As a French citizen, I praise the existence of the European Union.
I remember my parents telling me about the restrictions that endured during WWII and in the following years: children forced to eat worm-infested corn soup, parents drinking coffee made of barley, men smoking corn fiber instead of cigarettes (the famous “ersatz”, products replacing the original ones!), ladies without stockings, drawing a seam line on the back of their legs, trying to remember all day long not to cross their legs, or else the line would disappear…Many years later, our family house in the South was full of items brought in by refugees fleeing the Occupied Zone, whom my great-grand-parents generously hosted: books, toys, event pieces of furniture…
I remember my father’ s emotion when I was selected to learn German in Grade 8 – in my school, German was taught as second foreign language to the best pupils only – German! He, who had his father and brother imprisoned in Germany, and who had to learn German at school, not for his good scores, but just because it was mandatory…My parents’ awe when I returned from my visit to West and East Berlin – an adventurous school trip! - and their trust in Europe’ s future as a peaceful environment, despite the Cold War. In their eyes, that wall in Berlin was the last obstacle in a peaceful Europe, and they were longing to see it being knocked down. And they did!
To me, the birth of the European Community (“E.C.”), later called the “European Union”, (“E.U.”), is a remarkable human and political accomplishment.
Let’s look back: after WWII, Europe was on its knees, the providential Marshall Plan was welcome, and was implemented, but as this was an external tool to help Europe. Something else, more durable, and “ from inside” needed to emerge: the desire, and the leadership to build a community of countries willing to trade and cooperate in a forever peaceful environment.
This is how the CECA (European Community for Coal and Steel), thanks to the common vision of the French and German leaders, General de Gaulle and Konrad Adenauer, was created in 1951, uniting France, Germany, Italy, Belgium, Luxemburg and the Netherlands.
The mission of the CECA was for the six countries to have a common approach to industrial strategy relating to these fundamental resources, coal and steel. This was the first step to the construction of the European Community, sealed by the Treaty of Rome in 1957, taking over the CECA. Indeed, the European Community was born to help European countries rebuild their economy and trade in a peaceful way while creating the conditions of a fair and homogeneous market.
With the Treaty of Rome, custom tariffs were abolished within the E.C. country members, easing trade between the then six members. The famous “PAC” (Common Agricultural Policy) was set up, to be implemented in 1962: this policy was meant to help the six countries overcome the devastation of their respective rural economies through war: lack of workforce, neglect of land, pest infection, disorganized markets, even… grey market…
A new system needed to be set up to insure the supply of basic agricultural goods, to stabilize prices, to improve local agricultural productions and improve the rural workforce’s revenue. It implied artificial pricing and subsidies, so famously criticized… Mainly seen as easy and unfair money, this system was in fact intrinsically conflicting, as States competed between each other, – not mentioning the fights against it from overseas – and it certainly took many people s’ guts and careers to set it up and enforce it. Rightfully the PAC was reformed many times, and is still evolving towards a more environment-friendly and cost-effective system.
A major step towards integration was the introduction of the unique currency, the Euro, as planned in the Maastricht Treaty of 1992. Launched in 1999 and introduced to the population and living economic forces of eleven countries in 2001, Europe’s single currency is now shared by 16 EU countries[1] and around 329 million citizens, making it one of the world’s most important currencies and one of the EU’s greatest technical achievements.
In the Euroland system, each country is responsible for setting up its own budget and it public policies, but all of them plan them in solidarity and transparency with the other States., via the European Commission. Every Euroland member must comply with the “Pact for Stability and Growth”, which implies two main criteria (“ Maastricht criteria” ) : a public deficit rate under 3% GDP, a debt ratio under 60%. Why? Because the total euro monetary mass is limited by the European Central Bank. And the ECB applies policies that are set up by the governors of each Euroland country member’s central bank; the monetary policy is therefore global and cannot lean towards one country.[2].
What we see with Greece’s crisis has brought light to this system’s faults: the above mentioned criteria are in fact “ pro-cyclic”: when a country endures a slowdown in its economic growth, these criteria tend to exacerbate budgetary difficulties, as well as investors’ concerns, therefore increasing the country’s risk rate – therefore pushing interest rates up – and what if a country like Greece, Spain or Portugal needs more money? – the rule is, to seek money on foreign markets because the ECB will NOT provide it – it is not its role – but if the investors are not convinced with the sustainability of the accounts of the country, they will raise their rates, spinning up the infernal spiral …
The E.U. is able to pull through this crisis. First of all, the Euroland members recognize the importance “of being earnest”: a tightening and better control of statistics and reports is definitely under way. And the members are, at last, now more ready than ever to respect the Maastricht criteria: just lately, UK, Germany, France, Italy, have declared their willingness to reduce public spending and excessive debt. Concrete measures are under way, and this can be seen as a healthy move – the arts and science will be in these countries to be successful in both saving money and not raising taxes.
The second option unfortunately an easy choice. Also, the recent decision of the E.U. members to join and form a pool of borrowing countries, which in turn might be able to lend money to countries in need (not less than EUR 500 billion), complementing the loan of the International Monetary Fund (EUR 250 billion). To achieve this move certainly shows leadership and in a way, some creativity from the European leaders, and it is a shame that some media prefer to titillate and focus on the grudges between them, than to explain to us the conditions, the result and the consequences of such a move. These leaders have even convinced the ECB to purchase some portion of Greece’s bad debt, although as explained earlier, this goes against the European financial “orthodoxy”, so one can see how determined are to solve the current situation.
Contrary to any other political formation, the E.U, is an empirical construction which advances by phases. It was born as a small group of neighboring countries, it is now a “ formation” of 27 with a hard core of 16 using the Euro. It is through the difficulties that it encounters that we can see the vitality of the European spirit.
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[1] Austria, Belgium, Cyprus, Finland, France, , Germany, Greece, Ireland, Italy, Luxemburg, Malta, Netherlands, Portugal, Slovakia, Slovenia, Spain.
[1] The ECB’ main role consists in controlling the interest rates between banks and their customers within the Euroland, and in dealing with the Euro’s foreign exchange rates