Europe yet to learn from its mistakes

stefan-auer-thumb Dr Stefan Auer


First published in The Australian on 30 April, 2012.

Joe Hockey speaking in London recently was right: the age of entitlement is over. But few people want to hear this, particularly in Europe.

Europeans appear incapable of learning from their mistakes - their single currency is dysfunctional, their treasured European social model is in tatters, but they are demanding more of the same. They want more social protection, delivered by a bigger and a more powerful state.

Consider the results of the first round of presidential elections in France. About a third of the electorate opted for candidates promising to defy the forces of globalisation: the extreme right and the extreme left were not too far removed from each other in making people believe France can be insulated against the vagaries of the free market.

Yet the strongest candidate, Francois Hollande, didn't shy away from making claims about a better future. The socialist leader promised to lower the retirement age from 62 to 60 and to create 60.000 new jobs in the public sector. He will either renege on most of these promises, losing political legitimacy, or deliver on them and ruin France, as well as Europe.

This will lead to more social unrest, breeding contempt or even hatred among the people: contempt of voters for the elites, and - more worryingly - growing hatred of those nations that are not yet bankrupt. As the economic situation deteriorates, the anti-German sentiment across the eurozone will reach new heights. Whoever wins the French presidential elections, whether it is Nicolas Sarkozy or Hollande, will demand more concessions from Berlin and Frankfurt. The next French president will ask Angela Merkel in Berlin for less austerity, and the European Central Bank in Frankfurt for more money.

If those demands are met, the German people will not forgive their government, as they will be facing the erosion of their wealth through inflation and more bailouts. If they are not met, the rest of Europe will not forgive Germany, because they will continue to suffer the consequences of massive economic decline.

France and Germany, which have been instrumental in advancing European unity, are now set on a collision course owing to their conflicting material interests and differing political cultures. The Germans, like the French, look to the state to provide them with stability and protection. But while Germans learned to appreciate the advantages of globalised capitalism, the majority of the French people still view the free market as their enemy.

Even more important will be the battle over the future of the European Central Bank, which the French leaders never wanted to be as independent as the German Bundesbank used to be.

The fact that the second round of presidential election in France is on the same day as the national election in Greece might create the conditions for a perfect storm. Both polls are likely to mark the end of the consensus that led to the adoption of the fiscal compact, signed by 25 out of 27 EU governments, but awaiting ratification. If panicky markets trigger more economic decline, there will be no end to the mutual recriminations.

Mutual contempt, or even hatred, among EU nations will create a volatile political environment, and more volatility is the last thing the Europeans need. Niccolo Machiavelli understood this well at the beginning of the 16th century. The prince, he wrote, would be foolhardy to base his rule on generosity towards his people - not because being generous is bad, but because it is unaffordable. Sooner or later you run out of money. This is the problem the EU cannot address, as it has always presented itself as a force for good. The European social model promised a win-win proposition for all.

"If you earn a reputation for generosity," Machiavelli warns, "you will come to grief. If you want to sustain a reputation for generosity, you have to be ostentatiously lavish; and a prince acting in that fashion will soon squander all his resources, only to be forced in the end, if he wants to maintain his reputation, to lay excessive burdens on the people, to impose extortionate taxes and do everything else he can to raise money.

"This will start to make his subjects hate him, and since he will have impoverished himself, he will be generally despised.

"As a result, having injured many and rewarded few, he will be vulnerable to the first minor setback, and the first real danger he encounters will bring him to grief."

Germany is the prince in this parable, however reluctant its leaders are to exercise hegemony over Europe. Machiavelli was convinced nothing is as corrosive of power as contempt. But his solution is even less palatable than the mess the EU is in now. Machiavelli was convinced it was better to be feared than loved.

And the last thing the Europeans need is a scary Germany.

Dr Stefan Auer is Jean Monnet chair in EU Interdisciplinary Studies and senior lecturer in History and Politics at La Trobe University, Melbourne.