After the Irish government, the Portugal government has fallen victim of austerity. The UK is sticking to this course without rethinking whether austerity makes political and economic sense. I don’t need to remind anyone that the UK has already had a huge and violent student protest last year, and if this keeps going, we have every reason to think that there will be waves of protests all over Europe, especially in, Spain, Ireland, Greece, UK, Italy and Portugal. At this point, we have to wonder whether these governments are trying to serve their people or do they intend to create public unrests that would not happen if it were not for the irresponsible polices.
But of course, the Very Serious People in Europe, the German government, ECB and European Commission in particular, believe the austerity polices are anything but irresponsible. that is why Trichet called for even tighter fiscal rule. Let’s forget about economics for a while and just wonder what is the point of a democratic government. A democratic government is supposed to serve it people first and foremost, and the interest of the people, not investors, bankers, businessmen, other governments etc. should be the priority. Not only does Austerity not making any sense at all, even if it does, the governments should really think hard whether this is the best course of action in face of Europe-wide protests.
Why these governments are no longer responsible to their own people will be a good question to the future historians and political scientists. I will venture a guess here. Since Europe has become a single “community" with some kind of, but not total, political-economic unison, they all take another government next to them as the benchmark. As a matter of fact, the formation of the EU Union is supposed to make them, if not identical to each other, in terms of economic policy. As such, they have in effect created an European Union identity, while at the same time, there is still the national identity that the national governments have to maintain, and that created a split in the European image and national responsibility, and they will have to choose between them. Germany, with Merkel at the helm, apparently puts a higher priority in maintain its national identity together with the traditional German ‘virtues’: competitiveness, low inflation, and low debt. Since Germany is the largest economy in the EU zone (and not in crisis), other countries have to ask her for financial support and political support, because of that the EU identity has become, in effect, a mirror image to the German identity.
The people, however, are not so ‘European’ when it comes to their own immediate well-being. What they need right now are employment and investment in human capital; cutting back on social programs would not give the people a sense of confidence at all. For the ordinary people, they will get no benefits from the austerity programs, and even if there was any, it won’t concern them since what are required to rip the benefits, education, infrastructure, employment prospects, safe environment, etc. are taken away from them. The national identity is simple: European unity should not come at the expense of national well-being.
What we have is a mismatch between regional identity and national identity, and the crisis drives them further apart. We have to question whether the EU institutions are adequate enough to align them. The short answer is not. The institutions are too nationalistic and European at the same time. Too nationalistic in the sense that national governments are responsible for their own economic development and the well-being of the nationals; all the while too European that the national governments have to follow the European rules that do not allow effective fiscal and monetary policy for them to get out of the crisis. That is not limited to the Euro straitjacket issue; all European institutions play a part in creating this quagmire: free capital movement without unified regulation allows speculation to move around, well, ‘freely’; free movement of goods prevent countries to employ industrial policy to build up their economies to an adequate level that allows real convergence (and to reduce the disparity in real exchange rate); free movement of people is limited by language obstacles.
There are only two ways to resolve this at this point. Either go completely European or allow the national governments to regain their traditional competences. The European governments are democratic elected, but the EU institutions aren’t. The EU institutions are at best a composite of bureaucrats (except for the EU parliament, which houses elected representatives, but they don’t hold real substantial power and they are no necessary responsible to EU citizens as there is no true European political party as a coherent political unity as of this moment) who are appointed by the national government to handle European matters. Furthermore, European institutions does not have to deal with national protests, and that automatically take them out as stakeholder in national matters. If Europe cannot become a cohesive political unit, then the national governments should retake their power so that the nationals can have their say about their ‘destiny’. Karl Polanyi already warned about that 66 years ago, arguing that the lack of ability to decide national economic matters (due to external factors) was an important factor that gave rise to communism and fascism. It seems that not only the European leaders do not know their economics, they are also oblivious about their own history.