on August 28, 2012 - (permalink)

    Spot on analysis by Prof. Sambanis. This is exactly what the Germans are missing. This is not just about money and fiscal discipline. There is much more at stake. Nationalism has sneaked back into Germany through the back door. And it has become mainstream…

  2. avatar
    Πολίνα on August 28, 2012 - (permalink)

    The best written article I have ever read on stockwatch blog! I largely agree with you, except that it’s not just the Germans who must have a frank public discussion about what it means to be European. Greeks and other EU countries should do that soul searching too. Quoting and rephrasing Marge Simpson’s, “Lisa, marriage is a beautiful thing, but it’s also a constant battle for moral superiority”, I would say Europe is a beautiful thing, but it’s also a constant battle for moral superiority. The longevity of the European ‘marriage’ depends on whether Europeans can abandon that battle in practice and try to make the whole greater than the sum of its parts…

    • avatar
      Επιλήσμων on August 30, 2012 - (permalink)

      Dear Πολίνα,

      I think you are exagerating! I would agree, however, with you so far as to say that it’s the best written article IN ENGLISH I have read on the stockwatch blog. I myself, have read many excellent articles here in greek.

      So, for you, European Integration ( European Union) and the final outcome, is a beautiful thing, like a marriage.
      Well, this is part of the theoretical problem as to what we mean by European Integration / Union.
      To many people (e.g. politicians,elites,political scientists,common people) can and does mean different things.

      Someone described this as similar to the story of the Blind Men and the Elephant. You know perhaps the story: ( I have borrowed it from D.J. Puchala’s Paper in 1971 on Political Integration).
      Where several wise blind men were asked to touch an elephant and declare what the animal looked like. Each blind man touched a different part of the animal and therefore each concluded that the elephant had the appearance of the part he had touched.
      So they gave a completely different description of the elephant according to the part they happened to touch.
      I am wondering therefore what part of the “elephant” you happened to touch, and more importantly, what part Prof. Sampanis touched.

      • avatar
        ΠΟΛΙΝΑ on August 30, 2012 - (permalink)

        Dear Επιλήσμων,

        It is the best written article I have read. I think a person’s personal preferences cannot be put on a yardstick by another, but I am honored you chose to judge mine as exaggerated…

        As regards your story of the Blind Men and the Elephant, I think it is obvious from what I said previously that I don’t have one, specific definition of the ‘elephant’. Rather, my suggestion on how to best ‘view’ the elephant is by frank public discussion in all countries, by soul searching (i.e. deeply thinking and as such not just independently touching and judging) and by abandoning the battle for moral superiority (i.e. coming together to form a joint definition instead of competing about who’s definition is best). Think of it as the blind men sitting around together composing the image of the elephant.
        As regards Prof. Sampanis, I cannot reply on his behalf.

  3. avatar
    αθηνα on August 28, 2012 - (permalink)

    Eξαιρετικό το άρθρο του κ.καθηγητή. Αλλά δέν χρειαζόταν το ερωτηματικό στο τίτλο του άρθρου,γιατί η Ευρώπη και βέβαια έχει αποτύχει.Πάμπολλες φορές έχει ειπωθεί ότι το οικοδόμημα της Ε.Ε. θα καταρρεύσει εάν δεν γίνει η ασταθής αυτή ένωση των πολλών ταχυτήτων και των πολλών νομισμάτων, [αν είναι δυνατόν να υπάρχει η ευρωζώνη και άλλα 6-7 νομίσματα για διαφορετικούς λόγους],να μετεξελιχθεί λοιπόν, σε κάτι παρόμοιο με τις ΗΠΑ. Και γράφοντας αυτά,θα αντιπαρέλθω τα έωλα συνθήματα των μαρξιστών,ότι γιά όλα φταίει ο καπιταλισμός.Απλά εμείς οι νότιοι μάθαμε να βγάζουμε 2,και να ξοδεύουμε 3.

  4. avatar
    Michalis M. on August 28, 2012 - (permalink)

    Dear Prof. Sambanis,

    First, as a regular reader of stockwatch I’d like to thank you for your contribution the calibre of which is rarely encountered in Cyprus media. I have two points to discuss: first re the ‘the flawed concept of a monetary union without a fiscal union.’ In my opinion, a unified economic policy is as trivial to conceptualize as impossible to enforce. Aren’t the composite countries of EU sufficiently different to require different fiscal and monetary policies? Germany is an exporting country striving to limit costs, including labour, and favours a weak euro to sell cars in U.S.A and China. Greece is an importing country, produces very little and the living standards of its citizens largely depend on the purchasing power of euro. While in Germany negotiating with labour units and limiting wages has led to an increase in exports and growth the same policy applied in Greece resulted in reduced consumption and a wider public deficit. Which brings me to the second point: ‘Germans tell the Greeks how to live; the Greeks reply by calling them Nazis’. This is certainly true, and the vehement reaction of the ‘Mediterranean club’ against their northern patrons highlights that the EU countries are not only different in their economic needs but also different in their cultural, ethical and social standings. ‘…ethnic identities return’ because they have always been there and are now no longer suppressed by a mirage of unified prosperity. With the thread of another intraeuropean war now largely eliminated perhaps EU has outlived its purpose.

  5. avatar
    Taylor on August 28, 2012 - (permalink)

    Excellent Article.

  6. avatar
    phylarchus on August 28, 2012 - (permalink)

    In my opinion Prof. Sambanis describes accurately the current state of affairs in Europe.
    Basis of the EU were always financial benefits even if some leaders often spoke of will to secure “freedom” and, from time to time, referred vaguely to “common european values” (some efforts to mention religion in this context failed miserably).
    Finally in the first instance a “Gebilde” was attained, which fitted best mainly the larger countries Germany, France and Britain. Each one of them followed openly selfish policies, putting egoistic/nationalistic interests always first.
    Finally the Eurozone was formed, always on the same line of thinking. Here the interests of the big exporting EU countries were obviously served much more effectively than the ones of the underdeveloped. Low interest rates were available to all Euro countries, but could not be equally exploited by the poorer ones, who lacked technology and sufficient (because “locked”) know how. The result was that countries like Greece (unfortunalely way behind the advanced ones in every respect) exploited the billions of credits to live better, buy more luxury cars, employ more friends and in some cases build hotels and luxury houses without any plan. A prudent leadership would either never allow to be put unprotected in the lions cage, or demand something equivalent to the advantage of the patent low, the customs union and the free flow of capital, which shielded the advanced economies against “intruders” (i. e. incentives for factories to be built in poorer countries for technology transfer, preferential EU tax treatment of european tourists when visiting southern countries, cross-countries share ownership of important exporting organizations etc).
    However the main problem of the EU is the lack of will and effort to systematically work for a truly “common” place for all Europeans. Europe, yes, has failed and if it does not wake up and fix things quickly, it will simply disintergrate. The worst consequence to that will be that nobody will ever again dare work on such a noble, yet illusionary object.

  7. avatar
    Επαμεινώνδας on August 28, 2012 - (permalink)

    “With the thread of another intraeuropean war now largely eliminated”

    Μην είσαι τόσο σίγουρος. Η απειλή του πολέμου είχε σχεδόν εξαλειφθεί γιατί ακριβώς υποβαθμίστηκαν οι εθνικές διαφορές και κτίστηκε η ιδέα της Ευρωπαϊκής ταυτότητας και αλληλεγγύης. Αν επιστρέψουμε στους παλιούς εθνικούς διαχωρισμούς, η απειλή εντάσεων, συγκρούσεων, και ναι, ακόμα και πολέμου θα είναι πλεόν ορατή.

  8. avatar
    Economist on August 28, 2012 - (permalink)

    Great article, one point:

    EU started with a vision ( the European Coal and Steel Community, which was declared to be “a first step in the federation of Europe”).

    This vision was extended to include a group of countries to use the same currency, a politicallly appealing move towards creating a monetary union, which at the same time ignore the theory about “optimum currency areas”.

    The end result now is to have numerous “visions” across Europe, largely determined by nationalism.

    EU is currently trying to create a single vision for its member states (see the interim Report by Herman Van Rompuy “Towards a Genuine Economic and Monetary Union” issued on 25 June 2012, which proposes a vision for a stable and prosperous EMU based on four essential building blocks: an integrated financial framework, an integrated budgetary framework, an integrated economic policy framework and strengthening democratic legitimacy and accountability of decision-making within the EMU.

    This Report is expected to be finalised by December, based on the discussions of the EU leaders in the European Summits and the outcome of these discussions remains to be seen.

    Personally I am not very positive, the differences between euro area countries are very visible and one cannot expect that suddently all countries will become Germanies.

    Unfortunately, little Cyprus can do little in these discussions, given its size and relative weight. This is a hard but undeniable truth

  9. avatar
    Επιλήσμων on August 28, 2012 - (permalink)

    Ezra Pound had the foresight to diagnose the problem and danger, decades ago. In his essays for ‘The New Age’ in July 1917, “Provincialism the Enemy”, we can understand what Prof. Nicholas Sambanis means in his concluding sentence “…- and with it the triumph of parochialism in Europe”. (Although the term “parochialism” is a more common political term and therefore more apt to be used by a political scientist, I believe the term “provincialism” as used by E.Pound, would have been the better choice – although somehow similar in meaning.

    Please allow me to quote a few lines from E.Pound’s essay.

    ” Provincialism consists in two parts:
    (a) An ignorance of the manners, customs and nature of people living
    outside one’s village, parish or nation.
    (b) A desire to coerce others into uniformity …”

    The essay is reprinted in E.Pound’s “Selected Prose 1909 – 1965″.

  10. avatar
    Savvakis Savvides on August 28, 2012 - (permalink)

    There is no such thing as a European and never was really and I am sorry to note that most probably never will be. Europe is a construct of convenience for the few. It helped reduce tensions for a while and the threat of war (and that I may say at a huge cost of increased bureaucracy and inefficiency). The big test however will come when there is a direct conflict of interest among the nationalists within Europe. And that time is fast approaching. We are on a fast collision course that no-one really can do much about to avoid because it is driven by exogenous factors like the debt crisis and systemic flaws in the world monetary and financial system.

    The USA is totally different because although the country has been created substantially from European immigrants, they have developed a national identity as they struggled together against common enemies and had to survive common threats. They have created this new nation together and in the process relegated their initial identity below their American one. Moreover, the US is one united economy. No one complains in Texas or California if the President taxes them to bail out Detroit or Ohio. Many great economists (including Milton Friedman) predicted the downfall of the so called European Monetary Union because they immediately recognised that it is impossible to have monetary without fiscal union. Especially in a bunch of countries with different cultures, languages and productivity rates that until very recently were killing each other at war. This is the sad truth about Europe.

    The final nail on Europe’s coffin was the deregulation of financial markets and the incentives created for banks and hedge funds to channel trillions to Governments and Public Sector entities on the delusional premise that these are risk free investments! I like to be an optimist but it is hard to see a way out of this mess. Not just for Europe but for the whole world. Perhaps the Mayans were right after all; the end is upon us.

  11. avatar
    KKyriacou on August 28, 2012 - (permalink)

    Professor my congratulations on an excellent analysis.
    As you accurately point out EU is a vision promoted by the elites in an attempt to promote unity and contain armed conflicts that devasted the continent over the centuries. Even though that vision lacked the neccesary detail to make it workable in the long run, it has been succeesful in bringing nations together. The European vision has now matured to the point that certain necessary improvements have to be put in place to ensure that the dream stays alive. Few should be surprised that it came down to this, as both the Americans and the Brits have been very vocal of the practical flaws from the very start. Despite the recent rough waters we entered, I think we should take a step back and be content that national conflicts have been tranferred from the battlefields of Normandy to the conference rooms of Brussels. I have little doubt that at the end, under the weight of history lessons, drawn my two world wars, European leaders will rise to the occassion and make sure that they stay there. The problem and irony for us (Greeks/Cypriots) is that we may be sarcrificed for the same vision we want to stay part of. I hope that Greece will overcome its current low point where the only reason the main EU members want it to continue to be included is the threat that the timing of its exclusion poses. As for Cyprus, i also wish that Greece succeeds because if it does not i am afraid the economic blow to Cyprus may be fatal to its Euro future.

  12. avatar
    Michael M on August 28, 2012 - (permalink)

    I find this article quite overstreched in its conclusion. It is really a matter of lost identity within the EU, or a matter of a country that was run roguely by a corrupt system which created a debt burden that is relaint on EU support to repay? The greeks are trying to portray themselves as ‘victims’ of the situation, whereas they are the ones who created it in the first place. Its high time for Greeks to stop moaning and get back to work to pay their debts. We should also do the same in Cyprus. Complaing for the self-inflicted wounds helps no one. This is the raw truth, whether we like it or not.

  13. avatar
    AP on August 29, 2012 - (permalink)

    I agree with Michael. Greece (and Cyprus) need to get their act together. All the creativity, resourcefulness and energy simply need to be chaneled in the right direction. This will happen when the common people trust their government. And that will happen when:
    1. One knows that his/her neighbour pays what he is supposed to be paying for taxes, fees etc.
    2. One sees that the money collected by the government is put to good use.
    That’s it. Then we can expect prosperity and success – an example of this, is what happened with the German discipline and the Greek creativity in Euro 2004.

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