Euro advocate admits to big mistake

Dr Stefan Auer 

Dr Stefan Auer

First published in The Australian on 11 June 2013.






'You can't repeat the past?' Gatsby cries incredulously in Baz Luhrmann's marvellous cinematic adaptation of F. Scott Fitzgerald's novel. 'Why, of course you can.'

Would that it were. In real life, we cannot change history. The best we can hope for is to learn from mistakes to avoid repeating them.

Hans-Werner Sinn, a respected German economist, proved wiser than the characters of The Great Gatsby last week when he said: 'I was ein dummkopf (a dumb-head) as a young man.' Young he was not, but what he did proved to be a pretty dumb thing.

Sinn was in his 40s when he advocated the introduction of the single European currency. To his credit, and in stark contrast to Europe's political leaders, he has acknowledged his mistake for some time, having become one of the most prominent critics of the eurozone rescue efforts.

While Sinn's admission made headlines in German newspapers, world media was preoccupied with a damaging report produced by the International Monetary Fund, which admitted it mishandled the first bailout of Greece in 2010 by making overly optimistic predictions about its capacity for growth.

The IMF also pointed its finger at its partners in this endeavour, particularly the European Commission. It argued that an earlier restructure of the Greek public debt would have put the country in a better position in facing the downturn.

The findings are bound to increase Greek suspicions against the troika, the triumvirate consisting of the IMF, the European Commission and the European Central Bank, which has de facto ruled the country since 2010. The report implies that the European leaders and the commission objected to this policy because they prioritised European interests at the expense of Greek interests

Not surprisingly, the commission dismissed the IMF's criticisms. EU commissioner of economic and monetary affairs Olli Rehn lashed out at the IMF, accusing it of 'trying to wash its hands and throwing the dirty water on European shoulders'. It seems the EC can do no wrong. Admitting past mistakes would further undermine its tenuous legitimacy.

The great Polish philosopher Leszek Kolakowski predicted such a response 10 years ago: 'The situation has become worrying: a crisis of the common currency would now be a crisis for Europe as a whole, and in all respects. So if the common currency does not succeed, everyone will have to pretend otherwise.'

Alas, the common currency has not succeeded, and the EU elites pretend otherwise. The project failed comprehensively in all its key aims.

It was meant to make Europe more united and Germany more European; instead it made Europe more fragmented and German.

Politically, rather than cementing Europe's unity, the single currency has revived old hostilities between European nations, pushing them further apart from each other.

Economically, instead of reducing discrepancies in wealth across the eurozone, it has entrenched disadvantage by making an increasing number of nations on Europe's periphery less competitive.

The crisis has revealed the fallacy that underpinned the European project for a long time: that European integration is a win-win proposition benefitting all participants, nations and citizens.

Today's Europe is very far from this ideal. While Germany enjoys almost full employment with unemployment levels slightly above 5 per cent, Greece reached another record high with 27 per cent general, and a staggering 62.5 per cent youth unemployment.

Yet the European Commission is not the only culprit in this protracted crisis. The failure lies with the EU's 'political culture of total optimism', identified by distinguished Italian political scientist Giandomenico Majone, which prevents their leaders from acknowledging past mistakes. Neither the IMF report nor Sinn's critical confession is going to change this attitude.

If any evidence of total optimism was needed, French President Francois Hollande delivered it at the weekend in Tokyo when he proclaimed that 'the crisis in the eurozone is over'.

Yet European unity can survive only when its leaders recognise that the path taken about 20 years ago, when the euro was instituted through the Treaty of Maastricht, was misguided. Furthermore, they need to accept that the strategy pursued for the rescue of the eurozone for the past three years is failing.

What made Gatsby great in Fitzgerald's novel and Leonardo DiCaprio's amazing incarnation was his capacity to remake himself by remaking his own history.

It was only when he started believing he could change his love heart's past that he embarked on a journey of self-destruction. Gatsby would rather have died than to admit his mistake. Will the EU end up doing the same?

Associate Professor Stefan Auer holds the Jean Monet Chair in EU Interdisciplinary Studies at La Trobe University.