A dull thud in the distance
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Nai Day

February 13th, 2012 | Posted by Aosher in Politics - EU - (2 Comments)

Greece has a self-image as a country that says “no”. On October 28th every year the country celebrates “no day” (oxi day), remembering the occasion in 1940 when General Ioannis Metaxas refused to allow the Italians and Germans to occupy Greece without a fight. This brought Greece into the war – in fact, for a while in 1940 Greece was Britain’s only ally, and the Greek armed forces (which had been expected to simply roll over and accept subjugation) met with some early substantial successes, rolling the Axis powers quite some way back into Albania. Greece’s small army didn’t stand a chance in the long term, and the country was occupied from 1941 until the end of the war, but that moment of stubbornness was internalised as a national truth.

National identify can inform the behaviour of its citizens. Greek students have always been a bolshy lot – the University of Athens has long been a stronghold of the Greek Communist Party, the unions are punchy, and protests (bordering on the riotous) are a common fixture of the streets around Syntagma Square, the seat of Greece’s parliament. The population mainly reacted with delight when their politicians took the country into the Euro in 2001; it was widely known that the Greek government had cooked the books in order to qualify, but this was perceived as the wily Greeks getting one over on the stuffed shirts of Brussels. Mutterings in Berlin about chickens coming home to roost are not without justification.

Last night the Greek government passed an austerity bill (after a torturous negotiation process) that cuts another 150,000 public service jobs and slashes the national minimum wage. The response has been muted; social unrest has been restrained (by Greek standards; reports of 80,000 on the streets yesterday is big for any other European country but the fact that they were only out for a day or two speaks volumes), despite the lurid images being broadcast to the rest of Europe. The country of no seems beaten into submission.

Greece’s role in all of this is to be the sacrificial goat. Greece has the option of default, ejection from the Euro and an internal restructuring – which would be painful in the medium term, when the country has restructured enough to want to go back to the bond markets, but far less painful in both the short and long terms than the current retrenchment being enforced upon it. Greece can’t grow, and will thus never be able to pay its debts under the current status quo. But Greece’s parliament has been persuaded that the Euro crisis is Greece’s fault, and that its sacrifice is necessary for the sake of the Euro. And so it falls on its sword.

Unquestionable, however, is the claim that a Greek default would cause massive contagion. Talk of a Greek collapse triggering a tumble in Spain, Italy and even France is not scaremongering; it’s a very real and present threat. The ECB’s strategy is not to prevent a Greek collapse; it’s simply to stave it off for long enough to make sure that the fire won’t spread.

In 1940, when Greece was the only country in mainland Europe to stand up to Hitler and Mussolini, its spirited intransigence was hailed as a moment of national identity shining through. In 2012, Greece is once again singled out. I doubt that “yes day” will be remembered with quite as much fondness.

German strength, French weakness

January 25th, 2012 | Posted by Aosher in Politics | Politics - EU - (2 Comments)

There is an old adage to the effect that the Franco-German relationship exists to both hide France’s weakness and obscure German strength.

Post-reunification, Germany has had an uneasy relationship with its own power. It remains a reluctant military power, much to the frustration of its allies in Washington, London and NATO; and in the EU it has preferred to wield it’s clout quietly, allowing France’s Nicholas Sarkozy to take the lead on promoting a “Merkozy” agenda while keeping its own arm-twisting activities behind closed doors. The one area in which Germany has been contend to exert itself has been economic. Ironically, the division and reunification of the country has left it less dependent on post-manufacturing industries and recession-hit developed markets than it’s big European stablemates, and its historic position as east and south Europe’s main creditor has been carefully mitigated by extraordinarily low levels of public, corporate an personal debt. An economy that was already reaping the capacity benefits of its long, slow process of reunification is ideally placed to maximise its gains from a weak global economy and its subsequent rebound.

France is another story. The global recession has been particularly cruel to France, exposing the gaps in its massively centralised, leveraged economy. Even Britain’s similarly sized and distributed market has fared better, partly thanks to the City of London’s cozy relationship with the money markets but also thanks to a perception that the UK, which has much more control over its own currency and spending, is better placed to affect a recovery. The recent downgrade of its bonds by S&P has also effectively ended he collective delusion that France could be at the political core of the Eurozone. What moral right does France have to lead when it is ultimately in the same firing line as Italy and Spain? It’s political authority was always borrowed, but now the transaction is compromised. The ideological core of the Euro is Germany, and always has been, but that is now explicit.

This is starting to show in practice. Over the last month Angela Merkel has been taking meetings with European leaders in private, to promote her agenda, bypassing the French altogether. In public both sides insist that nothings has changed, but tell-tale signs of status anxiety – familiar to those who have observed the Anglo-American relationship – have started to emerge from Paris.

There are both opportunities and risks here for Germany and the Eurozone. The risks are most obvious. A Europe led by Franco-German concord could maintain a veneer of consensus politics. Unbridled German leadership may will no longer have that figleaf, and public discontent at ECB-enforced austerity may take on a new form. The image of an assertive Germany remains politically sensitive in Europe, for reasons that feel anachronistic in Britain and America but which still strongly resonate in Poland and Hungary. And like it or not, Germany’s political class are curiously uncharasmatic by European standards. This sends a message about what the Germans look for in a leader, but makes the task of selling tough economic reform to the Greeks and Italians – who have a marked preference for flash in their leaders – more of an uphill struggle.

The opportunities, however, are massive. Germany’s self-imposed doctrine of consensus-led soft power has allowed it to recover both the position and the reputation that it has always traditionally enjoyed, but the extent to which it can help – now that it has surpassed its local rivals and remains the only identifiably big fish in a medium-sized pond (which is shrinking by the day) – is diminishing. Meanwhile, it commands vast production resources, an educated and mobile workforce, and all of the legal accouterments considered necessary for an emerging market make the big leap. It feels odd to be talking about Germany as if it were an emerging power, as its level of development greatly exceeds that of the likes of, say, Brazil or South Africa. But, at the head and the heart of the world’s largest common market, Germany has the potential – if harnessed properly – to parlay its current position into something much greater. It is not too big a claim to suggest that the 21st Century could as easily be German as Chinese.

The obstacles to this are great. Britain, France, Italy and Spain are as likely to obstruct German leadership as support it, although – as David Cameron’s abortive veto over changes to the Euro Stability Pact before Christmas demonstrates – mutual antipathies make them unlikely to oppose a German ascent in tandem. The bigger obstacle is that Germany largely does not perceive itself as a hegemon-in-waiting. But then, neither did America. What is interesting is that Germany has many of the qualities required, should the need arise.