This article originally appeared on Slate.fr, Slate’s French sister site.
We’ve known all along that the first test of the European Union would be a recession. And now we have one—a great recession, perhaps even a depression. But the union isn’t rising to the occasion. As the crisis unfolds, Europe is caught up in small-time squabbles. As unemployment grows, politicians do nothing but point fingers. It’s as if the European Union, in the middle of a war, had decided to lay down its arms. Helpless and divided, we rely on others—on the United States and China—to overcome the crisis. Each member country can think only of saving its own banks, its own auto industry; there’s no comprehensive plan of action. We’re patching up holes, waiting around for America to save the day with a substantive solution. Just like 1944. The numbers speak for themselves: All the European plans combined reach $354 billion, or nearly 1.1 percent of gross domestic product. The Chinese plan, by contrast, adds up to $580 billion, or 7 percent of GDP over two years. And the U.S. Congress recently authorized an $850 billion stimulus, 6 percent of GDP. In France, we’ve been bickering over a measly $33 billion: Should we help businesses or stimulate the economy by giving directly to consumers? The truth is, we’re not interested in crafting a macroeconomic plan. We’re just waiting around for Washington or Beijing to save us.
Last Monday, while Barack Obama fought for a second bank-rescue plan in addition to the fiscal stimulus, EU member states discussed the possibility of discussing the possibility of acting in unison. In response to a request from France and Germany, the president of the union, the Czech prime minister, announced an April “summit.” But he didn’t set an exact date or lay out a precise program beyond discussing the valuation of toxic assets.
So as not to be outdone, the chairman of the Eurogroup, Prime Minister Jean-Claude Juncker of Luxemburg, lamented that “European countries have been developing plans and programs in isolation” without even minimal consultation with other member nations. “We need better coordination,” he said. Indeed we do.
“There are currently 16 national fiscal and monetary policies in Europe,” said Patrick Artus of Natixis. Laurence Boone and Raoul Salomon of Barclays Capital suggest that “Europe has missed the opportunity to take concrete steps forward.” As Europe stumbles, the weakest countries have seen their “spreads” (interest rates on debt in comparison with Germany’s—the standard) rise two or three points. The cost to the taxpayers of these countries will be $38 billion. Small change, by today’s standards! Did we really think that this same amount could fund a complete recovery program?
Our inaction will cost us far more dearly in the long term if the market begins to doubt the ability of weaker states to handle significant debt—or if the market questions the willingness of local populations to accept the hardships that debt brings with it: slashed budgets for investment projects and social services. Will the people not just understand but accept and submit to such cuts? There is no statute mandating that Europe as a whole come to the rescue of a state that defaults on its loans. We’d have to throw something together in a hurry, and even then we couldn’t necessarily prevent a ripple effect. Once the market smells blood, it’ll prey on the weak: after Greece, Ireland and then Portugal.
French President Nicolas Sarkozy has spoken publicly about the consequences of European disunity. But we’re far from addressing the problem. God forbid we give Greece $50 billion or $60 billion! For now, Germany categorically refuses to cough up the cash. Will it take the International Monetary Fund to restore order in the euro zone? That would be shameful.
This crisis is an opportunity to develop a truly federal economic and fiscal policy. Could that still happen? I don’t think so. We’re just waiting for the Americans and the Chinese.
This article first appeared in Slate.fr under the headline “L’Europe défaille dans la crise.” It was translated by Juliet Lapidos.