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By Dr. Jim Leontiades
Cyprus International Institute of Management
After the devastation of WWII, the establishment of the Common Market, later the European Union ushered in an era of hope and unity for Europe. The effort has been a huge success, until recently.
The Union became a club which countries were anxious to join. This popularity is fading rapidly. Iceland, a country that once applied for EU membership, has changed its mind. Iceland’s new government has indicated it would drop its bid to join the EU. Edmund Phelps, Nobel Laureate in economics, warned Iceland against EU membership, stating quite plainly that the EU experiment might yet “prove unworkable, unsuccessful”.
In Great Britain, popular skepticism has reached the point where a new political party dedicated to exiting the EU is one of the fastest growing political forces in Britain. A referendum within the next few years allowing citizens to vote on whether Britain should exit the EU is now a near certainty.
More generally a survey of European countries by the prestigious Pew Research Center has found a major drop in European popular support for the EU. Surprisingly, France, one of the eight countries sampled and the leader in establishing the European Union, registered the sharpest drop in sentiment. Last year 60% of the French had expressed a favourable impression of the EU. The current poll featured a 19 point drop, with only 41 % of respondents indicating they had a favourable impression.
WHY THE CHANGE?
Cypriots are in a good position to offer an opinion as to reasons for this change. Rarely has any country not defeated in warfare suffered the sort of economic destruction inflicted on Cyprus by the Eurogroup. Established by the EU to govern the common currency, the Eurogroup today overshadows its parent. In a case of the “tail wagging the dog” it is the Eurogroup along with the IMF and the European Central Bank (the Troika) which now wields the real power in Europe and influences public opinion.
While the EU deals with more abstract concepts like human rights, the movement of people across borders, safety and sanitation standards, the Eurogroup has the power to rule, or ruin, the very lives of its citizens. As we know all too well in Cyprus, it can dictate to member countries on matters such as taxation, salaries, retirement, privatisation, employment, the viability of its industries, the economic model a country should follow, etc.
This assumption of power could perhaps be more readily accepted if its efforts were crowned with success. As we are all too aware, just the opposite has been the case. The Eurogroup has led Europe into the greatest financial crisis since the great depression. The latest GDP figures show the Eurozone registering a sixth consecutive quarter of negative growth.
DEMOCRATIC DEFICIT
Even more significant as regards public opinion is the decidedly undemocratic nature of the Eurogroup’s governance. While the EU has broad ranging objectives and a democratically elected parliament, the Eurogroup is primarily a financial organisation. Its concern is with national finances, exercising a banker’s control with a banker’s mentality. As with any purely financial organisation, decisions are made largely by those members who have the necessary material resources necessary to achieve the organisation’s objectives. Smaller countries have very little voice. Accounts of decision making within the Eurogroup make it clear that Germany and the IMF make the key decisions. The others follow.
While the Eurogroup gives the impression that it knows what it is doing, the results do not bear this out. Eurogroup meetings proceed from one crisis to another. While the EU has been associated with significant benefits and citizen’s rights, the Eurogroup is associated by millions with austerity and autocratic decision making. Unfortunately, the failures and actions of the Eurogroup reflect unfavourably on its parent, the EU.
The EU is not unaware of the negative sentiment this is creating against it and the dangers it poses to the entire European movement. The European parliament has made no secret of its disagreement and opposition to the methods of the Eurogroup. In an attempt to counter this growing antipathy, both the President of the European Commission (Jose Manuel Barroso) and the President of the European Parliament (Martin Schulz) have recently gone out of their way to offer their support to President Anastasiades. But will this be enough to overcome the cultural difference between the spirit of partnership that provided the basis for the foundation and success of the EU and the quite different “banker” ethos of the Eurogroup?
