Wolfgang Münchau in Chained togetherEurointelligence 11/29/2020 explains why he thinks unity among the eurozone countries is a more urgent European economic and political need that great EU integration:
There would have been no eurozone crisis if the monetary union had been accompanied by a small fiscal and banking union from the outset. There would have been no Brexit if the EU had offered the UK a form of membership that did not include a commitment to ever-closer union. There would certainly be no stand-off with Hungary and Poland right now, because the two countries would not be in a position to blackmail the others over the EU budget.
The origin of my fundamental disagreement with Angela Merkel is precisely over this: she prioritised the cohesion of the EU and has been resisting eurozone integration. [my emphasis]
In a recent Eurointelligence podcast, Timothy Garten Ash on central European cakeism, Münchau interviews the British expert on eastern Europe about the current conflict over democracy and the rule of law in Hungary and Poland and how current EU structures make it a particular challenge to address. Ash says he thinks "illiberal democracy" is a term that still applies to Poland, but that Hungary is no longer an actual democracy, "illiberal" or otherwise.
A crackup of the eurozone would be a tremendous blow to European unity. Münchau is still sounding the alarm about the serious weak point of the eurozone construction:
Advocates of an ever-closer union have persistently misjudged the dynamics of a monetary union: that it leads to crises with terrible human consequences, unless it operates a fiscal union, a banking union and an unemployment re-insurance system. We have fledgling versions of all of them, but none work very well.
European banking is more national today than it was 20 years ago. As long as the recovery fund is anchored in the EU budget, it will remain a macroeconomic irrelevance. It should have been a eurozone-level project from the outset. Without more eurozone integration, internal imbalances will keep on widening. As constituted today, the eurozone is still unsustainable. [my emphasis]
There is a discussion underway in the EU about a plan for the EU to borrow money and distribute it to member countries to counter the negative economic effects of the corona crisis.
German Chancellor Angela Merkel and French President Emmanuel Merkel proposed a €500 billion recovery fund for the European Union in which the EU would borrow funds to distribute (not loan) to member countries to deal with the current recession that we're so far calling the COVID crisis or the coronavirus crisis. (Daniel Boffey, Merkel and Macron propose €500bn EU rescue fundGuardian 05/18/2020) One of the notable features of the proposed fund is that it would be an project of the full European Union, not of the euro currency zone.
The press like to refer to the relationship between the two leaders as "Merkron," reflecting the continued centrality of German-French leadership in the EU. A role that has now increased in relative importance with Brexit.
The "Merkron" proposal drew support from 23 of the EU's 27 members. Four countries, styled as the "Frugal Four," objected to the proposals on the grounds that it would be a direct EU support to member nations without an obligation to repay: Austria, Denmark, the Netherlands and Sweden. Austria's baby-faced Chancellor Sebastian Kurz has been prominent in making the case for the Frugal Four, also known as the Greedy Four. They made a counter-proposal whose central concept was that the assistance be made in the form of loans that would have to be repaid. This, of course, would affect the national credit rating and bond rates of countries like Spain and Italy, especially in the latter case increasing the likelihood of a new euro crisis.
The proposal has been evolving in the negotiations with the Greedy Four, with Ursula von der Leyen as head of the EU Commission proposing a variant. Lionel Laurent reports (An $826 Billion Battle Is Brewing in EuropeBloomberg Opinion 05/28/2020:
The European Union’s pandemic recovery plan has all the hallmarks of a historic leap in the dark for the 27-member bloc.
It aims to unleash as much as 750 billion euros ($826 billion) of fiscal stimulus, fueled by joint borrowing on financial markets - a big deal for member states that have always jealously guarded the power to tax and spend. The fact that the plan unveiled by Commission boss Ursula von der Leyen is so clearly aligned with the proposal from France’s Emmanuel Macron and Germany’s Angela Merkel is especially positive: Paris’s desire for continental assertiveness and foreign-policy grandeur hasn’t always matched Berlin’s focus on balanced budgets. ...
At the center of the battle are the so-called “frugal four” - the Netherlands, Sweden, Austria and Denmark - taking up a combative role similar to that of the British when they were members. As wealthy net contributors to the bloc’s budget, they’ve already been pushing back against what they see as unfair increases to the share they’re expected to chip in after Brexit; February negotiations on the next seven-year budget went nowhere after 28 hours of talks.
The Covid-19 crisis has redoubled efforts by the frugal four to push back against perceived profligacy, as the EU considers a bigger budget outlay than before, at 1.1 trillion euros (still only about 1% of gross national income), adds on pandemic stimulus tools and proposes aid in the form of grants rather than loans to be paid back — a package worth 2.4 trillion euros. The budget hard-liners may lack the diplomatic heft of Germany, but they can’t be ignored, as the plan needs unanimous support across national parliaments. [my emphasis]
Basti (Austrian Chancellor Kurz) is working this to promote his own anti-European credentials among the hard-right voters he works hard to cultivate. Basti has often aligned himself with the Visegrad group (Hungary, Poland, Czechia, Slovakia) on other anti-European positions like flat opposition to an revision of the Failed Dublin System of immigration and asylum processing. But his friends in the Visegard Group, including the EU's current start authoritarian, Hungarian Prime Mnister Viktor Orbán, want some of the money foreseen in the Merkron aid concept.
And, of course, different players try to negotiate deals over all kinds of things, so that's a factor always present in EU politics. (Just like every other kind of politics!)
Austrian Chancellor Sebastian Kurz said that he and the other leaders of the EU’s so-called frugal four group were encouraged by some aspects of the European Commission’s proposal for a coronavirus crisis recovery fund, but cautioned it represents just a “starting point” for negotiations.
“What we find positive - not just myself, but the Netherlands, Sweden and Denmark - is that there is a time limit and that the fund will be a one-time emergency measure and not the first step toward a debt union,” Kurz, who has emerged as the unofficial spokesman of the frugal faction, said in a telephone interview with POLITICO on Wednesday.
“Considering that there are many in Europe who want such a debt union, it’s important to us that this be clarified in writing once and for all,” he said, referring to concerns among the frugal group that the fund could morph into a permanent fixture, opening the door to mutualization of members' debt under the banner of the EU. [my emphasis]
Such political melodramas need to be understood in the context of EU politics, which is too often superficially reported even by the European press.
The EU is a strange critter. Its formal justifications are that it has promoted peace and democracy in Europe. And that's true. It's done both. But the teeth of the EU legal structure is in the economic area, and that structure is very much in the mode of the neoliberal gospel that we see embedded in "trade" treaties that are actually corporate-deregulation treaties.´ So despite the reality of the peace and democracy rationales, which I think are generally taken very seriously, the EU has no common foreign policy (to speak of), no common EU military, and a unanimity rule on major policies that make it extremely difficult to enforce the democracy part.
But the trade laws based on the deregulation-privatization model are enforceable in the courts. And the corporate lobbies aren't at all inclined to give up the advantages the EU structure brings them. Business regulation is dominated by EU laws and rules, but the various forms of social insurance - "social state" polices as they are also called - are the responsibility of individual countries, which given the way the European Supreme Court (EuGH) interprets the laws, creates heavy pressure to lower social-insurance protections toward the lowest common denominator. But it's not just the courts. The EU Commission, which is the EU executive body, has for years pushed member states to privatize their national health insurance programs, though fortunately most EU governments weren't so politically suicidal that they actually did much of it.
There's a lot of justified talk about the "democratic deficit" in the EU. I'm guessing that not even half of the voters in EU countries could correctly describe how laws are made by the EU Commission, the European Council, the Council of the European Union (not the same as the European Council!), and the European Parliament. For corporate lobbyists, this is a *desirable* state of affairs. Neither Merkel nor Macron have any intention of rocking that boat. And here's where the unanimity principle comes into play. If Macron and Merkel think it somehow looks good politically to advocate a common EU borrowing-and-subsidy program that they may not actually want, as long as they know that even one country will veto it, they are free to posture without having to worry they'll actually have to carry through. That way they can be the Good Europeans whose enlightened proposal got blocked by some annoying small countries.
Generally, the richer countries would prefer to have the vetoing country be one of the former "Eastern Bloc" countries. But in this case, the lowly Eastern countries want the money, so it's the Greedy Four who are the sticks in the mud on this one. If Germany and France apply even a fraction of the pressure they applied to Greece, Italy, Ireland, Spain, and Portugal in the last euro crisis to enact austerity measures, the dissenters will come around. (Craig Crowther, 'Frugal Four' will come round to EU's €750bn COVID-19 recovery fund, says former Finland PM StubbEuronews 05/28/2020) If Merkel and Macron don't apply that kind of pressure, we'll know they aren't serious. Since we're talking here about using public funds largely to bail out failing corporations and banks, it's possible that Merkel and Macron are serious on this one. Even staunch neoliberal austerians are true believers in "socialism for the rich."
Yanis Varoufakis is skeptical of the proposal, which he doesn't think will help with the problem the "periphery" EU countries like Italy face with pressure on their bond rates in a crisis. On the surface, the Merkron proposal is a move to make the EU more of a "transfer union". But the more critical problem is to make the eurozone (18 countries) a transfer union. That would mean things like have a eurozone-wide unemployment support program, for instance. Otherwise, the eurozone still faces the problem of the kind of tremendous pressure for internal devalution, i.e., lowering wages and living standards, that countries like Greece and Italy faced during the last eurocrisis. DiEM25 on Merkel Macron Announcement 19 MAY 2020:
There is an important geopolitical consideration in play with the "Merkron" proposal, as Wolfgang Münchau explains in China is pitting EU countries against each otherFinancial Times 06/24/2020:
China has shown remarkable skill in playing EU countries off against one another — for example in the race to develop 5G mobile networks. But this is just the beginning. China is well on the way to emerge as the most influential external power for the EU.
China’s Belt and Road Initiative, a project of long-term infrastructure investment spanning the Eurasian continent, lies at the heart of China’s global industrial strategy. EU governments understand this well. The Franco-German proposal for the €500bn coronavirus recovery fund includes a specific demand for an industrial policy to protect Europe against investments by third countries in strategic sectors. Yet such a strategy would pose problems for Italy, the likely main beneficiary of future Chinese investment in Europe. [my emphasis]
And Münchau's Eurointelligence looks more closely at the smoke and mirrors involved (Why it is not €500bn 05/29/2020):
When we read through the official document for yesterday's briefing, we were perplexed that the numbers did not add up - at least not in an obvious way. Further study of the proposal has revealed to us the reason why. The European Commission's claim that €500bn of the €750bn package comes in the form of grants is misleading. A more correct assessment is €400bn, which includes the €310bn grant element in the recovery plan and various bits and bobs, including an increase in structural funds. But it also includes components which the EU classifies as grants but whose ultimate incarnation is a loan. This is the Commission's old Juncker-fund reflex. It starts off by taking some real money and then leveraging it into a large loan. Whether this works or not is beside the point. Economically, this is not a fiscal impulse because it relates to claims that must be ultimately repaid. [my emphasis]
Europintelligence also argues that this is a clumsy attempt to backdoor a transfer-union function that really pertains to the specific needs of the eurozone:
... will the package survive the onslaught of the frugal four? The EU will need the consent of each of them to move ahead. They each will extract a price. On a per-capita basis, the frugal four are among the five largest net contributors to the EU budget. Leif Pagrotzky, a former Swedish economics minister, made the argument in Dagens Nyheter that Sweden should not veto the recovery fund, but argue that it is a eurozone-only instrument and Sweden should not take part in it. We agree with that argument. There is a lot of muddled thinking in Brussels about the nature of the monetary union, which is one of the reasons why the eurozone is stuck in a perma-crisis. The recovery fund is an economic necessity that arises as a direct result of countries having locked themselves into a permanent monetary union. It is not another regional aid programme.
The Dutch and the Austrians will have different objectives. We don't think they will want to veto the package, but the net economic gain for the EU as a whole is likely to be reduced through rebates for these countries. For example, if non-eurozone countries were allowed to opt out from the recovery fund, the refinancing burden on the remaining countries would increase, which in turn would reduce the extent of the fiscal transfer that is built into the package. [my emphasis]
Wolfgang Münchau, who was one of the best commentators on the eurozone crisis in the Great Recession is hearing new alarm bells going off. (Eurozone stability is under threat againFinancial Times 03/15/2020)
The last ten years showed that there were two big issues that could blow up the EU: the flaws in the structure of the euro currency and the refugee crisis on the southern border. Both in practice promoted nationalistic attitudes that encouraged anti-EU sentiment. Neither has been adequately addressed. Now the COVID-19 crisis is showing the cost of kicking the can down the road on both issues. The scandalously overcrowded refugee in Greece are particularly vulnerable to COVID-19 outbreaks, which Doctors Without Borders have been sounding the alarm about. (Immediate evacuation of migrant camps in Greece needed to contain coronavirus, says MSFEuronews 03/14/2020)
And that makes both the current refugee emergency and the COVID-19 pandemic more difficult to address.
The "social distancing" that is requiring a massive reduction of immediate economic activity in EU countries, along with the lack of EU-wide fiscal policy to compensate for it, could very well bring a new round of the euro crisis. Which is what Münchau focuses on here:
Taken together, the national policies will constitute a stimulus of sort, but they will end up increasing the eurozone’s internal imbalances. The fiscal deficits of Italy, Spain and France will
increase a lot. Those of Germany, the Netherlands and Finland may go up too, but by a lot less. The fiscal gap between the north and the south will widen. ... we are back to arguing about Italy’s solvency, which depends on low bond yields.
In other words, it can set off a new euro crisis. "Italy has not forgotten the reluctance of other EU member states to take in Syrian refugees who landed on Italian shores. Italy will emerge from its Covid-19 nightmare to a different world. It is not good for the EU to antagonise a founding member state."
The Herbert Hoover/Heinrich Brüning market-fundamentalist economic doctrines that dominate the eurozone are putting serious limits on economic growth and opportunity. And not just in the eurozone.
Since the leading center-left parties, mainly Social Democrats but also the Greens, embrace austerity economics to a large extent, the public discussion on that central economic concept is seriously restricted. It's not that the issues involved are impossibly complex. But understanding them does require more than endless recycling of tired clichees and Stammtisch (good ole boy) platitudes.
In Germany and Austria, not only big cities but smaller ones are experiencing soaring real estate prices and rents. Why? Frances Coppola has a big part of the answer: "Rising property prices seem to be the only means the people of the Eurozone have of restoring their lost wealth." (The Eurozone's Long DepressionCoppola Comment 05/06/2019)
But because market fundamentalism so dominates press coverage and commentary and politicians' statements, some concepts that are pretty elementary sound like exotic claims to much of the public. For instance, Coppola refers here to the accounting reality that the combined public and private deficits or surpluses in an economy equal the external current accounts deficit/surplus, i.e., what is popularly referred to as the trade deficit/surplus. Jamie Galbraith provides an accessible version of this accounting identity which is produced by real-world economic factors in The Predator State (2008).
The eurozone as a whole is running significant surpluses, i.e., exports more than it imports. And its largest national economy, Germany, runs continual surpluses supported by a policy of keeping the increase in German real wages below the increase in productivity. This also means that in the eurozone, domestic savings are running high. The flip side is that domestic investment is lagging. And the structural weaknesses of the euro as a currency, Coppola points out, is keeping the eurozone at a slower rate of growth than it needs:
Economies don't always bounce back after a "sudden stop" [such as the sudden stall in eurozone net investment in 2011]. If investment doesn't return, then the economy stays stuck in a slump. That is what has happened to the Eurozone. It needs much, much more investment. Investment by domestic corporations is slowly growing, but the ECB says that households are still deleveraging. And government investment is all but absent, as balanced-budget rules proliferate across the Eurozone and Brussels threatens to impose draconian sanctions on any country that dares run much of a deficit. Meanwhile, external investors stay away, put off by the Eurozone's poor growth prospects and rising political risks.
But the Eurozone authorities have very good reasons for pursuing policies that discourage external investment. The "sudden stop" in 2011 nearly destroyed the Euro. Those in charge in the Eurozone daren't risk another one. The current account surplus, and associated capital exports, are protective. After all, if you never borrow from the outside world, they can't hurt you. And if you are a net lender to the outside world, you have some leverage over them. Of course, they can still trash your currency, but as you don't need to service external debt, that doesn't cause you a major problem. It simply helps you to sell them more goods. Alternatively, they can refuse to buy your goods, in which case the loss of export income will make your population poorer. But hey, the people are already used to austerity, because that's how you maintain your current account surplus. They won't notice even more pain when the export income dries up.
In fact the Eurozone is behaving in much the same way as developing countries have since the Asian crisis of 1997, and for much the same reasons. Just as developing countries pursued export-led growth strategies and built up large FX [foreign exchange] reserves to protect themselves from sudden stops, so now the Eurozone, scarred by its own "sudden stop", is doing the same. Perhaps Eurozone leaders think the investment chill that is causing the Eurozone's poor growth, high unemployment and stubbornly low inflation is a fair price to pay to keep the Eurozone together. [my emphasis]
We know that in Europe and the US, far-right populist parties are drawing from sections of the public that are not themselves in obvious economic distress. Other factors than strictly economic ones are driving some of the support for those parties, including factors like xenophobia with particular appeal to people with an authoritarian turn of mind.
But economic stagnation and uncertainty do create conditions that facilitate demogogic political appeals. People afraid of "losing control," always a worry for authoritarians, respond with increased fear to general conditions that become more uncertain or tumultuous. Unless democratic countries can reverse some of the effects of what Coppola calls the Long Depression, those conditions will continue to feed rightwing demogoguery.
Coppola also embeds this tweet from Adam Tooze on the eurozone:
This data on Eurozone net saving should be retweeted daily! Large foreign lending is the flip side of the current account balance. But it is the low level of domestic investment and the complete absence of net public investment since 2012 that is truly dramatic. @SoberLookpic.twitter.com/5qtbpGiny3
Whilst at summit get-togethers America’s business leaders fret about “populism” and “class war”, on earnings calls they complain about “higher wages”. Love the fact that you can actually quantify this stuff. @ArborResearch via @SoberLookpic.twitter.com/M8FDcSzUgk
Marktfundamentalistischen Herbert Hoover/Heinrich Brüning Wirtschaftsdoktrinen, die die Eurozone dominieren, setzen Wirtschaftswachstum und Chancen ernsthaft ein. Und das nicht nur in der Eurozone.
Da sich die führenden Mitte-Links-Parteien, vor allem Sozialdemokraten, aber auch die Grünen, die Austeritätspolitik weitgehend zu eigen machen, ist die öffentliche Diskussion über dieses zentrale Wirtschaftskonzept ernsthaft eingeschränkt. Es ist nicht so, dass die damit verbundenen Probleme unmöglich komplex sind. Aber sie zu verstehen, erfordert mehr als ein endloses Recycling von müden Klischees und Stammtisch Plattitüden.
In Deutschland und Österreich erleben nicht nur Großstädte, sondern auch kleinere, sich aufschwingende Immobilien- und-Mietpreisen. Frances Coppola hat einen großen Teil der Antwort parat: "Steigende Immobilienpreise scheinen das einzige Mittel zu sein, mit dem die Menschen in der Eurozone ihren verlorenen Reichtum wiederherstellen können". (The Eurozone's Long DepressionCoppola Comment 05/06/2019)
(Alle Übersetzungen aus dem englischen in diesem Beitrag sind meine.)
Aber weil der Marktfundamentalismus die Berichterstattung in der Presse und Kommentare und die Aussagen der Politiker so dominiert, klingen einige Begriffe, die ziemlich elementare sind, wie exotische Behauptungen für einen Großteil der Öffentlichkeit. Coppola verweist hier zum Beispiel auf die buchhalterische Realität, dass die kombinierten öffentlichen und privaten Defizite oder Überschüsse in einer Wirtschaft seine Außenbilanzdefizit/Überschuss (current accounts deficit) entsprechen, d.h. dem, was im Volksmund als Handelsdefizit/Überschuss bezeichnet wird. Jamie Galbraith stellt in The Predator State (2008) [Deutsch: Der geplünderte Staat (2010) ] eine zugängliche Version dieser buchhalterischen Identität zur Verfügung, die von realen wirtschaftlichen Faktoren produziert ist.
Die Eurozone als Ganzes erfährt erhebliche Überschüsse, das heißt, sie exportiert mehr als sie importiert. Und seine größte Volkswirtschaft, Deutschland, weist kontinuierlich Überschüsse auf, die von einer Politik gestützt werden, die den Anstieg der deutschen Reallöhne unter der Produktivitätssteigerung hält. Das bedeutet auch, dass in der Eurozone die Ersparnisse innerhalb sie hoch sind. Die Kehrseite ist, dass die Inlandsinvestitionen hinterherhinken. Und die strukturellen Schwächen des Euro als Währung, so Coppola, begrenzen die Steigerung der EU Wirtschaft zu viel:
Volkswirtschaften springen nach einem "plötzlichen Stopp" nicht immer wieder zurück [wie etwa der plötzliche Stillstand bei den Nettoinvestitionen der Eurozone im Jahr 2011]. Wenn die Investitionen nicht zurückkehren, dann bleibt die Wirtschaft in einer Krise stecken. Das ist der Eurozone passiert. Es braucht viel, viel mehr Investitionen. Die Investitionen der heimischen Konzerne wachsen langsam, doch die EZB sagt, dass die Haushalte noch immer den Schuldenabbau betreiben. Und staatliche Investitionen sind so gut wie abwesend, da die Regeln für einen ausgeglichenen Haushalt in der gesamten Eurozone weit anziehen und Brüssel droht, drakonische Sanktionen gegen jedes Land zu verhängen, das es wagt, ein großes Defizit zu erwirtschaften. Unterdessen bleiben externe Investoren fern, abgeschwächt von den schlechten Wachstumsaussichten der Eurozone und steigenden politischen Risiken.
Aber die Behörden der Eurozone haben sehr gute Gründe, eine Politik zu verfolgen, die externe Investitionen abschreckt. Der "plötzliche Stopp" 2011 zerstörte den Euro beinahe. Die Verantwortlichen in der Eurozone riskieren keinen weiteren. Der Leistungsbilanzüberschuss und die damit verbundenen Kapitalexporte sind schützend. Denn wenn man sich nie von der Außenwelt ausleihen kann, können sie nicht schaden. Und wenn man Brutto-Kreditgeber nach außen ist, hat man etwas Einfluss auf sie. Natürlich können sie immer noch Ihre Währung verletzen, aber da Sie keine Auslandsschulden bedienen müssen, verursacht das kein großes Problem. Es hilft Ihnen einfach, mehr von ihren Waren zu verkaufen. Alternativ können sie sich weigern, Ihre Waren zu kaufen; in diesem Fall wird der Verlust von Exporteinnahmen Ihre Bevölkerung ärmer machen. Aber schau, die Menschen sind schon an Sparmaßnahmen gewöhnt, denn so halten Sie Ihren Leistungsbilanzüberschuss aufrecht. Noch mehr Schmerzen werden sie nicht bemerken, wenn die Exporteinnahmen versiegen.
In der Tat verhält sich die Eurozone in der gleichen Weise wie die Entwicklungsländer seit der Asienkrise von 1997, und zwar aus den gleichen Gründen. So wie die Entwicklungsländer exportorientierte Wachstumsstrategien verfolgten und große Devisenreserven aufbauten, um sich vor plötzlichen Stopps zu schützen, tut die Eurozone nun, die durch ihren eigenen "plötzlichen Stopp" gezeichnet ist, dasselbe. Vielleicht denken die Staats-und Regierungschefs der Eurozone, dass die Investitionsklima, die das schlechte Wachstum, die hohe Arbeitslosigkeit und die hartnäckig niedrige Inflation der Eurozone verursacht, ein fairer Preis ist, den man zahlen muss, um die Eurozone zusammenzuhalten. [meine Hervorhebungen]
Wir wissen, dass in Europa und den USA rechtsextreme populistische Parteien aus Teilen der Öffentlichkeit schöpfen, die selbst nicht in offensichtlicher wirtschaftlicher Not stecken. Andere Faktoren als rein wirtschaftliche treiben einen Teil der Unterstützung für diese Parteien an, darunter Faktoren wie Fremdenfeindlichkeit, die besonders Menschen mit einer autoritären Wendung ansprechen.
Aber wirtschaftliche Stagnation und Unsicherheit schaffen Bedingungen, die demagogische politische Appelle erleichtern. Die Menschen, die Angst davor haben, die Kontrolle zu verlieren, immer eine Sorge für Autoritären, reagieren mit erhöhter Angst auf allgemeine Bedingungen, die unsicherer oder turbulenter werden. Wenn es den demokratischen Ländern nicht gelingt, einige der Auswirkungen dessen, was Coppola die Lange Depression nennt, umzukehren, werden diese Bedingungen weiterhin die rechte Demagogie nähren.
Coppola bettet diesen Tweet von Adam Tooze über die Eurozone auch ein:
This data on Eurozone net saving should be retweeted daily! Large foreign lending is the flip side of the current account balance. But it is the low level of domestic investment and the complete absence of net public investment since 2012 that is truly dramatic. @SoberLookpic.twitter.com/5qtbpGiny3
Whilst at summit get-togethers America’s business leaders fret about “populism” and “class war”, on earnings calls they complain about “higher wages”. Love the fact that you can actually quantify this stuff. @ArborResearch via @SoberLookpic.twitter.com/M8FDcSzUgk
DiEM25 has functioned since its creation in 2016 as an advocacy group for left ideas in the European Union, including a focuses on economic stimulative politics instead of the destructive Herbert Hoover/Heinrich Brüning austerity economics. (The Progressive International is a new, loose alliance for various left-leaning groups and movements just stared by DiEM25 and the Sanders Insitute.) Their website defines their vision this way:
Europe is currently suffering from five crises: debt, banks, poverty, low investment and migration. DiEM25 is the infrastructure which European democrats of all political persuasions will use in order to develop common answers to these crises. We also demand more fundamental change: EU institutions, which were initially designed to serve the industry, need to become fully transparent and accountable to European citizens. Our long-term vision is for Europeans to write a democratic constitution for the EU.
Varoufakis has been DiEM25's most prominent leader to date. And, of course, he led a dramatic fight against the ruinous EU response to the debt crisis in Greece as Greek Finance Minister in 2015.
Varoufakis detailed that effort in Adults in the Room (2017) - German title Die ganze Geschichte: Meine Auseinandersetzung mit Europas Establishment - which gives a very valuable look at the vulnerability of the EU to economic crises and at the deep flaws of the euro currency. Varoufakis' account of austerity economics and the euro's problems is broadly consistent with those of Joe Stiglitz (The Euro: And its Threat to the Future of Europe, 2017) and of Varoufakis' close associate and ally Jamie Galbraith (Welcome to the Poisoned Chalice: The Destruction of Greece and the Future of Europe, 2016). Paul Krugman is more closely tied to neo-Keynesian views, particularly in his emphasis on the risks of budget deficits, but his account of the euro and the Greek crisis was substantially the same as that of Varoufakis. As were those of Brad DeLong and Wolfgang Münchau.
Up until this year, DiEM25 has been more of a left advocacy group, trying to rally left-leaning activists, parties, and voters around a pro-European (i.e., pro-EU) view that also rejects austerity and embraces progressive economic policies. Its current political manifesto strikes a left-populist tone (emphasis in original):
At the heart of our disintegrating EU there lies a guilty deceit: A highly political, top-down, opaque decision-making process is presented as ‘apolitical’, ‘technical’, ‘procedural’ and ‘neutral’. Its purpose is to prevent Europeans from exercising democratic control over their money, finance, working conditions and environment. The price of this deceit is not merely the end of democracy but also poor economic policies:
The Eurozone economies are being marched off the cliff of competitive austerity, resulting in permanent recession in the weaker countries and low investment in the core countries
EU member-states outside the Eurozone are alienated, seeking inspiration and partners in suspect quarters where they are most likely to be greeted with opaque, coercive free trade deals that undermine their sovereignty.
Unprecedented inequality, declining hope and misanthropy flourish throughout Europe
But in 2019, they will be standing up candidates for the EU Parliament election. They formed a party, Demokratie in Europa, to campaign in Germany, with Varoufakis himself heading the list. Obviously a provocative choice!
(Also, the usual German abbreviation for that party name would be DiE, which has a particular meaning in English! Proabaly, they intend the short form to be DE, which is the typical German abbreviation for Deutsch [German]).
I would describes DiEM25's position as a left social-democratic one framed as a left-populist appeal. Pascal Beucker notes that a Varoufakis candidacy in Germany definitely brings star power to the ticket. (Varoufakis plant Kandidaturtaz 20. 11. 2018) He has said he will use his candidacy to promote solidarity between northern and southern EU countries.
There doesn't seem to be much if any polling on Demokratie in Europa's potential performance next year. So there's not much "horse race" information available.
I've been saying since 2015 that the EU has two major threats that could break out again in a new immediate crisis that could wreck the EU: the faulty construction of the eurozone and immigration. Both came together in 2015, when Angela Merkel and the EU establishment promoted nationalist contempt against Greece in the debt crisis in the early part of that year, which severely complicated the response of the EU in the acute phase of the immigration crisis in 2015-16.
DiEM25 is not only in favor of reforming the eurozone structure to make the eurozone into what economists call an "optimal currency zone," they are also distinctly pro-immigration. On the last point, Varoufakis states that position polemically in the Democracy Now! interview above:
To answer an earlier question which I did not answer fully, our reaction to the arguments that we are being swarmed by foreigners and so on is: Let them in. Borders are a scar on the surface of the planet, on the face of the Earth. They make no sense. The only thing that they do is they increase the profits of the traffickers. And at the same time, we are failing to understand that Europe is aging. We need migrants. We need refugees.
So, in other words, you cannot compete with the fascists with fascism-lite, like Hillary Clinton the other day stupidly—and I use that word with a great deal of thought—suggested that the way to defeat populism in Europe is to erect borders around Europe and to stop migrants from coming in. Hillary Clinton said that, proving that she was unfit to be president of the United States yet again. You cannot compete with them playing their own misanthropic game. The only way you can compete with them is by appealing to the humanity of humans and also to their rationality. And using migrants as a football, in the end, backfires. So, we are going to fight them on the beaches - and when I say “them,” I mean the fascists, I mean those that Steve Bannon is organizing. They’re going to face up to the fact that we’re going to be there, and we’re going to be undermining their movement with arguments that appeal to rationality and to humanity. [my emphasis]
I don't assume that Varoufakis is advocating the immediate abolition of borders, but rather is making a provocative point which would benefit Demokratie in Europa's campaign if xenophobes pick up that quote to use against them. That would give them the chance to respond along the lines Varoufakis does there: "we are failing to understand that Europe is aging. We need migrants. We need refugees."
On both the euro and immigration, I would say that the EU leadership is generally aware that the kind of solutions toward which DiEM points are the practical and necessary ones. On the euro, Varoufakis in Adults in the Room recounts how eurozone finance ministers would agree with him in private on his proposals but reject them in public.
There may not be the same level of (private) agreement among European leaders on immigration. But the fact is, especially given the trend of climate change, the EU has a longterm immigration crisis. They are also experiencing shortages in candidates for various kinds of necessary jobs. To take just one example, in Austria, home care for the sick and especially the elderly is facing growing demand because the population is aging. And the demographics say that will only increase. But already in 2018, virtually every one of those jobs is filled by non-Austrian citizens. Many of them are from other EU countries, where borders already don't count when it comes to the movement of people.
But that also means that some eastern EU members are experiencing emigration of their own citizens, particularly younger ones, to wealthier EU countries offering more opportunity and higher pay. This is an important part of the background to rightwing-populist reactions against the EU in countries like Hungary, Rumania, and the Czech Republic. So, in other words, "Europe is aging. We need migrants. We need refugees."
Back in 2011, Charlie Pierce used to say of the Occupy Wall Street movement that sometimes it's enough to be shouting at the right buildings. DiEM25 is shouting at the right buildings in the EU.
