The European economic government - a French obsession - 23.07.2015

The idea of a "European economic government" has been brought up once again by Francois Hollande, two days ago, but this time confining it to "gouvernement de l'eurozone", which proves not only that French presidents have one bee in your bonnet, but also that everyone draws their own lessons from the current Greek tragedy, when, as European Council president Donald Tusk said, "Europe was very close to a catastrophe".

Hollande said that France is ready to participate in the "vanguard" of the creation of a Eurozone government, with its own parliament and specific budget, praising, in "Journal de Dimanche", Jacques Delors (who this year celebrated 90 years on July 20th), former president of the European Commission (between 1985 and 1994), who was apparently the first to formulate that idea, in 1997.

But he wasn't the only one, because in October 2010, former French president, Nicolas Sarkozy, presented it to the European parliament and one year later, in August 2011, he won over the German chancellor, Angela Dorothea Merkel, who became a supporter of the project, after France dropped the plan to have the Eurozone issue its own Eurobonds.

Now in the opposition, as president of the Republicans, Nicolas Sarkozy is struggling to fix his international perception (after the charges of corruption against him) and has brought up for discussion, in an article in Le Monde, on July 1st, the idea of the Eurozone government, asking for the reelection of a new president.

So, Hollande, on July 14th, does nothing but amplify the voice of his political opponent, who, for that matter, also criticizes Hollande.

You would expect he would be spared the criticism, since he shares the same opinion, but on the contrary, Hollande's intervention is considered by Republicans as being "of minor interest, because it sticks to generalities", and "The new Anticapitalist Party" calls Hollande "Merkel's little assistant, who wants to arrest democracy into a supranational Eurozone with a dummy parliament".

I've published my own opinion on that idea in BURSA, four years ago, under the title "What is to be done?"

I have nothing to add to it, it is still the same at this time.

I hereinafter reprint the article.

EUROPE'S GOVERNMENT, OR...

What is to be done?

"What is to be done?" was first of all, a novel with illuminist-socialist ideas by Nikolay Chernyshevsky, published in 1863 (sometimes credited to Alexander Herzen, being mistaken for "Who bears the blame?", a novel published in 1847); then, in March 1902, Vladimir Ilyich Lenin published in Stuttgart, under the same title "What is to be done?" the theory of the party organized according to the theory of "democratic centralism"; in turn, "democratic centralism" has been made into a principle underpinning the organization of the communist state (and not just of the party), as it was introduced by Leonid Ilyich Brezhnev, in the Soviet Constitution of 1977.

It is interesting that before providing the definition, the Explicative Dictionary of the Romanian Language of 1998, states that the term is "disused" ("Democratic centralism = core principle specific to the organization and the activity of communist and labor parties, which supports the fusion between centralism and democracy, the centralized leadership with participation from the members of the collectivity.").

Well in Tuesday's meeting, in Paris, between German chancellor Angela Merkel and French president Nicolas Sarkozy, makes it urgent to update the Dictionary, because the European Union will be reorganized based on the principle of democratic centralism, and thus, the term is reentering daily use.

And the fact that its use would resume at a European scale would make even the brilliant Lenin jealous, eclipsing his virtual joy that the questions of Russian socialists "Who is to blame?" and "What is to be done?" are both lumped together in the concerns of all those who are trying to come up with an answer to the world crisis.

A true economic European government - that is what the joint French-German proposal sounds like, after the meeting of August 16th, which was held in Paris, between the heads of the two states, Nicolas Sarkozy and Angela Merkel, whose idea, between the disastrous national imbalances of some of the member states of the European Union is to put the current president of the European Union, Belgian Herman Van Rompuy, at the head of the Euro-government consisting of the heads of the 17 states which are members of the Eurozone, which would then be meeting every six months..

Aside from how disgusting the idea of the "supreme-government" sounds to the ears of our generation - of those aged above 40, who lived in non-Soviet communist countries - it must be said that it does not go against the current Western mentality, since a poll that was published on Thursday in France, shows that the French trust Merkel more than they do their own Sarkozy.

Based on that, we could suspect that in the event of pan-European elections, the French would prefer the German Chancellor, (isn't it ridiculous? the entire history of the French-German conflicts has become irrelevant under the pressure of the sovereign debt crisis!); because 79% of the French are worried about the effects of the global financial crisis and 67% are worried about its impact on their living standard (this does not apply to us; at best we are only concerned by the divorce of Pepe and Oana Zăvoranu).

• The European government - a notion without any weight, for now

Merkel and Sarkozy did not mention what they meant by a "true European economic government", stating only that it is intended to allow coordinating and controlling the budget deficits of the EU member states, an idea which, on Wednesday, the spokesperson of the EU, Olivier Bailly, was quick to support:

"We had already mentioned the need to strengthen the economic side of the monetary and economic union. What is happening now and what was announced yesterday, as a proposal by France and Germany, is precisely a step in this direction".

What Bailly isn't saying is that the French-German proposal of a "euro-government" is a lot more political, than the alternative proposed to assuage the sovereign debt crisis in Europe, which was strongly rejected by Germany: the joint guarantee of the loans of the Eurozone by the 17 governments of the Eurozone.

In the absence of a definition, the notion of "Economic European Government" becomes open to any interpretation, from merely coordinating taxation and budget expenditures, for the purpose of a "fiscal union", all the way to the imperial one, where most Eastern-Europeans have parochial idiosyncrasies.

• Germany's aversion to the collective bonds

The supporters of the collective bonds of the Eurozone (except for the Germans), bring the following arguments in favor of the idea:

1) The public finances of the Eurozone, as a whole, have a debt to GDP ratio of 88%, which is far more respectable than the US' ratio of 98% and just a bit higher than Great Britain's (83%), whereas the record budget deficit is expected to go a little above 4%, better than the American one (10%), or the British one (8.5%).

Collective Eurobonds would inspire more confidence in investors than national bonds would, subjected as they are to the individual risk of every state in itself, of causing wariness among investors due to its excessive deficit and/or excessive indebtedness, (lack of confidence makes borrowing leverage more expensive, sometimes unsustainably so, generating liquidity crises, which lead to requests for the European Central Bank to buy their bonds, a process which, beyond certain limits, affects its independence).

2) The European Stability Fund (EFSF) set up last year for rescue cases, such as the one of Greece, was designed to cumulate this autumn, just 440 billion Euros, but its commitment to help Greece, Ireland and Portugal would barely leave it with enough money to support Spain, and it would obviously not support Italy.

Furthermore, the guarantees for each loan granted by the EFSF depend on the weight that each nation has in the economy of the Eurozone, meaning that the capacity of the EFSF to grant loans would diminish, for instance, if France were to lose its top rating "AAA" (as the markets suspect will happen).

Due to the reasons above, the collective Eurobonds were viewed as a viable solution to regain the confidence in the creditworthiness of the countries in the Eurozone.

On the other hand, the Germans don't like Eurobonds for two reasons:

a) Being one of the most creditworthy states, Germany would have to unduly pay a higher cost of borrowing due to its weighting with the less creditworthy states, which, according to calculations by the "Ifo Institute for Economic Research" of Munich, would cost the country an additional 1.9% of the GDP each year.

b) If the Eurobonds were to offer this insurance to all the governments which spend extravagantly, they would no longer have to worry about having to live within their means.

• The never bitten Westerners

The explicit idea of a "Euro-government", as a means for solving the sovereign debt crisis of the continent, has been plainly discussed, about a year ago, by Stefan Collignon, the president of "Scientific Committee of Centro Europa Ricerche" (CER), of Rome, who published in "Social Europe Journal" the article called "A European economic government could help solve the deficit of the European democracy".

Collignon says that the intergovernmental method by which the Euro is managed is ineffective, because the members - the national governments - will always pursue partial interests, rather than collective ones, even though their decisions affect all the citizens of the Eurozone.

Collignon says that the intergovernmental method by which the Euro is managed is ineffective, because the members - the national governments - will always pursue partial interests, rather than collective ones, even though their decisions affect all the citizens of the Eurozone.

"...The European citizens do not have the power to choose the policies that they would need to have discussed", professor Collignon writes, who also finds that the representation of the national interest of citizens, through the constitutional governments, has no equivalent in the representation of their European interest, and thus states that: "As a result, a certain degree of frustration and the perception of the undemocratic nature of Europe are becoming increasingly stronger in Europe", and then the professor attempts to scare us that "both these trends could destroy the European Union".

Of course, the professor can smell centralized leadership when he speaks of the control of the parts by the whole, because the "whole" can only manifest itself through its representatives sent in by the "center".

The only trick to make the bitter pill sweeter is to powder it with "democracy".

That's what Lenin did.

• The democracy topping

Collignon mentions how often the French have mentioned the expression "gouvernement économique" and how, after Germany's failure to solve the Greek crisis, Angela Merkel no longer rejected the idea, giving it a personal interpretation: "We, the 27 member states are the economic government" (our note: - similar to the current idea, which is however, confined to the 17 states of the Eurozone).

Collignon considers that the manner in which Merkel designed the Euro-government is pre-democratic and that democracy involves the principle "No taxation without representation", which would mean that the Euro-government should be controllable through the members of the European Parliament, elected as representatives of the citizens, not by the national governments.

What Collignon is saying is very clever.

Except that what he is saying doesn't matter anymore, if what the French understand by "Gouvernement économique europeen" , is that as long as a country is big, hexagon shaped and famous for its wine and cheese, it can thumb its nose at the rules against the excessive budget deficits.

It must be said that, after the meeting in Paris, Sarkozy convinced Merkel to postpone the passing of automatic sanctions against countries that have exceeded the budget deficit levels agreed on a EU level, because France would have been first on that list.

• The Romanian experience of democratic centralism

It is easy to discern that professor Collignon never experienced democratic centralism first hand, and he is so naïve, that he doesn't even mention the fact that his ideas, even the most democratic ones, should go through a continental Referendum.

My Western buddy, please believe me: Ceauşescu became a dictator by rising against the Soviet invasion of Czechoslovakia in 1968.

In order to protect him against the angry Soviet power, the population and the West gave him their support, which means he climbed so high and remained there for such a long time that I for one feel like he's still alive.

So much so, that 21 years after his death, sometimes, the tune of "the Party, Ceauşescu, Romaniaaa/the Party, Ceauşescu /Romaniaa" still echoes in my mind.

Yes, democratic centralism isn't an idiocy, it's a more subtle form of centralism, which is unavoidable in any government in which representatives govern citizens.

The real problem is another: why do we need "representation"?

Is that how the ancient Greeks of Athens described democracy?

Not really, is it?!

I don't think they used to say something about representative democracy, but rather about direct democracy...

With all that we have nowadays, internet, cellphones, iPads, fixed landlines, TVs and radios, with all of today's telecommunications that blanket the European continent, why isn't anybody speaking about direct democracy?!

All I'm hearing is a whisper: "What can be done?"

(BURSA, 22.08.2011)